Childcare yields continue to compress as CBRE sell another centre for close to 5.0%

19 April 2024

CBRE’s Australian Healthcare and Social Infrastructure Team have transacted yet another premium early learning investment. The sale marks close to 3 deals in three weeks for the team who are re-defining yield expectation in the sector with all three deals occurring at yields below returns of 5.3% across price points from $8-$17.5 million.

The most recent sale announcement is 2 Pinkhill Boulevard in Beconsfield (VIC). The subject property which is almost 2 years old is leased to Explorers Early Learning on a 15-year term with further options. The sales price of $8,000,000 reflects a yield of 5.05% – well below the current cost of debt.

The property was sold by Sandro Peluso, Marcello Caspani-Muto and Jimmy Tat who expect further transactions across the country to be announced imminently.

Sandro Peluso said “The past 3 transactions can leave no question in investor minds – the buy side window of opportunity is rapidly closing if it hasn’t completely concluded already. There is a finite supply of modern and quality childcare investments available in the marketplace and the number of opportunities is only shrinking with continual feasibility challenges for developers in metropolitan locations.

The lack of supply will see further comprehension in yields, and that is before we see the forecast reduction in rates at some point in the coming 6-18 months. This will only catalyse the yield compression we are witnessing firsthand in the space.”

Marcello Caspani-Muto said “The majority of our transaction are occurring via private capital or syndicates. These buyers continue to take a medium to long-term view of their passive investments and are willing to overlook the short-term cost of borrowing (if they are borrowing funds at all) to secure their investment future for the next 15+ years.

A more proactive approach to buyer education has also been critical in achieving these results. Cash flow analysis, cost of investing at benchmarked LVR’s vs leaving funds in the bank and so on. It’s more important than ever to spend time educating an assisting private capital, particularly as many are first time investors in the space.”

The above transaction follows the team’s sales announcements of 46 Dendy Street, Brighton and 86 Springvale Road, Nunawading over the past month at price of $17,500,000 and $12,800,000 respectively.