Leasing a childcare centre is one of the most common ways early learning operators expand their footprint across Australia. Many purpose-built childcare centres are developed by property investors who construct the facility and lease the premises to an approved provider to operate the service.
For operators, leasing can provide a faster and more capital-efficient pathway to growth compared with purchasing both the property and the business. Rather than committing significant capital to real estate, providers can focus their investment on staffing, service delivery, and building enrolments within the centre.
However, leasing a childcare centre is very different from leasing a standard commercial property. Operators must consider regulatory approvals under the National Quality Framework, service capacity, fit-out responsibilities, and long-term lease structures that align with the financial performance of the service.
In this guide, we outline the key steps involved in leasing a childcare centre in Australia and the key factors approved providers should evaluate before committing to a new location.
What Is a Childcare Centre Lease
A childcare centre lease is a commercial lease agreement between a property owner (landlord) and an approved childcare provider (tenant) that allows the provider to operate an early learning service from the premises.
Unlike standard retail or office leases, childcare centre leases are typically structured to support the long-term operation of an early childhood education service. Childcare centres are purpose-built facilities designed to meet strict planning and regulatory requirements, and operators often invest significant time and capital into building enrolments, recruiting staff, and establishing the service within the local community. As a result, stability of tenure is critical.
For this reason, we encourage operators to carefully assess each opportunity and, where the location and fundamentals indicate a strong long-term service, secure the longest practical lease structure. In many successful childcare centres, operators aim to establish an initial 20-year lease term, often supported by additional 10 + 10 + 10 year option periods. This structure provides the security needed to grow enrolments, build a strong reputation within the community, and fully realise the long-term value of the service.
A childcare lease will typically outline key commercial terms including:
- Lease duration and renewal options
- Rent structure and annual increases
- Maintenance and repair obligations
- Permitted use of the premises as a childcare service
- Security deposits or bank guarantees required by the landlord
- In some cases, personal guarantees provided by the directors of the operating entity
For approved providers, understanding the structure and obligations of a childcare centre lease is an important first step before committing to a new location and beginning the process of establishing a new early learning service.
Who Typically Owns Childcare Centres in Australia
In Australia, the ownership of childcare centres is often separate from the operation of the service. Many purpose-built childcare centres are developed and owned by property investors, while the early learning service is operated by an approved provider under a long-term lease.
This structure has become common because childcare centres are considered a specialised commercial property asset. Once a centre is leased to a reputable operator on a long-term agreement, the property can provide investors with stable rental income and predictable cash flow.
Developers will typically identify a suitable site, obtain planning approval for a childcare centre, construct the purpose-built facility, and then lease the completed premises to an approved provider. In many cases, operators are secured before construction is completed so the developer has confidence in the long-term viability of the project.
Ownership structures can vary, but the most common owners of childcare centre properties include:
- Private property investors
- Property development groups
- Syndicated property investment funds
- Institutional investors such as property trusts
Approved providers who lease these facilities focus on operating the childcare service itself. This includes managing staff, enrolments, regulatory compliance, and delivering early childhood education programs, while the landlord retains ownership of the physical property.
Understanding this separation between property ownership and service operation is important for providers considering expansion. Most opportunities to lease a childcare centre involve negotiating with a property owner or developer rather than purchasing the real estate itself.
Provider Approval Requirements
Step 1: Ensure You Hold Provider Approval
Before entering into a lease for a childcare centre, operators should ensure they hold Provider Approval under the National Quality Framework. In Australia, only approved providers are permitted to operate early childhood education and care services.
Provider Approval is granted by the relevant state or territory regulatory authority and confirms that an individual or organisation is suitable to operate childcare services. The assessment typically considers factors such as financial capacity, governance arrangements, compliance history, and the ability to meet regulatory obligations.
In New South Wales, information on obtaining Provider Approval can be found on the NSW Department of Education website: https://education.nsw.gov.au/early-childhood-education/operating-an-early-childhood-education-service/approvals-process/steps-to-obtain-provider-approval
Without Provider Approval, an operator cannot legally run a childcare service, even if a suitable premises has already been secured.
Once Provider Approval has been granted, the operator must also obtain Service Approval for the specific childcare centre location before the service can commence operating. Service Approval confirms that the premises, policies, staffing arrangements, and operational systems meet the requirements of the National Quality Framework.
