Childcare oversupply is when the number of approved places in a local area grows faster than the number of children using care, so occupancy falls even at well-run centres. In Australia it is now visible in the national data: centre-based day care occupancy fell from an estimated 81.8% in December 2023 to 76.1% in December 2025, according to analysis of Department of Education Child Care Subsidy data published by The Sector.
If your enrolments have softened and you cannot find a reason inside your own four walls, this article is for you. It sets out how to tell whether your centre is in an oversupplied catchment, what the 2026 numbers say state by state, and what operators are doing about it, including when a professional management partner is a better answer than a price cut or a sale.
What is happening to childcare occupancy in Australia?
National centre-based day care occupancy dropped about 5.7 percentage points in two years, from 81.8% to 76.1%, while the number of approved services kept growing. ACECQA's Q1 2026 snapshot counted 18,207 approved services under the National Quality Framework, up 1% on the year before. The Sector's analysis concludes that the driver is supply, not demand.
The picture is not uniform. Here is how the Child Care Subsidy data breaks down by state:
| State | Occupancy Dec 2023 | Occupancy Dec 2025 | Change |
|---|---|---|---|
| Western Australia | 82.3% | 70.5% | -11.8 points |
| South Australia | 77.1% | 70.3% | -6.8 points |
| Victoria | 78.3% | 72.2% | -6.1 points |
| Queensland | 83.0% | 79.4% | -3.6 points |
| New South Wales | 85.0% | 80.3% | -4.7 points |
| Australia | 81.8% | 76.1% | -5.7 points |
Source: The Sector, "New supply, softer occupancy", 26 May 2026, drawing on Department of Education Child Care Subsidy Data Report (December quarter 2025) and ACECQA NQF Snapshot data.
Western Australia is the clearest case. Approved places there rose an estimated 17.6% over the two years while the number of children using centre-based care stayed broadly flat. Queensland and New South Wales have softened less, but even there the trend is downward.
Why is it happening?
Four forces are working together, and they explain why a centre can lose enrolments without doing anything wrong.
New supply. CBRE's March 2026 Early Education report estimates roughly 30,000 new places a year came online across 2024 and 2025, concentrated in metropolitan growth corridors in Melbourne, Sydney, Brisbane and Perth. CBRE puts underlying demand growth at around 11,000 places a year in its base case, with about 5,000 places a year lost to closures.
Falling birth rates. CBRE reports Australia's fertility rate fell from 1.81 in 2015 to 1.45 in 2025. Fewer children in the 0 to 5 age group means a smaller pool for every centre in the catchment to share.
Cost of living. Families are delaying start dates, cutting days, or choosing on price. G8 Education's chief executive cited inflation, interest rates and cost-of-living pressure, alongside falling birth rates and heightened regulatory scrutiny, when announcing its closures.
Confidence. Child safety incidents across the sector in 2025 affected family trust. G8's chief executive said these incidents "impacted family confidence and trust across Australia."
What does oversupply look like at a large operator?
G8 Education, which operates 395 centres, announced in April 2026 that it would close 40 of them, about 10% of its network. Its spot occupancy was 56.4% as at 25 April 2026, down 7% on the same period a year earlier, and it reported a net loss of $303.3 million for 2025 after a large goodwill impairment, according to ABC News. G8 described the closures as a "suspension" and said it would consider lease surrender, divestment or other alternatives for each site.
That is a listed group with scale, a central marketing team and a treasury function. The lesson for an independent operator is not that your centre is about to close. It is that occupancy pressure is now a market-level issue, and the sector's largest operators are not immune to it.
How do you know if your centre is in an oversupplied market?
Oversupply is a local condition, so you diagnose it locally. Work through these five checks in order.
- Places per child in your catchment. CBRE's report found a national average of 0.47 approved places per child aged 0 to 5, with wide local variation: 0.69 in Glen Eira and Caulfield versus 0.31 in Dandenong, and 0.47 in Chatswood versus 0.32 in Fairfield. A catchment well above the national average has more places per child to fill. Look up your SA3 area on the Department of Education's data and compare.
- New approvals within five kilometres. Check the regulatory authority's register and council development applications for centres approved or under construction. A new 100-place centre opening on your street matters more than any state-level statistic.
- Your own enquiry-to-tour-to-enrolment funnel. ELC Group's guidance on occupancy pressure is to track enquiry volume, enquiry-to-tour conversion, tour-to-enrolment conversion, attendance versus enrolment, and waitlist movement. Falling enquiries with steady conversion points to a market problem. Steady enquiries with falling conversion points to a centre problem.
- Waitlist behaviour. A waitlist that declines offers when a place opens is telling you families have alternatives.
- Your occupancy cost ratio. Fixed rent does not shrink when occupancy does. As covered in our guide to childcare lease terms, total occupancy cost above roughly 15% of gross revenue starts to compress margin, and falling occupancy pushes that ratio up without a single clause changing.
A simple rule of thumb: if two or more of these point the same way, treat it as a market condition and plan accordingly. If only your funnel conversion is weak, it is more likely something you can fix directly.
What can an operator do about it?
There are five levers, ordered from cheapest to most structural.
