Investment in the childcare sector set to increase

Investors are expected to re-engage in the early childhood education and care sector, after an interest rate induced slowdown in 2023. 

While the increased cost of capital and related borrowing risks slowed private and institutional investment last year, a range of underlying growth drivers are expected to propel the market according to a new CBRE review.

These include the return of international migration and more favourable government subsidies, which will help bolster operator growth in 2023.

CBRE Australian Healthcare & Social Infrastructure Director Jimmy Tat said staffing shortages had been one of the key issues for the sector, with many businesses having to operate at a much lower occupancy, despite the demand from families.

However, with the return of international migration these issues were expected to ease, allowing for growth in the industry. 

Recent changes to the Federal Government’s Child Care Package subsidies as well as the government’s support of childcare as an essential service will be another growth driver, strengthening the resilience of the investment market. 

“We’ve already seen the positive effects of these government changes and while there will be some ongoing challenges, most childcare operators are positive about the future and the industry’s overall and consistent growth,” Mr Tat said.

“In tandem, we expect to see increased investment from both private and institutional investors, underpinned by the childcare sector’s long leases, single tenant structure, and the stability of operating with significant government support,”