The maintenance and improvement of university estates is an ongoing challenge – pressures on funding; challenging carbon neutral, net-zero targets; a post-Covid environment and uncertainty over student numbers are all in the context of needing to continue to invest in the campus and facilities to attract the best staff, students and stakeholders.
During, and shortly after, the Covid pandemic there was a lot of commentary about the demise of the physical campus. It was suggested by some that students and staff had got used to remote teaching and learning with cost savings (to institutions and individuals) reinforcing this.
Whilst a fully online campus was never going to be universally achievable or, arguably, desirable, the benefits of the HE built environment have resurfaced – not least relating to mental health and wellbeing and as a key part, for many (although not all – particularly local, mature, part time and working learners), of the ‘student experience’. Universities are often key drivers of local regeneration and levelling-up. They’re also significant local employers and key parts of a supply chain industry. It’s therefore probably more realistic to refer to a hybrid campus of physical and digitally-connected learning, living, research and teaching. The importance of place should not be underestimated.
The university estate continues to face many pressures, principally straitened and uncertain funding (exacerbated by tuition fee caps, rising utility and maintenance costs, increased interest rates and visa and Brexit-related challenges associated with the lucrative international student market). However the need to invest in the campus and facilities to attract the best staff, students and stakeholders remains. The days of investment largely coming from the state and institutions’ cash reserves are over. Universities’ estates and senior leadership teams are increasingly looking for additional and alternative sources of funding to meet these challenges. Having worked with several universities on this quest, some common themes have emerged. By thinking about these now, your institution will be best placed to be ready to apply for, and attract, that income and funding:
Know the extent of your estate
In many cases, universities have a hugely diverse and expansive estate which has been acquired and evolved over time. Increasingly this is expanding to locations outside of that institution’s traditional home base. Institutional funders, grant bodies and interested investors may require title certificates confirming points such as the extent and type of the university’s ownership, whether there are existing charges/mortgagees and if it’s occupied by third parties, the nature of that occupation.
We’re working with several HEIs’ estates teams to carry out a legal audit of their estate and we’re advising on action points. Examples include proactively applying to register unregistered parcels of land, updating titles and preparing and submitting applications for first registration and adverse possession of long used land where the university doesn’t have documented title. In addition to this legal exercise saving valuable time and costs, when liaising with a third-party funder or mortgagee it can also flag some surprises, with universities sometimes owning land and buildings they didn’t know about and vice versa!
Income stream
Universities often have a unique asset class: a range of land and buildings, often in prime, valuable city centre locations. Space utilisation is a long-standing challenge in the sector. This challenge, along with escalating energy costs and ever stringent net zero targets often calls for greater income.
Given all of this, we’re seeing a lot of universities receiving income from short and long-term rentals, with flexibility built-in such as break clauses, conditions and incentives being rent free periods and capped rents. This could be of particular interest in attracting university (and wider) spin-outs and start-ups. By strategically incorporating this thinking into estate masterplans, (not least to provide a rental stream and share/contribute towards other maintenance and occupational costs), and sometimes linking this occupation with the academic and research curriculum, this could also tap into HEIs’ increasing focus on employability.
Sharing risk and reward
Increasingly, given the challenging funding environment, universities are now no longer solely financing, delivering and occupying capital projects alone. Joint ventures, collaboration and nomination agreements with third-party partners are growing in popularity. Careful consideration needs to be given around any profit share and costs on acquisitions/disposals, tax and charity treatment, Office for Students requirements, KPIs, the extent to which the university can influence and control what’s being built, step-in rights and exit strategies. Reputational risk also needs to be considered, both in terms of the partners and source of funding, and in the event of a default such as a partially or non-built development. Protections may also be needed to minimise and mitigate against disruption to the student experience.
We’re assisting a range of universities with these shared development schemes which can help with the delivery and ongoing costs associated with new schemes and significant refurbishment projects.
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