Feasibility Study for a New Childcare Centre: What to Include

A feasibility study is the difference between a childcare development that generates strong returns and one that bleeds cash for years. Yet most developers skip it — or worse, rely on a one-page demand summary from a planning consultant and call it done. A proper feasibility study for a childcare centre covers five areas: demand, site, cost, revenue, and risk. Get all five right and you have a project worth backing. Miss one and you are guessing with millions of dollars.

Why Feasibility Matters More in Childcare

Childcare is not like building a warehouse or a retail strip. You cannot pivot the use if demand disappoints. A purpose-built childcare centre has limited alternative uses — the outdoor play areas, child-height fittings, and regulatory design requirements mean you are locked into a single-purpose asset. If the economics do not work, there is no easy exit.

The stakes are also higher than most developers expect. According to Loumain’s 2025 construction data, a purpose-built childcare centre costs $30,000 to $35,000 per licensed place in construction alone — before land acquisition. For a 100-place centre, that is $3 million to $3.5 million just to build. Add land, DA costs, professional fees, and fitout, and total project costs in metropolitan Sydney can exceed $5 million to $8 million depending on the site.

Component 1: Demand Analysis

The demand analysis answers one question: will enough families in this catchment area use your centre to make it financially viable?

Population and demographics. Start with ABS census data for the Statistical Area 2 (SA2) around your proposed site. You need the number of children aged 0–5, projected population growth over the next five to ten years, household income levels, and female workforce participation rates. Areas with high workforce participation and growing young families generate the strongest demand.

Existing supply. Count every licensed childcare place within the primary catchment (typically a 2–3 kilometre radius, or a 5–10 minute drive in suburban areas). According to the Mitchell Institute at Victoria University, roughly 35% of Australians live in areas classified as “childcare deserts” — neighbourhoods where there are more than three children per available childcare place. If your site is in or near a childcare desert, the demand fundamentals are strong.

Supply pipeline. This is the step most developers forget. Check council DA records for any childcare centres with development approval that have not yet been built. A site may look undersupplied today but have three approved centres in the pipeline. According to the ACCC Childcare Inquiry, the supply of long day care places in Australia has grown 69% since 2013 — from 401,000 to 675,000 places — through over 2,700 new centres and expansions. Your site needs to absorb its share of that growth and still have room.

The ratio test. Calculate the children-per-place ratio for your catchment. A ratio above 2.0 suggests undersupply and a viable site. Below 1.5, you are entering a competitive market where filling places will take longer and fee pressure is real.

Component 2: Site Assessment

Not every site that can get a DA should get one. The feasibility study needs to assess the site’s commercial viability, not just its planning merit. For a detailed breakdown of the DA process itself, see our complete guide to childcare centre development applications on the ChildcareLink blog.

Visibility and access. Childcare centres rely on drive-by visibility and convenient drop-off. Corner sites with dual street access consistently outperform mid-block locations. Parents choose centres they pass on their commute — a centre tucked behind an industrial estate will struggle regardless of how good the service is.

Size and yield. A standard 80–100 place centre typically requires 1,500 to 2,500 square metres of site area, depending on the building footprint and outdoor play space requirements. Under the National Quality Framework, centres must provide a minimum of 3.25 square metres of unencumbered indoor space and 7 square metres of outdoor space per child. Calculate the maximum number of licensed places the site can support, then model revenue from that capacity.

Surrounding land uses. Proximity to residential areas, schools, and employment hubs drives demand. Sites near hospitals, universities, and business parks can support premium fee structures. Conversely, sites near heavy industry, major roads with poor pedestrian access, or flood-prone land carry risk.

Zoning and planning. Confirm the site’s zoning permits childcare use — under the State Environmental Planning Policy (Transport and Infrastructure) 2021, childcare centres are permissible in most residential and commercial zones in NSW, but specific council requirements vary. Check setbacks, parking requirements, and any 200-metre separation rules from other childcare centres in R2 residential zones.

Component 3: Cost Modelling

A robust cost model includes every dollar between today and the day the centre opens its doors.

Construction costs. National averages sit at $2,000 to $3,500 per square metre for childcare buildings, or $30,000 to $35,000 per licensed place, according to Loumain’s 2025 data. Metropolitan builds trend toward the higher end; regional projects can sit lower but may face trade availability constraints.

Land acquisition. The most variable cost. In Sydney, childcare-zoned sites in high-demand catchments can sell for $2 million to $5 million or more. In regional centres, $500,000 to $1.5 million is more typical. The feasibility model must use a realistic land cost for the specific site — not an average.

Professional fees. Budget 12–18% of construction costs for architects, town planners, acoustic consultants, traffic engineers, landscape architects, and legal fees. Childcare DAs are complex — they require more consultant reports than most commercial developments.

Fitout and equipment. Purpose-built childcare fitout — including kitchen, laundry, child-sized furniture, playground equipment, and technology systems — typically adds $3,000 to $5,000 per place on top of base construction costs.

Holding costs. From land acquisition to centre opening, expect 18 to 30 months. That is 18 to 30 months of interest on any borrowed funds, land tax, insurance, and council rates — before a single dollar of revenue arrives.

