While ASX-listed ABC Learning Centres clearly dominates the state’s childcare sector, some Western Australian-based independent operators have also embarked on rapid expansion programs in response to a growing demand for their services.
While ASX-listed ABC Learning Centres clearly dominates the state’s childcare sector, some Western Australian-based independent operators have also embarked on rapid expansion programs in response to a growing demand for their services.
Buggles Childcare, which currently has seven centres, is looking to extend its market share in the next three months to become one of the state’s major independent players, with the opening of four new centres.
General manager David Lyons said the group would soon be opening centres in Coolbelup, Maddington, Beldon and Southern River, with a further three or so centre openings in pipeline within 12 months.
The new centres will increase Buggles’ number of licensed places from 458 to 766 in three months, with a forecast of 1,000-plus places in 12 months.
Following that, Mr Lyons said the group was looking to grow through acquisitions.
“In our next stage of development we’ll pick and choose from the existing centres in preferred locations, and looking at acquisitions and growing that way,” he said.
Cuddles Child Care is also on the expansion trail, and expects to have a total of 15 centres in the coming months following the addition of three centres in Maida Vale, East Victoria Park and in the City of Swan.
It is also building a new centre south of the river.
Cuddles Management director Alan Carver said the group was assessing a number of options, and was currently in discussions with investors over four potential blocks for the construction of new centres.
“Our strategic plan is based on growing five centres per year,” he said.
“For us, either we stay the same size or keep growing. With further growth, it would mean a public listing or some form of private equity funding.”
Fellow independent operator Mulberry Tree Childcare has now grown to 11 centres across the Perth region since commencing in 1995.
During the past 18 months, Mulberry Tree has opened new centres in Ascot and Wembley Downs, and has undertaken re-fits on four of its sites in the metro area.
But significant increases in rents and property prices are threatening to stymie growth of new centres.
With prices for properties of 1,200 square metres and bigger costing anywhere from $800,000 to $1 million, operators have been forced to look at the far outer suburbs as locations for their new centres.
Mr Lyons said high property prices had made setting up new childcare centres economically unviable.
“It’s priced childcare out of the corner block market now. With the residential property market we can’t compete,” he told WA Business News.
“It’s reached the situation where to buy something you’re paying $800,000, and that’s before you even put a building on it.”
Another childcare group proprietor, who did not want to be named, said the high property prices had forced him to look at the more affordable outer peripheral suburbs for new centres, in areas such as Parkwood, Cloverdale, Spearwood and Jandakot.
“We’ve crawled over every single suburb in Perth,” he said.
“The opportunity to open centres now has evaporated. The cost of land completely controls the viability of new centres.”
He said small, independent operators were finding it difficult to compete with developers for the large blocks, who were looking to develop potential duplex or triplex sites.
“We need 1,500 square metres, which a few years ago was around $500,000, and now you’re looking at close to $1 million,” he said.
Mr Carver said that he expects some consolidation activity within the industry, as some small owner operators are pushed out of the market due to rising costs and competition from the larger corporate players.
The number of licensed child care centres in WA for children aged 0 to six has been increasing steadily since 2003 at a rate of between 4 and 7 per cent per year, according to figures from the Department of Community Development.