In addition to Service Approval, operators must also apply for approval to administer the Child Care Subsidy (CCS) through the Australian Government. CCS is the primary subsidy that assists families with the cost of childcare and is an essential component of most childcare business models. Many operators apply for CCS approval while the service approval process is underway so the centre can enrol families and claim subsidy payments once it opens.
For operators considering leasing a new childcare centre, it is important to ensure the provider entity is properly structured and approved before committing to a lease agreement. Landlords and developers will often require evidence that the tenant is an approved provider, or is actively progressing through the approval process, before finalising lease arrangements.
Understanding the distinction between Provider Approval, Service Approval, and CCS approval is an important early step when planning to lease and operate a childcare centre in Australia.
Step 2: Evaluate Local Demand and Supply
Before committing to a childcare centre lease, operators should carefully assess the demand for childcare in the local area and the level of existing and incoming competition. A strong location with favourable supply and demand fundamentals can significantly influence the long-term success of a service.
One of the most common methods used by operators and developers is analysing the child-to-placement ratio within a defined catchment area, often within a 2 kilometre to 3 kilometre radius of the proposed centre. This ratio compares the number of children in the local population with the number of approved childcare places available.
A higher child-to-place ratio generally indicates stronger demand and a greater likelihood that a service can reach sustainable occupancy levels. Conversely, a lower ratio may suggest the area is already well supplied with childcare services.
Operators should also consider other local factors including:
- Existing childcare centres and their approved capacity
- Approved or proposed childcare developments in the pipeline
- Population growth and new residential developments
- Labour force participation rates in the local area, particularly among parents
- Forecast population growth of children aged 0–4 years
- Proximity to schools, employment hubs, and transport corridors
- Demographics of families within the catchment area
Higher workforce participation among parents often increases demand for early childhood education and care services, as more families require full-day childcare. Similarly, population forecasts showing growth in children aged 0–4 can indicate sustained demand for childcare places over the coming years.
Step 3: Understand Typical Childcare Lease Terms
Before committing to a childcare centre lease, operators should develop a clear understanding of the commercial terms commonly used in the childcare property sector. Because childcare centres are purpose-built facilities designed for long-term operation, lease agreements are typically structured quite differently from standard retail or office leases.
As discussed earlier, many operators seek to secure long-term tenure where possible. A strong childcare location can remain viable for decades, so lease structures often include long initial terms with multiple renewal options.
One of the most important commercial considerations is the rent relative to the number of approved places within the centre. In the childcare sector, rent is often assessed on a per-place basis, which allows operators to compare different opportunities more easily.
When evaluating a lease, operators should consider several key elements including:
- The base rent and how it compares on a per-place basis
- The structure of annual rent increases, commonly linked to CPI or fixed percentage increases
- The length of the initial lease term and available renewal options
- The level of security required by the landlord, such as bank guarantees or security deposits
- Whether personal guarantees are required from directors of the operating entity
- Responsibility for maintenance, repairs, and capital items
Operators should also review whether the lease allows sufficient time to build enrolments and stabilise the service. New childcare centres can take time to reach optimal occupancy levels, so lease terms should align with realistic operational ramp-up periods.
Careful review of the lease structure and financial obligations is essential before committing to a long-term childcare centre lease. Many operators seek professional legal and financial advice to ensure the lease terms support the long-term sustainability of the service.
Step 4: Assess Fit-Out and Equipment Responsibilities
Before signing a childcare centre lease, operators should clearly understand which party is responsible for the various components required to establish and operate the service. While many childcare centres are delivered as purpose-built facilities, the exact scope of what is provided by the landlord can vary from project to project.
In most developments, the landlord or developer will construct the core building and outdoor play areas in accordance with planning approval and regulatory design requirements. This typically includes the building structure, bathrooms, kitchen areas, outdoor play spaces, fencing, and landscaping.
However, the operator is often responsible for supplying the operational elements required to run the service. These may include:
- Internal classroom furniture and storage
- Educational resources and learning materials
- Office equipment and administrative systems
- Kitchen appliances such as refrigerators and microwaves
- Outdoor play equipment where not already installed
- Technology systems including security, attendance tracking, and communication platforms
Clarifying these responsibilities early in the negotiation process is important because the cost of equipping a childcare centre can be significant. Understanding exactly what is included in the landlord’s delivery and what must be supplied by the operator will help ensure accurate financial planning before committing to the lease.
Operators should also confirm that the completed premises meet all regulatory requirements for early childhood education services, including indoor space, outdoor play areas, safety standards, and accessibility requirements under the National Quality Framework.
