College campus Nois, contrary to popular belief, an idyllic island. Our colleges and universities are in crisis.
Trying to attract new students, colleges and universities – filled with students and money raised from higher tuition fees and / or government bounty – have competed with each other for years, building shiny new buildings. College campus expansion ranged from 8.5% to 19% between 2008 and 2018.
Much of this expansion has been driven by the need to replace or update aging infrastructure to keep pace with programmatic changes and meet student expectations. This led to what was called the “Building Complex” described New York Times 2012: “A decade of rampant construction of classrooms, dormitories and recreational facilities — some of which are overly generous to attract new students — has left colleges and universities heavily indebted.”
It has also exacerbated the crisis of delayed renovation or renovation of major renovations, which threatens existing buildings: all the attention was turned to new rather than existing buildings. It is now clear that this course has become unsustainable.
The prospect of going to college is one of the constant challenges. The continuing decline in enrollment is expected to accelerate, with enrollment declining by 15% after 2025. The current decline in enrollment has resulted in lower revenues, leaving many schools with no choice but to cut costs in some way. Colleges and universities are losing programs, faculty and equipment. They merge and close.
College or university real estate is often an untapped source of potential to free up capital, to attract and retain students, to support an academic mission, and – as a significant part of an institution’s balance sheet – to reduce fixed costs. All real estate objects – land and buildings – are subject to optimization.
Here are 10 specific strategies for using real estate:
1. EVALUATE: Colleges and universities should catalog and evaluate their physical premises and available resources, and align this information with the aspirations of the institution.
Factors to be analyzed include not only whether the number, size and type of classrooms are appropriate for the teaching practice of the campus, but also how the campus space is used. Administrators must consider the immediate and future needs, functionality and layout of buildings.
2. REPEAT: Conservation is often a driving force for colleges and universities, which often remodel iconic old buildings for legacy purposes. Falling somewhere between new construction and refurbishment, “redevelopment” projects boldly rethink an existing building or space and can introduce entirely new functions and operations.
3. REPAIR: Renovation preserves campus character, reduces project cost and time, requires less stringent code requirements, and promotes sustainability. Rather than looking at just one cycle, the design and equipment teams must ensure resiliency on every project: schedule minor upgrades every three to six years, minor repairs every 10-12 years, and major repairs every 20-30 years.
Predicting and allocating future budgets minimizes costs and ensures that the property continues to look and feel relevant.
4. CLOSE: Colleges and universities are closing down underutilized and inefficient buildings or buildings that have simply gone out of their prime. Closing these buildings lowers operating costs, energy consumption, deferred maintenance and possibly taxes.
5. DELETE: Demolishing buildings essentially does the same thing as closing them down, while eliminating the eyesore of a closed campus building. However, it also leaves a hole in the fabric of the campus and in the memories of alumni. Campus fabric can be repaired with smart planning and design: memories may require a good PR campaign.
6. STRATEGIC ALLIANCES, MERGERS AND PARTNERSHIPS: Universities are considering sharing services either on campus or between two or more other institutions. While the dynamics and scale of mergers vary considerably, most are driven by ongoing financial problems, exacerbated by the fallout from the Covid-19 pandemic.
There are a variety of areas for future consolidation, ranging from joint use of premises, consolidation of academic programs, consolidation of administrative services, joining a procurement and building sharing consortium, to the closure of one or more campuses. Shared services offer economies of scale that can result in lower costs and increased value for the institution. Care should be taken, however, that achieving such economies of scale may require significant and complex scale-ups.
7. REFINANCING: Changing the current economic outlook may involve drastic or deliberate tactics that may include: cutting faculty or programs, lowering tuition fees, ditching certain types of financial aid, refinancing long-term debt with tax-free bonds, and raising funds in an emergency. should be carried out with careful consideration and discussion, understanding the strategic objectives of the institution and with full transparency.
8. SALE / RENT: The property may be of minimal importance to the nature of the institution, but it may attract significant potential developers or third-party users. In March 2021, 107-year-old Urbana University in Ohio put up all 115 acres, 22 buildings, sports fields, a solar farm and surplus land for sale. CBRE positions this as “… a rare opportunity for both educational and institutional users, as well as investors looking for a unique redevelopment opportunity,” and suggests that corporate or residential developers may also be interested.
On the other hand, letting or leasing property to a third party allows the institution to maintain control while generating revenue and retaining ownership of the asset. A lease of land gives the developer the right to own the building built on it, but the landlord can often retain the right to consent to the method and aesthetics of any new construction, restrict the use of the building, and have the right to consent. to any sale.
Sale and leaseback will change the structure of land leases: a college or university can continue to occupy real estate, monetizing the cost of ownership. In a sale and leaseback case, the institution sells the property to a third party, and the institution receives a cash payment. The institution then leases the property from the new owner.
9. PRIVATE PUBLIC PARTNERSHIP (P3s): In 1999, Emmanuel College, a small Catholic liberal arts college in the Fenway area of Boston, had fewer than 500 students, fewer funds and no amenities that attracted students to larger universities in the Boston college market, but the president, Sister Anna, concluded deal.
The 17-acre campus, located adjacent to the leading hospitals of the Dana-Farber Cancer Institute, Boston Children’s Hospital and Brigham and Women’s Hospital, partnered with Merck, one of the largest pharmaceutical companies in the world, which signed a 75-year lease with the college in 2000. … $ 50 million to build a 300,000th laboratory building on an acre of campus.
The school’s partnership with Merck has boosted the college’s prestige as a research institution, and Emmanuel’s donation has grown from $ 7 million in 2000 to $ 136.6 million today. Brigham and Women’s also signed a long-term lease of land for another site on the Emmanuel campus, where they have plans to set up a medical research center.
10. PARTNERSHIP WITH COMMUNITIES: Universities can use off-campus public-private partnerships to reduce space constraints as well as facilitate collaboration with allied institutions.
Many institutions are initiating partnerships and collaborations to improve student learning outcomes in graduate school, create new academic disciplines and certification programs, keep existing programs relevant and up-to-date, and help local employers and communities. These partnerships often include technical support and can also help an institution implement cutting edge technology.
The most effective management strategy is a combination of all of the above. Through careful analysis leading to the right decisions, a college or university in financial distress can minimize the threat of going to a fund to cover costs, or worse, turning to the campus underfoot instead.
Colleges and Universities maybe survive and thrive without giving up your personality and physical presence.
Planning PlusJoan Pizzo specializes in educational institutions and is exploring what schools can do with their physical plants to relieve stress.