For approved childcare providers looking to expand, one of the most important strategic decisions is whether to purchase a childcare centre or lease one. Both approaches are common in Australia and each presents different financial, operational, and growth implications.
Some operators choose to purchase childcare properties as part of a long-term property investment strategy. Owning the real estate can provide control over the premises and potential capital growth over time.
However, many operators choose to lease childcare centres instead, particularly when expanding across multiple locations. Leasing allows providers to focus capital on staffing, service delivery, and enrolment growth rather than committing significant funds to property ownership.
In Australia, it is common for childcare centres to be developed by property investors and leased to experienced operators on long-term agreements. This structure allows providers to operate the childcare service while the property owner retains ownership of the real estate.
Understanding the advantages and limitations of each approach is important when planning expansion. In this guide, we explore the key differences between buying and leasing a childcare centre, and the factors operators should consider when deciding which strategy best supports their long-term growth.
In Australia, it is common for the ownership of childcare centre properties to be separate from the operation of the childcare service itself. Many purpose-built centres are developed and owned by property investors who lease the premises to an approved childcare provider under a long-term commercial lease.
This model has become widely adopted because childcare centres are considered a specialised commercial property asset. Once a centre is leased to a reputable operator, the property can provide investors with stable rental income and long-term tenancy security.
For operators, leasing can provide a practical pathway to expansion without the need to commit large amounts of capital to purchasing real estate. Instead of allocating significant funds toward acquiring the property, providers can focus their resources on establishing the service, recruiting staff, and building enrolments within the centre.
Developers will often seek to secure an experienced childcare operator before or during construction of a new centre. This helps demonstrate the viability of the project and allows the operator to plan ahead for regulatory approvals, staffing, and enrolment marketing before the service opens.
As a result, many opportunities available to operators involve leasing newly developed childcare centres rather than purchasing the underlying property, particularly in growing residential areas where new centres are being built to meet increasing demand for early childhood education and care services.
Buying a Childcare Centre
Purchasing a childcare centre can involve acquiring the business only, the freehold property and business together, or the freehold property as an investment. These transactions are commonly referred to in the childcare sector as Business Only, Freehold Going Concern, and Freehold Investment sales.
A Business Only purchase involves acquiring the operating childcare service, including the enrolments, staff, goodwill, and operational systems, while continuing to lease the premises from the property owner.
A Freehold Going Concern purchase involves acquiring both the childcare business and the underlying property. In this structure, the buyer owns the real estate and operates the childcare service from the premises.
A Freehold Investment purchase typically involves acquiring the property only, while the childcare service is operated by a tenant under a long-term lease. In this scenario, the buyer becomes the landlord rather than the childcare operator.
Owning the property can provide greater control over the premises and potential capital growth over time. However, purchasing a childcare centre often requires significantly higher capital compared with leasing, particularly where the property is included in the transaction.
Operators considering purchasing a childcare centre should carefully evaluate factors such as:
- The purchase price of the business and/or property
- Current enrolment levels and occupancy
- Historical financial performance of the centre
- Compliance of the premises with regulatory requirements
- Any lease arrangements attached to the property
For some providers, owning the property forms part of a long-term investment strategy. However, the capital required to acquire childcare real estate can limit the ability to expand across multiple locations. For this reason, many growing childcare groups choose to lease centres while focusing their capital on operating and scaling their services.
Leasing a Childcare Centre
Leasing a childcare centre is one of the most common ways operators expand their network of services across Australia. Rather than purchasing the property, the operator enters into a long-term commercial lease with the property owner and operates the childcare service from the premises.
This structure allows approved providers to establish and grow childcare centres without committing significant capital to real estate acquisition. Instead, operators can allocate their resources toward staffing, service quality, marketing, and building enrolments within the centre.
In many cases, newly developed childcare centres are constructed by property developers who intend to lease the premises to an experienced childcare operator. These centres are typically designed to meet regulatory requirements under the National Quality Framework and are delivered as purpose-built facilities ready for operation.
Leasing can provide several advantages for childcare operators, including:
- Lower upfront capital compared with purchasing property
- The ability to expand across multiple locations
- Greater flexibility when scaling a childcare business
- Access to newly developed purpose-built centres
However, leasing also requires operators to carefully assess lease terms and the long-term viability of the location. Because childcare leases are typically long-term agreements, operators should ensure the local market can support sustainable occupancy before committing to the lease.
