fbpx

Child Care and Aged Care Facilities. A Challenge for Developers

  1. Home
  2. /
  3. Blogs
  4. /
  5. Child Care and Aged Care Facilities. A Challenge for Developers
Child Care and Aged Care Facilities

The Australian demographic is made up of many different groups. In this article, we focus on the commercial development of the industries that cater for the aged (or aging) and the early childhood sectors. Both require specific services and facilities to enhance education, mobilisation (directly and indirectly) and quality of life. Although at opposite ends of the aging spectrum, these two societal classes have become an industry in themselves and have developers striving to answer their needs, creating an opportunity for investment along the way.

Challenges developers face when investigating the viability of a site for a child care centre or aged care facility are similar. Top of the list would be government requirements and standards set for space. There is also the cost factor.

Inner city areas are squeezed for space. On average, a child care centre uses 1000-3000 square metres of indoor and outdoor space. Mix this with an intensely competitive child care market and there is not much scope for a developer here. In regional areas however, larger pieces of land are easier to source. The downside is that regional areas do not have the same level of demand.

This brings into play the new residential areas that are in between an inner-city metropole and a regional centre. These are residential hubs that promise a lot but are not yet established so the risk is considered higher.

Developers have had to be creative with the space they do have. In the case of well-established suburban areas close to a city centre, a child care centre is now more commonly part of a multipurpose building. There are more and more cases of child care facilities being part of a residential development, much like we see the integration of retail and residential. In doing this, developers must commit to innovation in the design and planning of a centre, using the allocated space cleverly to maximise its potential and comply with government planning laws.

Child Care and Aged Care Facilities

For aged care facilities, it is much the same. Strategic planning has led to a combination format where aged care is mixed with retirement centres, offering a comprehensive solution that can adapt as the residents’ needs change. These are more commonly known as independent living for the retired residents and supported living for those requiring some level of care. This concept has provided the solution to the urban development issue of access to land. Developers are now able to utilise more vertical designs rather than sprawling estates.

People seeking this type of accommodation are more often looking in their own locality to remain connected to their support network, family or at least familiar surrounds. By creating aged care precincts that resemble a modern residential development in terms of communal feel and aesthetics, it is easily integrated into already established suburbs. This is not only an integration of a building but the assimilation of this sector so they are not left feeling ostracised or set out to pasture.

The building criteria differs from child care facilities, as they aim to cater for accessibility first and foremost. This means close attention to design of communal spaces, thoroughfares and living rooms, allowing ease of transition between the spaces and different levels of care, as required.

Another challenge is the prohibitive cost of building facilities for aged care and child care. Set up costs are one thing but there is also the on-going cost of educational programs, approval process and licence procurement, medical provisions and the biggest of all, labour. These factors can deter investors and as a result developers may shy away from this as a use for their land.

Colliers International recently published a white paper about the Early Childhood Development and Care (ECDC) industry which highlights the favourable aspects of this industry as an investment opportunity. If developers are looking to retain ownership of the property and can withstand the hurdles of the approval process and licence applications, most centres enjoy long term leases. 20 year leases are becoming more common with initial leases between 10 and 15 years plus options to extend. If you are looking to offload the property, Brian McInally of Colliers’ Associate Director of Transaction Service – Childcare estimates an average sale price for a child care centre between $1.5 and $6 million with yields up to 7%.

Add to this the fact that this sector uses the triple net lease tenancy agreement. Unlike standard lease agreements, this one stipulates the operators of the business are responsible for maintenance, insurance and property taxes, not the landlord.

Government support for these industries has made it more appealing to both investors and developers. The federal budget announcements made earlier this year included an adjustment to the childcare rebate system commencing July 2018. This offers a scaling system of the childcare rebate. Starting from a 20% rebate for families with an annual income between $250,000 to $340,000, up to an 85% rebate for households earning less than $65,000. This works to increase demand in the industry, therefore making it more attractive to investors. With the reality of balancing full-time work with raising a family, paired with renewed government incentives, the child care industry shows no signs of slowing.

In a bid to plan for future demand, Brisbane City Council has provided incentives to developers, reducing infrastructure charges and streamlining the approval process for aged care facilities.

As developers and investors see increasing potential in these sectors our communities are embracing a new found diversity. More government incentives will further encourage growth, property development and commercial investment opportunity notwithstanding.

