In a commercial property market offering endless opportunities for investors, the childcare sector stands out for its stability and growth potential. The sector has demonstrated resilience in a market that has experienced significant shifts over the last few years. Given the essential nature of childcare services, demand remains robust which provides a buffer against market volatility.
As one of Western Australia’s most active childcare centre property developers and investors, Jarra Property is uniquely positioned to provide a snapshot of some of the advantages of investing in the industry, and why it’s a front runner to be considered for investment.
Advantages of Investing in Childcare Property
Resilient and Defensive Industry: The childcare industry’s resilience during economic downturns makes it attractive to investors seeking stability and long-term growth. Jarra Property’s conviction in the childcare sector is mainly due to the defensive nature of the industry. The sector is recognised by both major Australian political parties as a critical driver of national productivity, which was apparent during COVID-19, when the federal government provided significant financial industry support.
Industry Growth: Industry growth is expected to be driven by ongoing government funding and demand for formal childcare arrangements due to a rising maternal workforce participation rate, strengthening demand for childcare and higher day rates. The expected increase of industry employment over the next five years and WA’s projected population growth for the next 10 years, also indicate strong demand growth potential for childcare services over the next decade.
Attractive Yields: Compared to other sectors, childcare properties tend to offer more attractive yields. The combination of long-term leases, typically ranging from 10 to 20 years plus renewal options, and stable demand equates to reliable rental income and potential for capital growth.
Strong Tenant Covenants: With many national childcare operators, additional security is often offered to landlords in the sector. Well established and reputable operators often have strong financial backing and established business operations.
Leasing Advantages: Alongside common rent escalations, many childcare leases are also triple net leases, meaning the tenant covers the cost of property tax, insurance and maintenance costs in addition to the base rent.
Highly Regulated Industry: As a highly regulated industry, investors can be confident that childcare operators will maintain high standards of safety and service delivery, resulting in stable and reliable tenants.
Overall, the childcare industry offers a compelling opportunity for commercial property investors. As a growing asset class, it represents one of the most stable and in-demand sectors in the WA property market. With significant activity amongst national and local childcare operators looking to expand their footprint in WA, the childcare industry will continue to be an integral aspect of commercial property investment.
About Jarra Property
Jarra Property is one of Western Australia’s most active childcare centre property developers and investors with an established track record, having successfully delivered approximately $100 million of projects over the past five years. Currently delivering our 25th childcare development project, developing Nido Early School in Australind, our significant experience in the sector mitigates and reduces investor exposure to development and project delivery related risk.
With an investment process that emphasises risk mitigation and value creation for investors, we utilise our own balance sheet for design, town planning, leasing and establishing certainty around construction costs. Once these conditions are satisfied, we structure our funds to maximise alignment between ourselves as managers and investors.
Jarra Property has realised property investments of more than $40.0 million with an average fund term of less than 24 months, an average investor IRR (pre-tax and post fees) in excess of 20.0%, and returning more than 1.3 times our investor capital (on average).*
Contact us today for more information https://www.jarraproperty.com/ or info@jarraproperty.com
Sources: IBISWorld Childcare Industry Report (Aug 2022), ABS Data
* Disclaimer: This article was prepared by Jarra Funds Management Pty Ltd (ABN 67 654 846 214) (AFSL 538113) The information was prepared for general information only and does not take account of any person’s objectives, financial situation or needs. Any person considering investment action on the basis of this communication must seek individual professional advice relevant to their particular circumstances. Past performance figures are no guarantee of future returns. Date of preparation: 05 November 2024