Greater use of private sector partnerships can help universities and their host locations to build the right real estate for their mutual growth, property experts have suggested.
Speaking at a roundtable event at the UKREiiF real estate conference in Leeds earlier this year, participants from university estates teams, developers and investor L&G Real Estate argued partnerships could help higher education institutions tackle issues around funding and risk to get projects up and running.
Mike Coplowe, head of development partnerships at L&G, said the investor has a "huge mandate" from its pension customers to deliver on social purpose, explaining that development in university cities suited its investment strategy due to the similarities of their "long-dated" approaches to investment.
He said: "Universities have a mandate that is very different to the private sector, and we've got to appreciate that in terms of how things are structured, how we operate, the timing of investments and the levers that we need to pull.
"But I think what is interesting is the scale of opportunity it can create when the right minds comes together ... we've done regeneration for quite a while now in places like Sunderland and Newcastle, and definitely by supercharging the universities we are seeing that the regeneration can happen at a quicker pace because of the gravity it creates."
L&G has already invested in Oxford, famous for its world-leading university, where it has established a partnership with the institution to expand and improve its academic, residential and commercial buildings.
The partnership, known as Oxford University Development, has three consented projects which are under construction, reflecting an investment of circa £300 million. Anna Strongman, OUD chief executive, said the agreement had delivered clear benefits around sharing development and operational risk, with L&G taking all risk where appropriate.
She said: "We are developing different types of assets, which have different risk profiles associated with it. Building out a new innovation village and investing in the infrastructure, that is a different risk profile from building an academic building with an identified and committed tenant.
"The university has been very open and honest about its ability to take the risk, and in return L&G has stepped up to take on the risk and they are pricing that risk accordingly. Effectively, the university is paying a price for not taking the risk, but it is prepared to do so because they understand their capacity for risk and, in return, are receiving operational assets required to support their future."
Delegates also discussed the potential for private partnerships to help bring research out "from the lab to the real world" during the discussion, with participants identifying a common need for more and improved residential and life sciences accommodation at universities.
One estates leader at a top university said their institution was reaching a "critical stage" where a lack of living options in the city for both students and staff meant it would have recruitment and retention issues, alongside poorer standards of living.
Other participants said students in their locations were being forced to take accommodation in neighbouring towns and cities, with many of them "not afraid" to pay higher rents. A lack of purpose-built student accommodation also sees a tension between students and locals bidding for family housing.
A need for more high-quality lab space to house ambitious university spin-outs was another pressure on estates teams at universities, with some worried that the UK would lose business and suffer economically unless more was done to house ambitious firms.
Ben Woods, head of regional development at the University of Bath, said: "If we want to single companies out and drive economic value, they've got to have a place to go to and at the moment they have not got that.
"We have lab-based companies going elsewhere because they need to go where the labs are, but they would ideally like to stay. As we've found with digital companies, they would like to orbit their host university.
"Universities are drivers of economic growth alongside our students, and the more research we do, the more we get. But then you reach a point where there is a physical asset gap to enable that to grow. Outside of the Golden Triangle you find that is a particular issue."
Woods suggested that the university was looking at spaces outside of the city to support its growth and support the economy of neighbouring locations, with a "one-in-one-out" approach to development within Bath.
He added: “[There] are opportunities presented by neighbouring locales, attached by good transport links, or equally working with those local authorities where a transport link might be needed to support growth, and the presence of student accommodation or a university science park, it actually unlocks that development space and acts as an accelerator for spaces."
Delegates at the roundtable also flagged the need for universities to upgrade and improve their existing infrastructure, as well as expand via new developments, with ESG at the forefront of the thinking of property owners and developers across all sectors.
Some leaders said many universities were facing the prospect of deploying an "awful lot of capital and resource" to renovate their ageing campuses, arguing that universities were not meant to tackle multi-phase development projects.
Andrew Whitehead, JLL director, suggested that private partnerships could be used in these scenarios to share the risk and cost of redevelopment projects or upgrades to buildings, adding that an "enormous amount of capital" was waiting to deploy capital into universities.
"It's going to take an awful lot of capital and an awful lot of resource and, with the best will in the world, I don't think that is what universities were established to do," he said. "In some instances, we are talking about wholesale change, large innovation districts, multiple phases of buildings.
"That's where I think partnerships can enable. It allocates risk to partners where they are best places to take it. For the Life and Mind Building in Oxford, it was appropriate that the financial risk was taken by the university because it was space for their benefit, for the benefit of their growth and their people who use that space.
"Whereas it was appropriate for the L&G as the development partner and the funder to take contractor risk and take the risk around getting the steel out of the ground, delivering the building for the university."