Component 4: Revenue and Financial Projections

This is where the feasibility study becomes a financial model. You need to project income, expenses, and returns over a minimum five-year horizon.

Daily fees. Research comparable centres in the catchment. Fees in metropolitan Sydney for long day care range from $120 to $200+ per child per day depending on location and quality. Regional centres typically sit at $90 to $140. Your feasibility study should model conservative fee assumptions — do not assume you will be the premium operator in the area on day one.

Occupancy ramp-up. This is the critical variable that determines whether a project succeeds or fails. New childcare centres do not open at 80% occupancy. According to the ACCC, breakeven occupancy for childcare centres ranges from 50% to 85% depending on the cost structure. A realistic ramp-up for a new centre in a well-chosen location is 40–50% in year one, 60–70% in year two, and 75–85% by year three. Some centres in competitive markets take four to five years to reach mature occupancy.

Child Care Subsidy (CCS) impact. CCS does not go to the operator — it reduces the gap fee parents pay. But it dramatically affects demand. The three-day guarantee introduced in January 2026 means every child is now entitled to subsidised care for at least three days per week regardless of parental activity, expanding the potential market. Factor this into your demand projections.

Staffing costs. Typically 60–70% of total operating costs. Staff-to-child ratios are regulated — 1:4 for children aged 0–2, 1:5 for ages 2–3, and 1:10 for ages 3–5 in most states. Model actual staffing costs using current award rates plus on-costs (superannuation, workers’ compensation, leave provisions). The Fair Work Commission’s 3.5% minimum wage increase for FY2025/26 should be factored in.

Occupancy costs. If the centre will be leased to an operator, the rent becomes the investor’s revenue and the operator’s cost. Net rents for childcare centres typically range from $1,200 to $7,000 per licensed place per annum depending on location. For a freehold going concern, model occupancy costs as a percentage of revenue.

Operating expenses. Food, consumables, utilities, insurance, maintenance, marketing, and administration typically account for 15–25% of revenue. Do not underestimate insurance — childcare centres face higher premiums than standard commercial properties.

The viability test. A feasibility study should model three scenarios: base case (realistic assumptions), upside (faster ramp-up, higher fees), and downside (slower ramp-up, lower occupancy). If the downside scenario still produces an acceptable return within five years, the project has genuine merit.

Component 5: Risk Assessment

Regulatory risk. Changes to the National Quality Framework, staffing ratios, or CCS policy can alter the economics overnight. The shift to a new NSW Early Learning Commission as the state regulator from December 2025 adds uncertainty during the transition period.

Competition risk. A new centre opening 500 metres away during your ramp-up period can extend your time to mature occupancy by 12 to 18 months. Monitor the DA pipeline continuously, not just at the feasibility stage.

Construction risk. Cost overruns and delays are common in childcare construction due to the specialised nature of the build. Budget a 10–15% contingency above your base cost estimate.

Staffing risk. The educator shortage is the single biggest operational risk in Australian childcare. Industry data indicates that approximately 90% of centres report difficulty filling positions. If you cannot staff the centre, you cannot fill the places — regardless of demand.

Tenant risk. If you are developing for lease, the quality of your operator-tenant determines the asset’s value. A long lease to a reputable operator with a strong NQF rating commands premium yields. A short lease to an unproven operator compresses what investors will pay.

When to Commission a Feasibility Study — and Who Does It

Commission a feasibility study before you commit to purchasing a site, not after. The cost of a professional feasibility study — typically $15,000 to $40,000 depending on scope — is a fraction of the cost of a failed development.

Specialist childcare feasibility consultants combine demographic analysis, planning expertise, and industry financial benchmarks. Generic property consultants often miss the nuances of childcare — particularly the ramp-up modelling and regulatory constraints that make this sector unique.

For developers and landowners evaluating whether their site is suitable for childcare use, a feasibility study is the essential first step. For investors assessing whether a childcare centre represents a sound investment, the feasibility study behind the original development tells you whether the fundamentals are solid or whether you are buying someone else’s optimistic assumptions.

The Bottom Line

A childcare centre feasibility study is not a formality — it is the document that determines whether your project makes money or loses it. Cover all five components: demand, site, cost, revenue, and risk. Model conservative assumptions and stress-test them. If the numbers work in the downside scenario, you have a project worth pursuing. If they only work in the best case, walk away.

Considering a childcare development? ChildcareLink provides specialist advisory services for developers, landowners, and investors evaluating childcare opportunities. Visit childcarelink.com.au or contact our team directly.

Sources

• Loumain (2025) — childcare construction cost data
• ACCC Childcare Inquiry Final Report 2024 — supply growth and breakeven occupancy
• Mitchell Institute at Victoria University — childcare deserts research
• IBISWorld — market size data
• ACECQA — NQF space requirements and service approvals
• Productivity Commission — Report on Government Services 2026
• Australian Government Department of Education — CCS and Three Day Guarantee data
• Fair Work Commission — wage increase data

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. ChildcareLink recommends seeking independent professional advice tailored to your specific circumstances before making any business or investment decisions.