Step 5: Conduct Financial Modelling
Before committing to a childcare centre lease, operators should undertake detailed financial modelling to ensure the service is commercially viable. A long-term lease represents a significant financial commitment, and understanding the projected performance of the centre is essential before signing.
Financial modelling typically begins with estimating enrolment capacity and occupancy ramp-up. Most new childcare centres do not reach full occupancy immediately and may take 12 to 24 months to stabilise. Operators should model conservative enrolment growth during this period.
Key financial inputs often include:
- Approved number of childcare places
- Projected occupancy levels over time
- Average daily fee rates
- Child Care Subsidy considerations
- Staffing costs and required educator ratios
- Rent and annual increases under the lease
- Operating costs such as utilities, insurance, and consumables
Rent should be carefully assessed in relation to expected revenue and occupancy. In the childcare sector, operators often benchmark rent against the number of approved places to determine whether the lease structure is commercially sustainable.
Operators should also consider the working capital required during the early stages of operation, when enrolments may still be growing but staffing and operational costs are already being incurred.
A well-prepared financial model allows operators to assess whether the proposed lease structure is viable and provides greater confidence when negotiating commercial terms with the landlord.
Step 6: Negotiate the Lease Agreement
Once the commercial fundamentals of the opportunity have been assessed, the next step is negotiating the lease agreement with the landlord or developer. While many childcare centre leases follow broadly similar structures, the specific terms can vary depending on the project, the landlord’s expectations, and the experience of the operator.
Because childcare centres often involve significant investment by the operator in staffing, enrolments, and operational setup, it is important that the lease structure allows sufficient time for the service to establish itself.
During negotiations, operators commonly seek to address several key points including:
- Commencement timing, particularly if the building is still under construction
- Rent commencement, which may differ from the lease commencement date
- Rent-free or reduced rent periods to support the early enrolment phase
- Conditions linked to regulatory approvals, such as obtaining Service Approval
- Security requirements, including bank guarantees or security deposits
- Assignment rights, which allow the operator to transfer the lease if the business is sold in the future
Operators should ensure that the lease provides a practical pathway to opening the service and building enrolments without excessive financial pressure in the early stages.
Because childcare centre leases are long-term commercial agreements, many operators engage experienced legal advisers who understand the childcare sector to review the lease before execution. This helps ensure the terms are commercially reasonable and aligned with the long-term operation of the service.
Where to Find Childcare Centres for Lease in Australia
Approved providers looking to expand their operations typically source opportunities through a combination of industry networks, property developers, commercial agents, and specialist childcare marketplaces.
Many new childcare centres are identified well before construction is completed. Developers often seek to secure an experienced operator early in the development process so the project can proceed with greater certainty. For this reason, operators who are actively monitoring opportunities are often better positioned to secure strong locations before they reach the broader market.
Opportunities to lease childcare centres may arise through:
- Direct relationships with childcare developers
- Commercial real estate agents specialising in childcare assets
- Industry contacts and existing operator networks
- Specialist childcare listing platforms
Dedicated marketplaces can make it easier for operators to identify potential opportunities and evaluate different locations in one place. Platforms such as ChildcareListings.com.au aim to connect approved providers with available childcare centre lease opportunities across Australia, helping operators explore potential sites and assess their expansion options.
For providers considering their next location, regularly reviewing available opportunities and conducting careful market analysis can help identify centres with strong long-term potential.
Final Considerations Before Leasing a Childcare Centre
Leasing a childcare centre is a significant long-term commitment and should be approached with careful planning and due diligence. While strong locations can support successful services for many years, selecting the wrong site or agreeing to unfavourable lease terms can create long-term operational challenges.
Before committing to a lease, operators should ensure they have thoroughly assessed the key fundamentals of the opportunity. This includes understanding the local supply and demand dynamics, evaluating the financial viability of the service, and confirming that the lease structure aligns with the long-term operation of the centre.
Operators should also ensure that:
- The provider entity is correctly structured and approved
- The local market can support the proposed number of childcare places
- Lease terms allow adequate time to build enrolments
- Fit-out responsibilities and capital costs are clearly understood
- Professional legal and financial advice has been obtained where appropriate
Taking a disciplined and analytical approach to evaluating childcare opportunities can help operators secure locations that support sustainable occupancy and long-term growth.
For approved providers seeking to expand their network of services, careful site selection combined with a well-structured lease agreement can form the foundation of a successful childcare centre.
