What a childcare centre costs to buy or build
Childcare is where operating business meets institutional property: the same centre can be a $375,000 business purchase or an $8.5m freehold investment depending on which layer you are buying. Here are both sets of numbers.
Buying an operating centre
| Measure | The numbers |
|---|---|
| Per licensed place, metro strong catchments | $30,000 to $45,000 |
| Per licensed place, regional | $15,000 to $25,000 |
| Owner-operated centres | 1.8 to 2.9x earnings |
| Professionally managed | 2.9 to 4.5x plus |
| Freehold investment cap rates | 4.25 to 5.25% metro, 5.25 to 6.25% regional |
Live examples run from a 46-place inner-Melbourne centre at $375,000 to a 110-place centre at $3m and investment freeholds above $8.5m. Occupancy is the multiplier's master: above 85% earns premium pricing, below 75% gets discounted.
Building one instead
Purpose-built centres cost $19,000 to $34,000 per approved place to construct depending on spec and state, excluding land and approvals, with the loose fitout, furniture, resources, outdoor equipment, kitchen, adding $150,000 to $400,000 on top. A 100-place build is therefore a $2m to $3.5m construction project before land, which is why most operators enter by buying or leasing rather than developing.
Financing childcare
Freehold going concerns fund at up to around 70% of valuation, leasehold operations at 40 to 60% depending on the lender. The freehold layer is classic property lending; the business layer prices on earnings quality and occupancy history. Buyer equity gaps are commonly bridged with property at roughly 6% to 9% p.a. as a working rule. Start at business acquisition finance or the property-backed guide.
Frequently asked questions
How much does a childcare centre cost to buy?
Metro centres in strong catchments price around $30,000 to $45,000 per licensed place, regional $15,000 to $25,000, with going concerns at 1.8 to 4.5 times earnings depending on management structure and occupancy.
How much does it cost to build a childcare centre?
Construction runs $19,000 to $34,000 per approved place excluding land, plus $150,000 to $400,000 of loose fitout, so a 100-place centre is a $2m to $3.5m project before land.
What occupancy should a centre have before I buy?
Above 85% attracts premium multiples; below 75% buyers discount. The occupancy history is the single biggest lever on price.
How are childcare purchases financed?
Freehold going concerns fund to around 70% of valuation, leaseholds 40 to 60% depending on lender, with buyer equity gaps commonly bridged against property.
Business layer or freehold layer, priced right
Tell us the centre and which layer you are buying and we will structure the funding, usually within a day.
This article is general information only and not financial, credit, or tax advice. Ventas Asset Lending is a finance broker, not a lender. Approvals are subject to lender assessment. Consider your own circumstances and speak to a qualified professional, including your accountant for any tax questions.