Universities get creative with private partnerships

Universities are increasingly exploring new business models to join forces with the private sector and provide high-class amenities to students.

November 01, 2018

With competition for new students rising at U.S. colleges and universities, extravagant campus amenities are booming in an effort aimed at drawing tuition-paying prospects.

But lazy rivers, bowling centers and movie theaters with free popcorn aren’t as widespread at institutions that rely on state funding, which are grappling with reductions in government contributions. Instead, many schools have focused on partnering with the private sector and startups, says Kevin Wayer, President of JLL’s Public Sector and Higher Education business.

“University-led development has to distinguish between what’s worth spending money on, and what’s a gimmick,” says Wayer. “It has to be an investment for the future.”

For example, the University of California has embarked on a public/private partnership to build more than 10,000 affordable housing units for students at UC Merced, the university’s youngest satellite campus.

The $1.3 billion partnership to expand the campus will accommodate thousands of additional students, support new jobs and stimulate an estimated $1.9 billion in economic growth for the area.

Such partnerships are new territory for universities, which are becoming not only employment drivers, but economic development drivers as well.

A case for community development

State funding has not yet been restored to levels seen before the Great Recession a decade ago, leaving many universities to consider different options in order to build projects. Out of 49 states analyzed by the Center on Budget and Policy Priorities, 45 spent less per student in the 2018 school year than in 2008.

With state funding down and education costs on the rise, universities are trying to avoid hiking their tuitions in response. The timing is perfect, Wayer says, for institutes of higher education to re-define the recruiting role of their real estate.

By turning the focus of their investments to those that improve economic development and career-readiness in the larger geographic areas they exist within, universities are finding partners in their surrounding communities.

“It is becoming a common push-pull story,” says Herman Bulls, Vice Chairman of the Americas at JLL and co-founder of its Public Institutions business. “Universities recognize a need to increase enrollment and build out their space, but they don’t have sufficient levels of state or federal funds. It takes creative partnerships with the private sector.”

One emerging model is to create new spaces on or near campus that bring together research centers, restaurants, retailers, hotels and apartments into miniature neighborhoods that are nearly self-contained.

Harvard University, for example, is making use of a once-vacant university-owned parcel of land adjacent to its campus. It is partnering with private entities to construct combination office and laboratory buildings, as well as a hotel and conference center, and an apartment building.

Tapping into the startup economy

From on-campus business incubators to corporate-supported programs dedicated to career training, universities are also tapping into the start-up economy.

In Kansas, Wichita State University launched an Innovation Campus concept, setting up a series of public/private partnerships (P3s) with area corporations like Airbus and NetApp that have resulted in tech-rich courses designed to create a ready-made workforce.

Previously, these corporations had an 18- to 30-month lag-time between hiring a graduate and having a fully productive employee. By engaging the university’s students in applied learning activities, Innovation Campus partners can now train potential employees while they are still in school, cutting the post-graduation on-boarding time to as little as six months.

“Bringing together the academic faculty and students, the local business community and the social environment is a cross-functional idea,” says Bulls. “It’s going to be a differentiating factor, and I predict more institutions in the next decade are going to have to look at alternative business models.”