Market insight: Key factors shaping the Australian child care market for sellers

The Australian early learning sector is undergoing a period of structural adjustment 

Over the past year, a noticeable wave of child-care centres has come to market as long-standing operators reassess the balance between effort, risk and reward. At the same time, buyer demand remains active, though more selective than in previous cycles. More recently there have been a large number of announced centre closures from G8, Australia’s largest provider. So, what are the key forces shaping the market, what are buyers prioritising, and how are these dynamics influencing pricing and valuation outcomes for sellers?

Supply, demand and transaction activity

Recent months have seen a meaningful increase in centres being offered for sale. This reflects a combination of owner fatigue, staffing shortages, rising operating costs and heightened regulatory scrutiny. On average, most centre operators have seen occupancy decline between 5% and 8% due to changes in consumer demand, particularly at the infant care level.

Despite this increase in supply, transaction activity remains robust: hundreds of millions of dollars’ worth of centres have changed hands within a relatively short timeframe, and many transactions continue to occur off market through targeted buyer approaches rather than broad sale campaigns.

On the demand side, buyer appetite persists but has shifted. Large, private equity backed buyers have generally retreated from the market, while mid-sized operators and trade buyers remain active, particularly those seeking bolt-on acquisitions close to existing operations. Buyers are increasingly focused on centres that offer quality operational continuity, manageable risk profiles and alignment with their current geographic footprint.  

Demographics continue to underpin demand. Population growth in outer suburban corridors and regional centres is driving the need for additional early learning capacity. In Queensland, for example, centres with circa 90–100 licensed places often represent a 'sweet spot', balancing staffing, occupancy and operational efficiency more effectively than very large facilities.

Buyer behaviour and market consolidation 

A key trend is the increasing sophistication of buyers. Rather than chasing scale at any price, acquirers are applying more rigorous filters around risk management frameworks, compliance history, staff stability, occupancy levels and earnings quality. While there is some appetite for turnaround opportunities, these are typically pursued by buyers with specialist operational capability rather than general investors.  

Developers have also adapted to market conditions. Centres that were previously built with the intention of an early sale are now more commonly being operated in-house or under management agreements until a more favourable exit point emerges. This reflects a market where operational performance, not just physical assets, drives value.  

Cost pressures and profitability

Rising costs are central to current valuation discussions. Labour shortages and wage inflation have materially increased staffing costs, while heightened compliance requirements mean many operators now budget for dedicated compliance expertise. Rent, historically a manageable proportion of revenue, has also increased, further compressing margins. Historically, rents typically ran at 8% to 15% of revenue. Now, materially higher ratios are being observed in many centres, amplified by the nationwide contraction in demand for places.

Occupancy has therefore become a critical determinant of profitability. Centres typically need to operate at or above approximately 80% occupancy to generate attractive sustainable earnings under current cost structures. For some owners, this has prompted a strategic decision: either scale the business to spread overheads or exit the sector while buyer demand remains supportive.  

Regulation, compliance and transaction risk 

Regulatory oversight and compliance history now play an outsized role in transaction outcomes. Ongoing or unresolved investigations can derail deals during due diligence, with buyers unwilling to accept open-ended regulatory risk. As a result, centres with robust systems, transparent reporting and a clean compliance record attract stronger buyer interest and smoother transaction processes.  

Landlord consent has also emerged as a friction point, particularly where purchasers are new operators or less established groups. Early engagement with landlords and clear communication around buyer credentials can be critical in preventing late stage disruptions to a sale process.  

Geographic variations 

Location clearly continues to influence pricing.

Demand and pricing for childcare centres vary by location. Major growth corridors like Brisbane, Western Sydney, and Melbourne’s inner suburbs see strong demand due to population growth and competition for quality centres. Affluent urban suburbs can command higher fees and valuations because families are willing to pay for convenience and quality. Meanwhile, undersupplied areas and regional markets are also seeing rising interest, as shortages create opportunities and drive premium pricing. Overall, buyers focus on locations with strong demographics, limited competition, and growth potential. Growth areas like Hunter Valley and Central Coast in NSW are also high demand. Buyers often buy in clusters of two or three to manage labour shortfalls, as they can share staff across the cluster. 

Pricing and valuation trends

Peritus Childcare Sales has recently sold and settled over $250m of Leasehold (Business Sales) with EBITDA multiples ranging from 4x – 7x. While transaction data is not always publicly transparent, recent activity indicates that buyers are still prepared to pay attractive multiples for high-quality centres. Valuations are increasingly grounded in both the historical track record and realistic forecast projections, taking into consideration the changing market dynamics and catchment area fundamentals. Centres located within strong catchment areas with sustainable rental levels with modern facilities, stable staffing, high occupancy and strong compliance frameworks tend to command a premium, while those with operational weaknesses, challenging catchment fundamentals and unsustainable rental levels face pricing pressure or extended sale timeframes.  

High-quality portfolios remain attractive. Groups of five to 15 centres are in demand, but at one to two times Price/Earnings multiples lower than larger groups. Therefore, circa five to seven times Price/Earnings multiple is generally top of the range for small to mid-range groups.

What this means for sellers 

For owners considering a sale, preparation is critical. There is a wall of centres on the market for sale, so vendors need to differentiate their centre via the preparation and marketing campaign. Normalising the centres financials, having a data room ready with the key due diligence material is imperative not only to speed up the overall sale process but also to protect vendors from a disclosure perspective.

Buyers are scrutinising compliance, forward looking cost structures and operational resilience more closely than ever. Addressing these issues in advance, rather than during due diligence, can materially improve both transaction certainty and pricing outcomes. In a market that rewards quality and transparency, a well prepared centre remains a highly saleable asset.

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