Sentiment has improved from 2013 to to mid 2017 with a strong movement in prices noted to date. Agents report that listings have been limited as operators and current owners believe that they are in possession of a greatly appreciated asset with a high cash flow component and hence selling is seen as unwarranted in the current market.
The has resulted in premium now being paid for any centre now listed in the market due to scarcity value of listings.
The corporate buyers have taken to approaching and canvassing operators directly via cold calling in order to facilitate acquisitions and this has caused in itself a two tier market in which corporate entities will pay over and above the retail buyers valuations.
Due to the economy performing softly overall a premium has been placed on income producing or high cash flow businesses, of which childcare falls into that category, resulting in further segmentation and driving the childcare market in general.
There has been an active interest in investment child care centre (lessors’ interest) sales with investors being driven by the current low cash-rate cycle in relation to yields as opposed to traditional child care investors in the past focusing on fundamentals. These investment sales are at times now curiously priced beyond combined freehold going sales as investors seek passive investments only. Yields have therefore fallen in Sydney and regional areas.