Soaring Real Estate Costs Squeezing Out Day-Care Providers

Ironically, this dilemma comes at a time when the need for day-care providers is increasing with the city's burgeoning growth. "While it's been wonderful to have such a booming economy in Austin, to have a lot of companies moving in and expansion, and increasing values in real estate, one of the negative sides of that is it's making it very hard for early childhood programs to offer services in central Austin," Dietche tells GlobeSt.com. "A lot of programs are closing their doors and not being replaced because in today's market the prices and the rents are almost double what a preschool can afford."

Valda DeWitt, program administrator for Region 7 Child Care for the Texas Protective and Regulatory Services, the state agency that oversees day care licensing, agrees. "We don't have many child-care providers near downtown Austin businesses because it's too expensive," DeWitt tells GlobeSt.com. "It truly prevents new people (providers) from coming in because the cost is prohibitive."

Most day-care costs-70% to 80%-are put toward payroll and related expenses, leaving very little for the cost of space, according to Dietche. Coupled with this problem is the cost of renovating any potential space to meet the needs of a preschool, such as adding classrooms and a playground. He says each Open Door site requires 3,500 sf to 4,500 sf. The central school pays $1,800 per month for its 4,500-sf site, owned by the Travis County Mental Health-Mental Retardation Program, according to Dietche. The central school is facing an August shutdown because the county agency plans to consolidate its Austin services in the building instead of paying high rents, Dietche says.

The central school is located about two miles west of the state capitol building. Dietche says Open Door isn't being picky about where the space is located, it just wants a centrally located site to service downtown or central Austin workers. The other schools are situated in east and south corridors. He is concerned that the $250,000 maximum mortgage capability isn't sufficient to buy the 3,000-sf plus space that is needed for the operation. If a site doesn't turn up, Dietche says Open Door will have to merge with the facility in east Austin.