The early childhood education sector in New Zealand has experienced a lot of change over recent years. It is an industry that has seen steady growth, partly fueled by population growth and the introduction of government policies like 20 Hours Early Childhood Education (ECE).
Due to this government support, the number of ECE services in New Zealand has increased by 7% in the past three years, with the number of qualified teachers increasing by 11.7%.
For many commercial property owners, this represents a new opportunity for property investment. But like any growing market, it’s important to be aware of the factors that affect it and the value of the property.
Before investing in an ECE property, you should know exactly what it is. The Ministry of Education states that childcare facilities can cover several different types, including:
Every ECE centre needs a licence. To obtain an ECE centre licence, there are a number of requirements that must be met, such as:
Population growth and government support and have contributed to the rise of ECE centres throughout New Zealand. As a growing market, the childcare sector has seen a lot of interest from commercial property investors.
What rental prices can you expect out of ECE centres? Rentals on childcare facilities are generally calculated on the basis of a rate per licensed child, per annum. Because of this, the size of the facility is a significant factor in rental prices.
This can be broken up into two main types: converted residential dwelling and purpose-built facilities.
To give you an example, in Tauranga, converted residential dwellings can lie between $1,500 and $2,000 per child, whereas purpose-built facilities tend to be higher, priced between $1,750 and $2,750 per child.
In the past, converted residential dwellings were commonplace, but due to the recent growth of ECE centres, the market is now dominated by purpose-built facilities.
If you are a commercial property owner, there are several things you should consider when investing in ECE centres. As with any investment property, the potential value is determined by the overall quality of improvements, location and sustainable income (which is driven by the quality of service).
There are several factors which affect rent, many of which are unique to ECE properties, such as:
What does this mean for property investors? Sales evidence indicates that childcare centres show similar levels of return to the wider market for commercial property. While ECE centres present a good investment opportunity, not every property is the same and there are many things to take into account.
If you’re looking to invest in an ECE centre, here are a few questions to ask yourself and your valuer:
Our TelferYoung valuers as well experienced in the commercial property market and can provide valuable insights and advice for those looking to invest. If you’re looking to enter into ECE property investment and need some advice, talk to your local valuer today.
Posted 12 months ago