Frequently Asked Questions
How long are childcare centre leases in Australia?
Childcare centre leases in Australia are typically structured as long-term commercial leases because operators invest significant time and capital establishing and growing the service. A common structure is an initial 10-year lease with a further 10-year option, often referred to as a 10 + 10 lease.
However, where a location demonstrates strong long-term fundamentals, many experienced operators aim to secure longer tenure. For high-quality opportunities, it is not uncommon for operators to pursue an initial 20-year lease term with additional option periods such as 10 + 10 + 10 years. This provides the stability required to build enrolments, establish a strong reputation within the community, and realise the long-term value of the service.
How is rent usually calculated for a childcare centre?
In the childcare sector, rent is often assessed on a per-place basis. Operators commonly compare opportunities by dividing the annual rent by the number of approved childcare places within the centre. This provides a simple way to benchmark different locations and determine whether the rent is commercially viable.
Can you lease a childcare centre without provider approval?
No. In Australia, only entities that hold Provider Approval under the National Quality Framework are permitted to operate an early childhood education and care service. While some developers may enter into conditional agreements with operators progressing through the approval process, a childcare centre cannot legally operate until the provider holds approval and the service receives Service Approval.
What is Service Approval?
Service Approval is the regulatory approval required to operate a specific early childhood education and care service at a particular location. In Australia, even if an operator holds Provider Approval, they must also obtain Service Approval before a childcare centre can legally open and begin operating.
Service Approval confirms that the premises, policies, staffing arrangements, and operational systems meet the requirements of the National Quality Framework. This includes factors such as indoor and outdoor space requirements, safety standards, educator-to-child ratios, and operational procedures
Only once Service Approval has been granted by the relevant state or territory regulatory authority can the childcare service commence operations and begin enrolling children.
How do I apply for the Child Care Subsidy (CCS) as a childcare provider?
To administer the Child Care Subsidy (CCS), childcare providers must obtain approval from the Australian Government. CCS is the primary subsidy that helps families reduce the cost of childcare and forms an essential component of most childcare service revenue.
Before applying for CCS, the operator must first obtain Provider Approval from their state or territory regulator. Once Provider Approval has been granted, the provider will be issued access to the National Quality Agenda IT System (NQA ITS), which is used to manage regulatory applications and notifications for early childhood education services.
Through NQA ITS, an approved provider can submit their Service Approval application for the specific childcare centre location. While this process is underway, the provider can also apply for approval to administer CCS through the Australian Government using PRODA and the Child Care Subsidy System (CCSS).
Many operators begin the CCS approval process while their Service Approval is being assessed. Running both processes in parallel helps ensure that once the centre receives Service Approval and is ready to open, the service can enrol families and process CCS payments without unnecessary delays.
Further information about the approval process for providers in New South Wales can be found on the NSW Department of Education website: https://education.nsw.gov.au/early-childhood-education/operating-an-early-childhood-education-service/approvals-process/steps-to-obtain-provider-approval
How long does it take to open a new childcare centre?
The timeframe can vary depending on the project and regulatory approvals. For new developments, operators often secure the lease 12 to 24 months before opening, allowing time for construction, regulatory approvals, recruitment of staff, and enrolment marketing.
What security is usually required in a childcare lease?
Landlords commonly require a bank guarantee or security deposit as part of the lease agreement. In some cases, directors of the operating entity may also be asked to provide personal guarantees depending on the experience and financial strength of the operator.
Who usually pays for the fit-out of a childcare centre?
In many developments, the landlord constructs the core building and outdoor play areas, while the operator is responsible for supplying internal furniture, educational resources, office equipment, and operational systems. The exact responsibilities can vary depending on the project and should be clearly defined in the lease agreement.
How do operators evaluate whether a location is suitable for childcare?
Operators typically analyse local demand and supply fundamentals before committing to a lease. This may include reviewing the number of children within the catchment area, the number of existing and approved childcare places, population growth forecasts, workforce participation rates, and planned residential developments.
How long does it take for a new childcare centre to reach full occupancy?
New childcare centres typically take 12 to 24 months to reach stable occupancy, although this can vary depending on the local market and the effectiveness of the centre’s marketing and community engagement.
During the early months of operation, enrolments usually build gradually as families become aware of the service and places become available. Operators should plan for a ramp-up period and ensure they have sufficient working capital to support the centre while enrolments grow.
