What Affects the Price of a Childcare Centre? The Real Drivers Behind Every Sale

The asking price on a childcare centre is rarely the answer. It is the start of the question. Six things move the price up or down materially — everything else is rounding error.

We have advised on, valued, or transacted enough centres over the past four years to say with some confidence: every sale negotiation comes down to the same six drivers. A buyer who understands them does not overpay. A seller who manages them does not undersell. The rest of this article is the breakdown.

Driver 1: The Lease — The Single Biggest Number on the Page

For a leasehold business sale, nothing moves price like the lease. We have seen the same trading P&L attract 4.5x EBITDA in one negotiation and 3.2x in another — the only difference was the lease.

What buyers (and their lenders) actually weight:

Years remaining including options. Under nine years total typically caps the multiple. Twelve to fifteen years remaining including exercisable options is where most metro buyers want to land. Lenders will rarely write a meaningful loan term beyond the secure lease term, which means a centre with eight years remaining is also a financing-restricted asset.

Rent as a percentage of revenue. The healthy band is roughly 11–14% for a well-run metro centre. Above 17% the deal becomes structurally fragile — any occupancy dip eats into operator margin first, and buyers price that in. Below 10% it is usually a red flag that a market rent reset is coming on the next review.

The rent review mechanism. Fixed annual increases are predictable and price well. CPI is acceptable. Market reviews — particularly market reviews with a hard floor at the higher of CPI or market — sit on the watchlist of every experienced buyer because they introduce real downside risk in a rent-rich catchment.

Make-good and assignment terms. Onerous make-good clauses can cost the seller $80,000–$300,000 at exit if not negotiated down before listing. Assignment provisions that require landlord consent at the landlord’s absolute discretion materially restrict sale exit.

The full anatomy of these terms is set out in our pillar on the childcare centre lease and the terms every operator and landlord must know. For sellers, the lease is the one driver you should not arrive at the negotiation table without having reviewed line by line.

Driver 2: Occupancy — and More Importantly, Where Occupancy Is Going

Stated current occupancy is the number every listing agent leads with. The number that actually drives price is the trend and the forward read.

A centre at 92% occupancy looks great on a flyer. The same centre, in a catchment with three childcare DAs at council and 200 new dwellings completing inside 18 months, is sitting on borrowed time. We covered this in detail in our guide to childcare supply and demand and how to read the market — the forward catchment ratio, not the spot occupancy, is what disciplined buyers price to.

Sustainable occupancy of 85% or above in a balanced catchment commands the top end of the relevant cap rate or multiple band. Occupancy that has been bought through unsustainable fee discounts, free incursions, or a refer-a-friend program running for six months will not survive due diligence — and a sophisticated buyer will rebase the occupancy assumption before assigning a multiple.

The shorthand we use with sellers: a 90% occupancy centre with a clean trend line and a stable catchment will routinely outprice a 95% occupancy centre on a slipping trend.

Driver 3: The Quality of EBITDA — Not the Headline Number

Two centres can quote the same EBITDA on a sales memorandum and trade at very different multiples. The reason is the gap between stated EBITDA and adjusted EBITDA.

In our experience the gap usually sits between 15% and 35% — meaning a centre marketed on $700,000 EBITDA can land at $480,000–$595,000 once normalised. Owner wages added back at market replacement, related-party rent rebased to market, one-off COVID grants stripped out, casual cover for owner-worked hours costed in, and add-backs for “extraordinary” items that turn out to be recurring — these are the levers buyers’ accountants pull in week one of due diligence.

We deliberately do not re-explain the line items here because we have already covered them in detail in our guide to EBITDA adjustments every childcare buyer must understand. The point for this article is narrower: a clean, well-evidenced EBITDA prices materially higher per dollar than a messy one. Sellers who pre-empt the adjustments and present a defensible normalised EBITDA tend to receive offers within $50,000–$150,000 of their target. Sellers who do not tend to receive offers $200,000+ below.

Driver 4: NQF Rating, Provider Approval, and the Number of Places

Three regulatory inputs sit underneath every value conversation.

NQF rating. A National Quality Standard rating of Exceeding is a price driver. Meeting is the market floor. Working Towards is a discount. Significant Improvement Required is a deal-breaker for many buyers and almost all institutional money. The price gap between an Exceeding centre and a Working Towards centre with otherwise identical financials is rarely less than 30–60 basis points on the cap rate — and on a $4 million centre that is $200,000–$400,000 of value sitting in the rating column.

Provider approval and history. A clean provider with no enforcement history attracts a wider buyer pool. A provider currently subject to compliance directions or under conditional approval narrows the pool to investors who can absorb regulatory risk — and they price for it.

Approved places and licensed capacity. A 90-place approval is a different asset to a 75-place approval at the same trading occupancy, because the headroom for revenue growth is different. Buyers price headroom. Centres that have unused licensed capacity (running 70 children in a 90-place approval) trade at premiums where the catchment supports growth and where the building can physically accommodate the extra rooms.

