The ECEC freehold market strength persists – In conversation with Adam Thomas, Director Burgess Rawson
As we move through 2021 the demand for freehold early childhood education and care centres has shown little sign of subsiding as investors buoyed by actions from policy makers and signals from monetary authorities continue to seek opportunities to add to their portfolios.
The Sector recently spoke with Burgess Rawson Director and Childcare Specialist Adam Thomas about what continues to underpin demand, what investors are currently focused on and also a bit more detail on a significant portfolio his team are now actively marketing.
Burgess Rawson is Australia’s largest ECEC real estate and business broker. The agency conducts freehold auctions on a six-weekly basis at which ECEC centres from across the country are sold to an increasingly large pool of investors.
Demand for ECEC freeholds remains strong – What are the drivers here?
After a strong start to 2021 the momentum at the half year point appears to be very much intact as investors were buoyed by the Federal Government’s decision to provide more support for Australian families via CCS amendments starting in 2022.
The changes are expected to see over 250,000 Australian families benefit from improved affordability which in turn is expected to see increases in demand for ECEC services.
But although significant, this was not the only boost for the ECEC freehold market in the last several months with comments from the Reserve Bank of Australia’s Governor adding an important signal too as Mr Thomas explained.
“Many investors have become increasingly comfortable with the notion of ECEC being an essential service which is a really important aspect when talking about reasons to purchase an ECEC free hold property.”
“But the other very important variable is interest rates and if one looks at Governor Lowe’s recent statements on monetary policy it is clear that the RBA remains very grounded when it comes to inflation expectations which in turn mean rate rises are still likely a long way off.”
“With affordability measures in the pipeline and interest expectations very much anchored for the foreseeable future we believe conditions remain very supportive for ECEC freehold demand.”
Buyers interest for non metro persists – Where are their key geographical focuses?
The move away from metro and CBD services has persisted over the course of 2021 cementing a trend that started with the onset of the COVID-19 pandemic and has been reinforced by the multiple lock downs that have been enforced since.
Instead investors have remained focused on urban and suburban opportunities as well as regional areas where yields tend to be a bit higher than average.
“The focus of investors on urban and suburban opportunities is very much intact. This is not too much of a surprise given the environment we all now live in,” Mr Thomas said.
“What is notable however, is that we are seeing more opportunities and interest arise in suburbs which would not have historically been considered particularly desirable for investors but are now presenting as interesting due to the fact that existing ECEC freeholds in those communities tend to be a bit older and a replacement cycle with new stock is underway.”
“The other key trend is the interest in regional sites which has continued unabated as investors look to lock in the higher yields that they offer their urban counterparts.”
Demand mix broadening out – Who are the key investors in the current environment?
As confidence has continued to build in the market the types of investors, in terms of both their size and their location, has also continued to broaden with interest from private small to medium buyers, many of them new to the space, being joined by increased levels of larger institutional investors and overseas investor interest.
“The last few months we have continued to see strong interest from mostly urban based private investors who have been consistently active since the second half of 2021.” Mr Thomas said.
“These investors tend to focus on individual assets that are presented in our portfolio auctions and given the fundamentals we expect that to continue.”
“That being said, we are also seeing an increase in inquiries from larger domestic investors and overseas investors who have interest in specific areas and or larger baskets of properties.”
“A good example of that is the recent launch of a 21 development site portfolio that is being marketed for sale by Burgess Rawson in which a wide range of different centres, all with leases to established operators, is being offered for sale.”
“So with the combination of our regular portfolio auctions and these larger opportunities presenting themselves there is certainly something for every investor which helps explain the broadening of interest that we have seen.”
“It is definitely an exciting time to be a part of the ECEC sector and we look forward the next few months with interest.”
To learn more about Burgess Rawson’s ECEC services please click here or to speak with Adam Thomas directly please email here or call on 0418 998 971.