As colleges and universities address the challenges of operating in the pandemic era, consider how you might leverage facilities in new ways to support the bottom-line while also enhancing the campus experience.
Throughout the global pandemic, many colleges and universities have been asking, what do we do now? While health and safety concerns remain a priority, now is also the time for colleges and universities to look to the future and consider, where can we go from here?
As you address the challenges of operating in the pandemic era, consider how you might leverage facilities in new ways to support the bottom line while also enhancing the campus experience. For example, do you need to house all administrative activities on campus? An analysis of off-campus options may reveal cost-saving opportunities while freeing up campus facilities for learning.
Matt Do, Senior Vice President Higher Education for JLL, led a discussion around how the campus is being reimagined with three higher education real estate and facility leaders.
- Rob Wynkoop, Associate Vice President of Auxiliary Services, Purdue University
- Mike McCormick, Associate Vice President Asset Management and University Architect, University of Washington
- Jeff Graham, Executive Director, Real Estate, University of California San Diego
Q: How are current pressures changing the conversation about space on your campus?
Wynkoop: Our staff is mostly off campus right now, so we’re trying to determine what to do with all the open administrative space. As for learning spaces, we had 36,000 students on campus in the fall semester, with a mix of virtual and on-campus classes. We’re trying to figure out next steps, like whether we should continue with the same space precautions that we put in place in classrooms. Are we going to make them larger or smaller? Ultimately, we’re trying to decide how to best use our space to make sure those students who decide to come to campus have the best experience possible.
McCormick: We were the first major university to shift online and we’re now offering less than 5% of classes on campus. We have about 10,000 students on campus, and the question is, what do we do with all the space that’s not being used? We’ve been fairly aggressive at curtailing buildings and shutting off space to conserve energy and focus our resources. This process is giving us insights into what space is critical to the university, and what space is maybe not so critical.
Like everyone, we’re also seeing significant financial pressure. For example, the residence hall system and the medical center have been losing money, and our state revenues are down. We’re catching it from every angle and fund source—allowing us to have a different conversation about the cost of space, which is the second-highest cost we have.
“ 80% of our staff said they were equally or more productive working at home.”
Q: Do you plan to continue remote working policies? Are you reimagining your administrative spaces?
Wynkoop: Pre-pandemic, we had about 500 administrative staff working in leased offices in buildings surrounding campus, in addition to staff who worked on campus. We were in the process of renewing those leases when COVID-19 hit. Within the last few months we decided to end those leases completely and continue to have folks work from home—eliminating $1.2 million dollars a year in lease costs that will go straight back to the general fund.
Now we need to figure out what we can do with the additional administrative space that’s empty on campus. Our folks for the most part like working from home, but they miss face-to-face meetings. So, we want to create more collaborative space.
There’s also a new potential to leverage unused administrative space to help with growing academic programs. Historically, a fast-growing academic program would raise money for a new building. Now we can ask an additional question: What if we can instead work together to figure out how we could renovate under-utilized space in a way that supports program needs—and saves millions of dollars in construction costs over the long term, too?
McCormick: This moment is really asking us, why do we come to the office? We’re finding we can accomplish our goals in much less space. We’re doing a series of investigations and prototypes to figure out the right balance between remote and in-person work, the outcome of which could have huge potential savings for the university.
Graham: Like most other universities, all our non-essential staff began working remotely immediately when COVID-19 began, and will likely continue through March of 2021 at least. In an online survey, 80% of our staff said they were equally or more productive working at home and that they wanted to continue to work from home when the pandemic was over, at least for a few days each week. Additionally, the vast majority of supervisors were supportive of remote working.
We’re going to look closely at how changes in remote work strategy might affect our campus and leased-space strategy, and determine how much space we might be able to recoup as we bring administrative staff back to leased spaces off campus.
“We’re looking to capitalize on P3 projects to expand our impact, spend less money and preserve capital for core needs.”
Q: Will public-private partnerships (P3s) play a greater role on your campus?
McCormick: One dynamic at play is that, even before COVID-19, capital funding for public universities was becoming more limited and difficult to come by. We’re focused on preserving debt capacity for things where debt is the only option, like renovating buildings. So, we’re looking to capitalize on P3 projects to expand our impact and, quite frankly, to spend less money and preserve some capital for core needs we all have—like deferred maintenance backlogs.
Graham: We had a few P3s in the pipeline when COVID-19 hit. A couple were placed on pause because they required a lease commitment backed by the university health system. But the vast majority of the P3 projects we have planned are pure revenue generators—ground revenue and research revenues that would come to the university through industry partners that will develop space in our research park. Those were momentarily paused for a few months over the summer, but are now up again.
Generally, our CFO favors a well-structured P3 in the right situation because it preserves our debt capacity for core academic and student housing projects. It’s also the only way to create millions of dollars of new revenue per year that is bondable for 65 to 75 years of a ground lease term, and that we can count on as new revenue with guaranteed escalations every five years.
Wynkoop: We just finished our first P3 projects—two new residential halls that were literally going up as COVID-19 hit. They opened on time in August and now 1,200 students are in those rooms. Overall, the project was a great success.
Q: What other real estate and facilities strategies are helping you conserve budget and reduce costs?
Graham: We manage about 650,000 square feet of off-campus investment office space, occupied by both UCSD and third-party tenants. With the current market, we’re seeing double-digit lease rate reductions and greater amounts of rent, pre-rent and tenant improvement allowances to keep the tenants because other landlords are trying to attract them away. Right now, we’re trying to reduce operating expenses and keep tenants in the spaces, even if it requires significant rent reductions and greater concessions.
Other than that, we’re focusing on P3 developments that should be good revenue generators for us. We’re very lucky that our research park is situated in the heart of the life sciences and tech research triangle of San Diego, as it’s one of the few developable areas left with great density and capacity.
McCormick: We’re really focused on enabling the value of our land to allow us to do some things we couldn’t do otherwise. For example, we’re talking about a research building that will be co-occupied by private and public agencies as well as some of our research groups. That would not have been possible if we weren’t able to capitalize on the value of the land and leverage it to create this kind of facility.
“If we’re not experts at a project, we probably ought to find somebody in the private sector that does it every day.”
Q: What advice do you have for other campus facility and real estate teams facing converging financial pressures?
Graham: A couple of things have helped my department and our campus respond to this unprecedented and unexpected crisis. One is that the vast majority of my staff has an entrepreneurial mindset and is used to thinking outside the box. We also quickly created a small lease restructuring unit to lay out new criteria for making decisions on things like rent concessions or deferment, which allowed us to respond quickly to our off-campus tenants and keep our retail tenants in business.
McCormick: It’s important to work with a big, well-rounded team with a lot of expertise. That’s why we combined our real estate, project delivery, campus planning and capital planning groups—it takes expertise across the board to be successful.
One thing we often hear about P3s is the loss of design and quality control that can accompany partnerships. But we don’t believe that’s necessary. It’s totally possible to be part of the selection process with the architects and the design process, approvals and quality assurance process. It isn’t something we have to completely turn over to someone else. After all, we’re tasked with the same things on campus: to reduce operations costs and hit the budgets and schedules. And we can do all that with effective partnership.
Wynkoop: If you consider P3s, you’re going to have advisors from the outside to get through this. Find partners you truly trust for the long haul. At Purdue, we use the same partner for a number of projects simply because they deliver. There’s not a lot of fanfare—they’re real people who come into the room day in and day out.
Overall, our sense is that if we’re not experts at a project, we probably ought to find somebody in the private sector that maybe does it a little better, that does it every day. And so that’s been our approach.