This growth is notable given the broader economic challenges, including rising interest rates and inflationary pressures.
The report details a record breaking 2023, where the NSW childcare sector achieved a turnover of $293.8 million, surpassing the pandemic-driven peak of 2021.
Despite economic headwinds, metropolitan childcare assets have remained an attractive proposition for investors, offering stable yields. The average yield across metropolitan areas stood at 4.93 per cent, showing little change, despite significant increases in the cash rate.
“Childcare centres are proving to be one of the most resilient asset classes in the current market,” said Peter Vines, director of RWC Western Sydney. “The stable yields, government support, and unique advantages such as land tax exemptions and tenant-paid outgoings make them a standout choice for investors, even in an uncertain economic climate.”
Western Sydney has emerged as a key area for childcare development, accounting for approximately one-third of all childcare sales in NSW. This strong performance is underpinned by the 716 new childcare projects in the pipeline across the state, with over 80 per cent concentrated in metropolitan areas.
“The growth in Western Sydney is a testament to the region’s increasing demand for childcare services, driven by population growth and urban development,” said Mr Vines. “However, developers need to carefully assess local demand and competition before proceeding, as oversupply could present risks in some areas.”
Government subsidies continue to provide strong support for the sector, with $3.36 billion allocated nationwide in Q1 2024 alone. In NSW, centre-based daycare remains the dominant form of childcare, accounting for 60.4 per cent of all children in care.
The sector faces unique challenges, including rising construction costs and ongoing labour shortages. These factors have led to a preference for single-level developments to control costs and reduce project complexity. While overall population growth is strong, a declining birth rate poses potential long-term challenges for the sector.
“Demographic shifts present both opportunities and challenges. The increasing population creates immediate demand for childcare services, but a declining birth rate could influence future growth. Strategic planning will be key to ensuring the long-term sustainability of the sector," Mr Vines said.
Childcare assets remain highly attractive for investors due to their unique features. The report encourages potential investors to focus on the long-term stability and the continued government support of the sector.
“With these unique advantages, childcare assets continue to perform well despite the broader economic uncertainty,” said Mr Vines. “For investors seeking security, childcare remains a standout option.”
