The commercial property market offers endless opportunities for investors, but 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.
As one of Western Australia’s most active childcare centre property developers, Jarra takes an active approach to invest in childcare. We are uniquely positioned to outline the advantages of investing in the industry, and explain why it’s a front runner to be considered for investment.
Invest in Childcare – The Advantages of the Sector
Resilient and Defensive Industry: Jarra’s conviction in the childcare sector is mainly due to the defensive nature of the industry. Given the essential nature of childcare services, demand remains robust which provides a buffer against market volatility. The childcare industry’s resilience during economic downturns makes it attractive to investors seeking stability and long-term growth. The sector is also recognised by both major Australian political parties as a critical driver of national productivity, which was apparent during COVID-19, when the sector was the first to be provided with significant financial support by the federal government.
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.
Social Infrastructure: Investing in childcare helps support early childhood education and development, labour force participation and contributes positively to the local community.
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 that choose to invest in childcare can be confident that the operator will maintain high standards of safety and service delivery, resulting in a stable and reliable tenant.
Workforce Investment: The federal government has pledged an additional $3.5 billion to increase wages for childcare workers, enhancing workforce retention and sustainability.
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.
Introducing Jarra Childcare Trust
Jarra Childcare Trust presents a compelling opportunity for wholesale investors looking for stable income and potential capital growth from an essential service industry, with a long history of unwavering government support. Click here to find out more.
This blog is for information purposes only and does not form financial advice or investment recommendations. Fund performance is subject to risks and target returns are indicative, based on assumptions and are not guaranteed. For more information, please refer to the individual Fund Information Memorandums. The blog has been prepared without taking into account your individual circumstances, objectives, financial or taxation situation. You are advised to seek your own individual investment advice from a relevant tax and investment professional before making any investment decisions.
