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Property leased to childcare centre an opportunity to acquire an in-demand asset class

Tags: Commercial

The land and buildings housing a popular childcare centre in Rotorua have been placed on the market for sale.

The freehold property, which has a Capital Value of $955,000, offers 312sq m of floor space on 1012sq m of land. It is located in the city’s southern fringe, close to Te Puia, Whakarewarewa Maori Village and the Redwood Forest.

The property is leased to Evolve Education Group until March 2024, with one six-year right of renewal, and generates $78,643 a year plus GST and outgoings.

Evolve Education Group owns more than 130 early childhood education (ECE) facilities around New Zealand. Its Sala Street centre, which operates under the name Learning Adventures Rotorua, is licensed for 50 children and offers modern facilities designed to encourage child development.

Bayleys sales agents Mark Slade and Brei Gudsell are marketing 21 Sala Street for sale by auction on Tuesday, May 8 at 346 Te Ngae Road.

Ms Gudsell says: “21 Sala Street is leased to a proven and experienced childcare operator until with options to extend to 2030. It is an opportunity for investors to acquire a high-quality, low-maintenance asset with long-term stability.

“And the underlying value of more than 1000sq m of land in a popular residential area will translate into substantial value at end of the lease term.”

Learning Adventures Rotorua operates out of three buildings in the area, with 21 Sala Street licensed for children aged two to five years. The other buildings cater to children aged three to five years and zero to two years.

The Sala Street centre is open from 7.30am to 5.30pm, to accommodate parental working. It has five onsite carparking spots and plenty of off-street parking to allow easy drop-offs and pick-ups.

It also offers easy access to main arterials and enjoys high levels of local amenity. Nearby are Pak'nSave and Countdown supermarkets and Central Mall Rotorua, which is home to a Farmers department store and the Warehouse - all of benefit to busy parents with children at the childcare centre.

Ms Gudsell says Learning Adventures centres are community-based early childhood education centres. Evolve Education Group describes them as "a vital link in the communities they serve, places where we respect the diversity of children, backgrounds and ethnicity, and where whanau are very welcome".

“Evolve Education Group runs 130 childcare centres plus the Porse and Au Pair Link home-based companies. It caters for children aged between zero and five years, and its network of childcare centres spans the entire country," she says.

Ms Slade says New Zealand’s high childcare participation rate has made childcare centres an in-demand sector for commercial property investors.

"Early childhood education is big business in New Zealand, with developers and investors seeking to capitalise on the surge in demand for places at childcare centres,” Mr Slade says.

“Since 2008, the proportion of children enrolled in early childhood education has risen from 93.6 percent to 96.6 percent, while time spent in ECE has reached an average of 21.7 hours a week, up from 13.5 hours in 2000. Public funding for the sector is reliable and secure, rising from $860 million in 2008 to almost $1 billion.

"It's hard to find a commercial property investment class that competes, and investors who have experienced their benefits tend to hold onto them."

The Government fully funds 20 hours of care a week for all children aged three, four and five. It has recently pledged to spend an extra $193 million over three years for ECE and increase funding for centres that employ 100 percent qualified and registered teachers. Its stated goal is to have 98 percent of children attending an early childhood service before starting school.

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