Competition Among Top Universities Heats Up; Cool Campus Real Estate Matters

By David Houck, Managing Director and Leader of Higher Education group, JLL

Wide-eyed college freshmen flood the quads and dormitories of universities across the country with the expectation of high-tech classrooms, libraries, lounges, gymnasiums and residences. But as federal and state budgets remain tight and public pressure to curb skyrocketing tuition costs builds, universities are hard-pressed to meet the great expectations of their students and faculty with fewer resources.

Adding to the challenge, many institutions lack the financial resources required to make even the most basic repairs and updates to their aging facilities and infrastructure. To fill the gap, many campuses are seeking creative financing structures and turning to the private sector. University leaders are hoping to ease their school’s financial burden while increasing efficiency and providing the modern experience today’s students and faculty expect.

Our Higher Education team recently revealed four real estate trends that will impact higher education in 2017:

• P3s hold the key to meeting development goals.

Public private partnerships (P3s) are nothing new. In fact, they have been used in the United States since the 1800s. In higher education, the public private partnerships are prevailing because universities can fund both facility development and address deferred maintenance on buildings. However, one size does not fit all. It is crucial that universities conduct a systematic analysis to discover the model that will benefit their institution.

• Campuses get a facelift to attract students and faculty.

Construction investment in the education sector is still below spending in the early to mid-2000s. This could change in 2017. We expect construction on university campuses to accelerate as institutions build and renovate facilities that reflect their brand and appeal to students. Students are looking for housing that prioritizes connectivity and co-working. In fact, student accommodation is becoming like a combination of a high-tech office building and a modern boutique hotel. By engaging the private sector for its expertise in construction and facilities management, universities can focus on their core mission of educating students.

• Universities go green to save green.

According to the Princeton Review’s 2016 College Hopes & Worries Survey, 61 percent of prospective students value “commitment to sustainability” when choosing a school. And universities are dedicated to going green as well. Almost 700 universities across the country have signed the Carbon Commitment, pledging to reduce greenhouse gas emissions and achieve carbon neutrality as soon as possible. With this commitment, university presidents are reshaping institutions and communities while training the future political, business and scientific leaders who will help solve climate change.

Reducing energy use goes hand-in-hand with reducing energy costs. In 2017, universities will increase collaboration with the private sector as they implement new smart building technologies that help reduce resource consumption, which in turn will lower expenses.

• Space is the hottest new recruitment tool.

As universities compete in an intense war for students and faculty, many will borrow workplace strategies from the private sector. This fierce competition for space and talent is leading to both new development and creative renovations of first-generation space. Universities are taking cues from the private sector for ways to make their spaces more engaging and productive. They’re reconfiguring space to support collaboration and building campuses close to amenities to attract new faculty talent, mimicking the workplace strategies of the tech sector.

University administrators are also determined to improve office productivity by giving each school or department greater accountability for the cost of their space. Universities are often charging each department for the real estate they occupy, a trend we anticipate will continue in the coming year. And universities with revenue-generating research, technology and incubator projects will need to develop strategies to compete with private-sector co-working spaces to attract and retain startups. JLL’s 2016 Higher Education Perspective paper highlights four universities that are establishing and executing strategies that maximize returns and minimize risks while leveraging their real estate.

A successful P3 balances flexibility with structure, matches goals to reality, and meets the needs of both the university and private partners. This requires a complex web of hard work, systematic analysis, and meticulous decision-making. Meanwhile, retaining specialized real estate, finance and legal advisors who guide and support the institution throughout the whole process is essential to campus growth and success. The desired end result will maximize efficiency and satisfaction to all parties involved while allowing universities to focus on their core mission and campus experience.