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Burgess Rawson release Early Education Insights Report amidst robust investor interest
Jason Roberts
Jul 18, 2023
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Burgess Rawson, the early childhood education and care (ECEC) focused real estate and business broker, has released its inaugural Early Education edition of its Burgess Rawson’s Industry Insights Report series.
The report, which aims to highlight key trends and developments in the early education freehold property market, is the most recent version of the series and draws on the knowledge and experience of the Burgess Rawson team led by Adam Thomas, Managing Director, Queensland.
“As Australia’s undisputed leader in the sale of early education investments, Burgess Rawson has transacted 77% of all assets offered to market in the last 18 months,” Mr Thomas highlights in the Welcome section of the report.
“Unrivalled experience, expertise and industry data has put us at the forefront of this exciting asset class, and we’re excited to share such knowledge with you in this publication.”
Key insights in this years report are as follows:
- Cap rates - As with most industries, metropolitan early education assets have historically transacted at a sharper cap rate than those in regional locations. That said, a softer average cap rate for metro assets was experienced in the period since COVID-19 started but this has reversed in more recent quarters.
- Cap rates for long versus short term leases are very similar - While long term leases, especially to national tenants, will always provide security, short term leases also provide an opportunity for investors. This is evidenced by a cap rate difference of only 0.02% when comparing short to longer term leases.
- Cap rate spreads have narrowed dramatically - The difference between the yields paid for transactions on a monthly basis has narrowed materially over the last seven years and now stands at 111 basis points, whereas, reflecting as far back as 2016, the cap rate spread was 342 basis points.
- Cap rates by state - Victoria is a standout with the average cap rate tightening to 4.99%, the firmest in the country. New South Wales cap rates softened by 25 basis points, to 5.47%, while Queensland softened by 18 basis points, to 5.2%. Western Australia has the highest returns at 5.88% making the state a standout opportunity for investors.
- Rents - Early education rents across Australia have increased year on year. Over the past decade, rents have grown by 87%, and by 27% since 2020 alone. Since 2020, South Australian rents have grown by 49.3% to $3,760 making it the most expensive in the country.
- Sales prices - Monetary policy tightening has resulted in contracted LVRs and this has played a part in the total investment quantum available to investors. As a result, smaller place centres on the same rents have sold more readily in 2022. On a per place basis, the average sale price was $66,900 with the number of places per centre averaging 90.
To learn more about the highlighted insights above and additional developments in the Early Education Insights Report click the link to download the document.
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