Driver 5: The Property Itself — And Whether the Sale Includes It

Whether a sale is a leasehold business, a going-concern freehold (business plus property), or a tenanted freehold (property only) changes both the buyer pool and the price logic.

Leasehold businesses are typically priced on EBITDA multiples of 3.0–4.5x in the current market for solid metro centres, with stronger lease and stronger trade pulling toward the upper end and weaker on the lower.

Going-concern freeholds (where the operator owns the building) are usually priced on a yield (cap rate) basis on the property component plus a goodwill or business-value layer. Stonebridge Property Group’s Childcare Investment Review reported $205 million transacted across 27 deals in 2025, with metropolitan freehold cap rates compressed into the 4.25–5.25% band and regional freeholds in the 5.25–6.25% band — a 90–130 basis point compression in 12 months.

Tenanted freeholds (the building only, with a lease in place to an unrelated operator) trade purely on yield against the property cash flow.

Each path has tax, financing, and exit consequences. The structural decision drives the buyer pool, and the buyer pool drives the price. We covered this in our comparison of leasehold vs freehold childcare investments and what each is actually worth.

Property-specific factors then layer in: building age and condition, compliance with current National Regulations design standards, outdoor space ratio, parking provision, age-appropriate room layout, and embedded capex requirements (HVAC, roof, kitchen, fencing). A centre that needs $250,000 of deferred maintenance is not the same asset as the one that does not, even when the trading numbers match.

Driver 6: The Market Cycle — Cap Rates and the Cost of Money

Two centres priced the same in 2023 do not price the same in 2026. The reason is the discount rate.

The Reserve Bank of Australia held the cash rate at 4.35% through May 2026 after three increases earlier in the cycle. That rate flows directly into senior debt pricing and indirectly into the cap rates investors will accept on yield-priced assets. The relationship is not perfect, but it is reliable: when the cost of money goes up, cap rates widen, and value comes off. When the cost of money comes down, cap rates compress, and value goes up.

We have written separately on how interest rates affect the childcare property market. For pricing decisions inside that environment, sellers in 2026 have benefited from three structural tailwinds despite the cash rate level — the demand step-up from the Three Day Guarantee, ongoing institutional appetite for income-producing essential-services real estate, and a still-narrow pool of investment-grade childcare assets relative to capital looking for them. Cap rates compressed in 2025 even as the cash rate sat at cycle highs. That decoupling will not last forever.

The mechanics of how cap rates translate to dollar value, and the bands buyers actually use in 2026, are covered in our standalone piece on childcare cap rates in Australia — which we link to here rather than repeat.

How These Drivers Move Value Together

Each driver is meaningful on its own. Combined, they explain almost the entire spread between two centres that look superficially similar.

A worked illustration. Two suburban Sydney centres, both 90 places, both trading at $5.6 million revenue, both reporting roughly $700,000 EBITDA on the listing memorandum. Centre A: 14 years remaining on lease including options, 11.5% rent-to-revenue, fixed 3% annual reviews, 90% sustained occupancy in a balanced catchment with no DAs lodged, Exceeding NQF rating, and adjusted EBITDA at $695,000 (essentially clean). Centre B: 7 years remaining on lease, 16% rent-to-revenue, market reviews every three years, 92% occupancy in a catchment with two lodged DAs proposing 180 places, Meeting NQF rating, and adjusted EBITDA at $560,000 after normalisation.

On a leasehold sale, Centre A clears 4.3x adjusted EBITDA — call it $2.99 million. Centre B clears 3.3x adjusted EBITDA — call it $1.85 million. Same headline numbers on the brochure. A $1.14 million spread on identical-looking centres. That is the six drivers in action.

For sellers, the read is: the price you get is the price these drivers deserve, not the price you decide to ask. For buyers, the read is: do not pay for the brochure number — pay for the driver-adjusted number.

For both, the sensible starting point before any of this is reading the value indicatively. Our childcare centre value Estimator takes 60 seconds and gives an honest range based on the same drivers above.

Key Takeaway

Six factors set the price of a childcare centre — lease, occupancy and forward catchment, the quality of EBITDA, the rating and approval, the property and structure, and the market cycle. Two centres that look the same on the brochure can be a million dollars apart once those six are read properly. Read them before you list, and read them before you offer.

Thinking about buying or selling a childcare centre and want an honest read on what it is actually worth? ChildcareLink runs confidential valuations for buyers and sellers across Australia. Start with our 60-second value Estimator, or contact our team directly via childcarelink.com.au for a tailored appraisal.

Sources

• Stonebridge Property Group — Australian Childcare Property Market Continues to Surge with $205 Million Transacted in 2025 (Childcare Investment Review)
• Burgess Rawson and CBRE — Childcare transaction benchmarks FY2024–25
• ACECQA — National Quality Standard rating bands; National Regulations design and capacity framework
• Productivity Commission — Report on Government Services 2026, Section 3 Early Childhood Education and Care
• Reserve Bank of Australia — Cash rate target, May 2026
• ChildcareLink advisory experience — EBITDA adjustment gap range observed in 2024–2026 transactions; ratings-to-cap-rate impact observation; six-driver pricing framework

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.