Strong Leasing Demand for Childcare Centres

18 April 2021

A premium early learning centre has been leased off the plan by CBRE’s specialist Healthcare & Social Infrastructure team making it their third leasing transaction in as many months in 2021.

Positioned in the blue-chip suburb of Bentleigh, 58 Patterson Road features industry leading design with construction set to commence in the coming months. Designed by Point Architects, specialists within the early learning space, the centre will also feature basement parking for 27 vehicles.

The centre will be permitted for 124 places and has been leased By Inspire Early Learning at an annual commencing rental of $540,000p.a across a total building area of 869sqm ($4,254 per childcare space).

CBRE’s Jimmy Mr Tat said “Demand remains incredibly strong within the child care leasing market for well researched and selected locations. Long gone are the year where anyone could by a site in the growth corridors of Melbourne, get a planning permit and look to lease or even sell for a premium. Sites need to be well researched and selection supported via a details demographic assessment and paired with experienced design and architecture within the sector. Well identified metro Melbourne locations with strong demand or market gaps will paired with a relevant and experienced database will attract the highest quality providers possible for any development.”

“This is now one of multiple child care centres we have leased to Inspire Early Learning who’s brand continues to grow a rapid yet sustainable pace. Their Montessori teaching style has been highly popular amongst families over multiple years and this is reflected in their strong overall occupancy rates and differentiated service offering.

Director of Inspire Early Learning, Stephan Yang said “ The team at Inspire are excited by the prospect of bringing another high quality centre to Bentleigh, but particularly one which focuses on the provision of learning under the Montessori framework.”

The Centre is being developed by George Babatsias of Jet Oil Pty Ltd whose family owned petroleum business has held the site for over 20 years.

The CBRE team comprises Sandro Peluso, Josh Twelftree, Jimmy Tat and Marcello Caspani-Muto.

Further Information

We are often asked about the single tenant exposure risk that a Childcare Centre investment has. Our response to this question is ;

If a Centre is well located and well designed it should attract a quality operator. Typically Centres are designed and built with the co-operation of the Operator so it essential at the early stage to pick a well credentialed and experienced operator.

The Childcare Centre operator is generally likely to run into problems if it either has too much debt in the business (as was the case for ABC Learning) or cannot attract high quality staff to maintain minimum national standards. In the first instance, that tenant will likely attempt to sell their business to a new operator who seek to rebuild the business. In the worst case, the tenant will default on the lease and the owner will need to find a new operator, which should be possible if the centre is well designed.

The leasing risk is also similar to other single tenant exposures for example; most industrial buildings, fuel stations and fast food sites all have single tenant risk. the quality of the lease covenant also comes down to the strength and credit quality of the specific tenant.

The key to success in each of these is to ensure the location and design attributes are right for the market, or very easily modified.

Disclaimer: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.