SOURCE – https://www.realcommercial.com.au/news/develop-or-buy-the-key-childcare-question

https://www.theurbandeveloper.com/childcare-australias-golden-investment-opportunity/

https://www.theurbandeveloper.com/housing-elderly-answer-call/

https://www.brisbane.qld.gov.au/sites/default/files/20160916-aged-care-accommodation-incentives-fact-sheet-sept-2016.pdf.pdf

DISCLAIMER – Alleura recommends each individual seek the services of a qualified service provider before undertaking any financial investment. The information provided here is for general information purposes only. It is not intended as financial or investment advice.

Child Care and Aged Care Facilities

For aged care facilities, it is much the same. Strategic planning has led to a combination format where aged care is mixed with retirement centres, offering a comprehensive solution that can adapt as the residents’ needs change. These are more commonly known as independent living for the retired residents and supported living for those requiring some level of care. This concept has provided the solution to the urban development issue of access to land. Developers are now able to utilise more vertical designs rather than sprawling estates.

People seeking this type of accommodation are more often looking in their own locality to remain connected to their support network, family or at least familiar surrounds. By creating aged care precincts that resemble a modern residential development in terms of communal feel and aesthetics, it is easily integrated into already established suburbs. This is not only an integration of a building but the assimilation of this sector so they are not left feeling ostracised or set out to pasture.

The building criteria differs from child care facilities, as they aim to cater for accessibility first and foremost. This means close attention to design of communal spaces, thoroughfares and living rooms, allowing ease of transition between the spaces and different levels of care, as required.

Child Care and Aged Care Facilities

Another challenge is the prohibitive cost of building facilities for aged care and child care. Set up costs are one thing but there is also the on-going cost of educational programs, approval process and licence procurement, medical provisions and the biggest of all, labour. These factors can deter investors and as a result developers may shy away from this as a use for their land.

Colliers International recently published a white paper about the Early Childhood Development and Care (ECDC) industry which highlights the favourable aspects of this industry as an investment opportunity. If developers are looking to retain ownership of the property and can withstand the hurdles of the approval process and licence applications, most centres enjoy long term leases. 20 year leases are becoming more common with initial leases between 10 and 15 years plus options to extend. If you are looking to offload the property, Brian McInally of Colliers’ Associate Director of Transaction Service – Childcare estimates an average sale price for a child care centre between $1.5 and $6 million with yields up to 7%.

Add to this the fact that this sector uses the triple net lease tenancy agreement. Unlike standard lease agreements, this one stipulates the operators of the business are responsible for maintenance, insurance and property taxes, not the landlord.

Government support for these industries has made it more appealing to both investors and developers. The federal budget announcements made earlier this year included an adjustment to the childcare rebate system commencing July 2018. This offers a scaling system of the childcare rebate. Starting from a 20% rebate for families with an annual income between $250,000 to $340,000, up to an 85% rebate for households earning less than $65,000. This works to increase demand in the industry, therefore making it more attractive to investors. With the reality of balancing full-time work with raising a family, paired with renewed government incentives, the child care industry shows no signs of slowing.

Child Care and Aged Care Pie Chart

In a bid to plan for future demand, Brisbane City Council has provided incentives to developers, reducing infrastructure charges and streamlining the approval process for aged care facilities.

As developers and investors see increasing potential in these sectors our communities are embracing a new found diversity. More government incentives will further encourage growth, property development and commercial investment opportunity notwithstanding.

SOURCE – https://www.realcommercial.com.au/news/develop-or-buy-the-key-childcare-question

https://www.theurbandeveloper.com/childcare-australias-golden-investment-opportunity/

https://www.theurbandeveloper.com/housing-elderly-answer-call/

https://www.brisbane.qld.gov.au/sites/default/files/20160916-aged-care-accommodation-incentives-fact-sheet-sept-2016.pdf.pdf

DISCLAIMER – Alleura recommends each individual seek the services of a qualified service provider before undertaking any financial investment. The information provided here is for general information purposes only. It is not intended as financial or investment advice.

Previous Post
Melbourne’s Balancing Act – Housing Supply Vs Property Demand
Next Post
Property Purchase – The Alternative Options – Rent To Buy; Installment Contracts; Vendor Financing

Share This

Related Posts

Menu
Translate