Why childcare operators are ideal Sydney City Fringe tenants

As commercial real estate agents specialising in Sydney’s vibrant city fringe, we’ve witnessed the dynamic interplay between residential growth, educational institutions and essential community services. Among these, the demand for high-quality childcare centres stands out as a consistently strong and increasingly critical need, particularly close to major employment and education hubs like Sydney University, UTS, the Royal Prince Alfred Hospital (RPAH) and now, the University of Notre Dame Australia’s Sydney Campus. This article will delve into the compelling reasons behind this demand, explore the existing landscape and highlight the attractive proposition that childcare operators represent for commercial landlords in our sought-after territory.

The concentration of professionals and academics around these key institutions fuels a significant need for accessible and reliable childcare. Sydney University, UTS and the University of Notre Dame Australia are major employers and attract a large cohort of students, many of whom are parents. Similarly, RPAH is a substantial employer with a diverse workforce operating across various shifts. These individuals require childcare solutions that are conveniently located, allowing for seamless transitions between work or study and family responsibilities. The time saved by having a childcare centre nearby is invaluable for busy professionals.

To gauge the existing supply, a survey of the area reveals a number of established childcare facilities.

Quantifying the precise potential demand is complex and requires detailed demographic data, including the number of staff and students with young children, their preferred childcare arrangements (long day care, occasional care, etc.) and the capacity of existing centres. However, we can infer strong potential based on the number of individuals employed or studying at these institutions. The University of Sydney employs thousands of academic and professional staff and has a large student population. Even a small percentage of these individuals requiring childcare would generate significant demand. Similar to Sydney University, UTS has a substantial workforce and student body located across multiple campuses in the city fringe. Located in Chippendale, the University of Notre Dame Australia (Sydney Campus) contributes to the demand for childcare in the immediate vicinity. Royal Prince Alfred Hospital, a major tertiary hospital, RPAH operates 24/7 and employs a vast number of medical, nursing, administrative and support staff working various shifts. This creates a unique demand for flexible childcare options.

Beyond these anchor institutions, the surrounding suburbs are also experiencing residential growth, further increasing the need for local childcare services. Suburbs like Surry Hills, Glebe and Camperdown are popular with young families and professionals who value proximity to the city and these major employment hubs.

To further illustrate the demand, it’s crucial to consider other organisations in the vicinity that contribute to the pool of potential childcare users.
These include:

Medical research institutes: Organisations like the Centenary Institute, located near RPAH and Sydney University, employ numerous researchers and support staff with families.
Specialised medical centres: The presence of specialised medical centres and clinics around RPAH attracts healthcare professionals who often work long and irregular hours.
Technology companies: The growth of the technology sector in areas like Chippendale and Ultimo has led to an influx of young professionals who may require childcare.
Creative industries: Surry Hills and surrounding areas are home to many creative agencies, design firms and media companies, employing individuals with varying work schedules.
Government agencies: Various government departments and agencies have offices in the city fringe, with employees who are potential users of childcare services.

The data indicate a mix of university-affiliated, private and community-based centres operating in and around these key areas. Many report having waiting lists, suggesting that demand currently outstrips supply.

While specific profitability figures for individual childcare centres are not readily available publicly, the childcare sector in Australia is generally considered robust. Government subsidies, such as the Child Care Subsidy (CCS), help to make childcare more affordable for families, underpinning demand and revenue for operators. High occupancy rates, driven by strong demand in areas like the Sydney city fringe, contribute to the financial viability of well-managed centres.

Childcare operators are great tenants

From a commercial landlord’s perspective, securing a reputable childcare operator as a tenant offers numerous advantages:

Long-term leases: Childcare businesses typically seek long lease terms (often 5-10 years with options) to provide stability for their operations and families. This translates to consistent rental income for the landlord.
Reliable income stream: The essential nature of childcare services, coupled with government support, makes these businesses relatively resilient to economic fluctuations, ensuring a reliable income stream for the landlord.
Strong community connection: Childcare centres become integral parts of the local community, fostering goodwill and potentially attracting other complementary businesses to the area.
Lower turnover risk: Once established, childcare centres tend to have lower tenant turnover compared to other commercial uses due to the significant investment in fit-out, licensing and community relationships.
Positive social impact: Hosting a childcare centre contributes positively to the social infrastructure of the area, supporting working parents and the overall wellbeing of the community.
Potential for premium rents: Given the high demand and specialised requirements of childcare facilities (e.g., outdoor play areas, specific safety standards), landlords may be able to command premium rental rates for suitable properties.
Less susceptible to online disruption: Unlike some retail sectors, childcare is a service that requires a physical presence and direct interaction, making it less vulnerable to competition from online businesses.

From our observations, the Sydney city fringe, particularly around Sydney University, UTS, the University of Notre Dame Australia and RPAH, presents a compelling market for childcare centres. The confluence of major employment and education hubs, coupled with residential growth and the presence of numerous other organisations, underpins a strong and growing demand for these essential services. For commercial property owners in this territory, partnering with a quality childcare operator offers a secure, long-term and socially responsible investment opportunity. As the needs of working families continue to evolve, the demand for accessible and high-quality childcare on their doorstep will only intensify, making this sector a thriving prospect for astute commercial real estate ventures.

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Contact us at Ray White Commercial Sydney City Fringe