For many providers seeking to grow their network of services, leasing childcare centres can offer a practical pathway to expansion while allowing capital to be focused on operating and developing high-quality early learning services.
Key Differences Between Buying and Leasing
Both buying and leasing a childcare centre can support the growth of an early learning business, but each approach carries different financial and operational implications. Understanding these differences can help operators determine which strategy best aligns with their long-term goals.
One of the main differences is the level of capital required. Purchasing a childcare centre, particularly where the property is included, usually requires a significant upfront investment and financing arrangements. Leasing a centre generally requires less capital at the outset, allowing operators to allocate resources toward staffing, marketing, and building enrolments.
Another key difference is flexibility. Operators who lease centres may be able to expand across multiple locations more quickly, while those who purchase properties may experience slower expansion due to the capital required for each acquisition.
Ownership of the property can provide long-term security and potential capital growth. However, leasing allows operators to focus on the operational performance of the childcare service rather than property ownership.
The differences can be summarised as follows:
For many childcare operators, the decision between buying and leasing depends on their capital position, long-term investment strategy, and the opportunities available in the market.
Which Strategy Is Right for Your Childcare Business?
The decision to buy or lease a childcare centre ultimately depends on the operator’s financial capacity, long-term strategy, and growth objectives. Both approaches can support a successful childcare business, but they serve different strategic purposes.
For operators focused on long-term property investment, purchasing the freehold of a childcare centre may provide additional benefits such as property ownership and potential capital appreciation over time. This approach can suit providers who prefer to operate a smaller number of centres while building equity in the underlying real estate.
However, many growing childcare providers prioritise scalability and operational growth. Leasing childcare centres allows operators to expand into multiple locations without committing large amounts of capital to property acquisition. By directing capital toward staffing, marketing, and service delivery, operators may be able to grow their network of centres more quickly.
When evaluating opportunities, operators should consider:
- Available capital and financing capacity
- Long-term expansion strategy
- Local market demand for childcare services
- Lease terms or purchase price of the opportunity
- The level of operational risk they are prepared to accept
For many approved providers, leasing centres provides a practical pathway to expansion while maintaining flexibility to pursue opportunities in growing communities.
Understanding the benefits and limitations of each strategy can help operators make informed decisions when evaluating their next childcare centre opportunity.
Finding Childcare Centres for Lease or Sale
Approved providers looking to expand their services can identify opportunities through industry networks, property developers, commercial real estate agents, and specialist childcare marketplaces.
Many opportunities are identified before construction is completed, particularly in growing residential areas where new centres are being developed to meet increasing demand for early childhood education and care.
Specialist platforms such as ChildcareListings.com.au allow approved providers to explore childcare centres available for lease or sale across Australia and evaluate potential locations for their next service.
Regularly reviewing available opportunities and conducting careful market analysis can help operators identify locations with strong long-term potential.
Frequently Asked Questions
Is it better to buy or lease a childcare centre?
The decision depends on the operator’s capital position and long-term strategy. Buying a childcare centre can provide property ownership and potential capital growth, while leasing allows operators to expand across multiple locations with lower upfront capital. Many growing childcare groups choose to lease centres so they can focus resources on operations and scaling their services.
What does “Business Only” mean when buying a childcare centre?
A Business Only sale refers to purchasing the operating childcare service without acquiring the underlying property. The buyer takes over the enrolments, staff, goodwill, and operational systems while continuing to lease the premises from the property owner.
What is a Freehold Going Concern childcare centre?
A Freehold Going Concern sale involves purchasing both the childcare business and the property it operates from. In this structure, the buyer owns the real estate and operates the childcare service from the premises.
What is a Freehold Investment childcare centre?
A Freehold Investment purchase refers to acquiring the property only while the childcare centre is operated by a tenant under a long-term lease. The buyer becomes the landlord and receives rental income from the childcare operator.
Why do many childcare operators prefer leasing?
Leasing allows operators to expand their services without committing large amounts of capital to property ownership. This enables providers to allocate resources toward staffing, marketing, and building enrolments while operating centres in purpose-built facilities developed by property investors.
How do childcare operators evaluate whether a centre is a good opportunity?
Operators commonly assess several factors including the local child-to-place ratio, population growth, labour force participation among parents, nearby childcare competition, and projected growth in children aged 0–4 years within the catchment area.