1. Fix the enrolment funnel. Respond to enquiries the same day, offer tours within 24 hours, make fees and Child Care Subsidy information clear, and follow up. This is the highest-return change for most centres and costs nothing but discipline. Our practical guide to improving occupancy walks through it step by step.
2. Use the 3-Day Guarantee properly. Since 5 January 2026, all Child Care Subsidy eligible families are entitled to at least 72 hours of subsidised care per fortnight, regardless of activity test results. In an oversupplied market the policy does not fill places by itself, but it widens the pool of families who can afford a third day. Make sure your enrolment process and fee communication speak to it.
3. Differentiate on something other than price. The services that hold occupancy are typically embedded in their local community, visible online before a family walks in, and strong on retention. Price cutting in a soft market tends to invite retaliation from neighbouring centres and erode the margin you need to pay educators.
4. Re-examine the cost base and lease. If occupancy has structurally reset, your roster, fee structure and lease terms need to reset with it. This includes asking the landlord about rent reviews, incentives and options before the situation becomes a sale conversation.
5. Bring in professional management. For owners who are stretched across compliance, workforce and finance while occupancy softens, a management partner can run the centre day to day while the owner keeps the asset. This is often a better answer than selling into a soft market, where buyers are pricing in lower occupancy. Our article on how to value your childcare centre explains what that discount looks like.
Is now a bad time to sell a childcare centre?
Sale values are driven by EBITDA, and EBITDA is falling at centres where occupancy is falling. Buyers have also become more selective: The Sector's 2026 review of the Queensland market describes disciplined buyers favouring quality assets, strong occupancy and clear operational fundamentals. A centre that is under-occupied because of a temporary local supply bump may be worth more in two years than it is today. A centre that is under-occupied because of lease, quality or compliance problems will not recover by waiting.
The honest answer is that it depends on why occupancy fell. That is the first question we work through with an owner, before any conversation about selling or staying.
What is the compliance load on top of this?
Softer occupancy is arriving alongside a heavier regulatory environment. ACECQA's Q1 2026 snapshot shows statutory compliance actions rose from 574 in Q1 2025 to 933 in Q1 2026. The National Early Childhood Worker Register commenced on 27 February 2026 and requires approved providers to update it within 14 days of a worker being employed or of any change to their details. For a single-centre owner, that is a lot of administration to carry while revenue is under pressure.
Frequently asked questions
What is a healthy occupancy rate for a childcare centre in Australia?
CBRE's lease benchmarks assume typical occupancy of 80% to 90% of places for a well-performing centre. The national average was an estimated 76.1% in December 2025. Centres below roughly 70% usually find their financial model under serious pressure, because rent, wages and fixed costs do not fall with enrolments.
Which states have the worst childcare oversupply?
On the December 2025 Child Care Subsidy data, Western Australia (70.5%), South Australia (70.3%) and Victoria (72.2%) had the lowest occupancy and the sharpest falls since December 2023. Within every state, outer-suburban growth corridors are the most exposed.
Why is my childcare centre's occupancy dropping?
The most common causes are new centres opening nearby, a falling local birth rate, cost-of-living pressure on family budgets, reduced days per child, and a weaker enrolment funnel. Check places per child in your catchment and your enquiry-to-enrolment conversion to work out which applies.
How many childcare centres has G8 Education closed?
G8 Education announced in April 2026 that 40 of its 395 centres would close, about 10% of its network, citing occupancy of 56.4% and wider sector pressures. It described the closures as a "suspension" while it considers lease surrender, divestment or other options for each site.
Should I sell or bring in management if occupancy is falling?
If the cause is a temporary local supply bump, bringing in management to run the centre while you wait for the market to rebalance can protect the asset's value. If the cause is structural, such as an unsustainable lease or serious quality issues, a sale or restructure may be the better option. A Discovery Package assessment gives you the numbers to decide.
Where ELM fits
ELM has managed more than 200 centres across Australia and has spent thirty years running early learning services, not advising from the outside. We work with owners across operations, finance, compliance and growth, including centres facing exactly the pressures described above.
If your occupancy has softened and you want a clear read on whether it is the market, the lease, or the centre, our Discovery Packages assess your financial position, compliance profile and operational performance. You can also test your numbers yourself with the feasibility calculator, or book a Discovery Call to talk it through.
References
- The Sector, New supply, softer occupancy: what December quarter data suggests about shifting childcare markets, 26 May 2026. thesector.com.au
- ABC News, Childcare group G8 to close 40 centres after child abuse scandal, 29 April 2026. abc.net.au
- CBRE Research, Child Care Centres: Intelligent Investment, Early Education Report, March 2026. burgessrawson.com.au
- ELC Group, Occupancy Pressure in Childcare: What Falling Numbers Are Telling You and What to Do, 23 May 2026. elcgroup.au
- The Sector, The 2026 Queensland childcare centre sale landscape, 2026. thesector.com.au
- Department of Education, 3 Day Guarantee. education.gov.au
- ACECQA, National Early Childhood Worker Register. acecqa.gov.au
- Department of Education, Child Care Subsidy Data Report, December Quarter 2025. education.gov.au
Last updated October 2026. This article is general information only and does not constitute financial or legal advice. Occupancy figures are estimates drawn from the cited sources and will change as new data is released.