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How universities can use property to work more with their local communities and businesses

  • 28 April 2021
  • By Mat Oakley

This blog was kindly contributed by Mat Oakley, Head of UK and European commercial research at Savills. You can find Savills on Twitter @savills.

After over a year of debate, anyone who works in the offices sector is probably more than a little bored of speculating on whether COVID has permanently changed how we interact with and use the workplace. The reality is that it has, but only to an extent: people still need to work in offices, but probably not so often. Meanwhile, a company still needs an HQ building, but it is likely to be used for different purposes then housing 500 workers in front of their laptops.

How is this relevant to the higher education sector? The most obvious answer is that trends we see in corporate offices tend to feed through to education workplaces. Less obvious is that changes in how occupiers use offices – and indeed the wider ramifications of the pandemic in the property markets – may open up new commercial opportunities for higher education institutions. It is these opportunities I want to focus on.

The use of flexible workspace was a major trend underway prior to COVID. Serviced office operators such as WeWork and IWG were actively chasing larger businesses as clients, leading to more traditional landlords also offering some of their office space on a flexible basis to tenants. For organisations, flexible spaces satisfy a lot of challenges that both pre-dated and have emerged from the pandemic.

While universities themselves may explore accommodating some of their own staff in such flexible spaces, the bigger opening for them here is possibly as flexible landlords themselves.  Many universities are relatively unusual in that they still own the majority of their offices. Where offices are permanently or temporarily underutilised, then leasing it on a short-term basis to third parties might bring added income.

There are a number of routes to offering such spaces to the open market, ranging from leasing that space to a flexible workspace operator to operating it yourself as a flexible provider. For the latter, there are an increasing number of companies which will ‘white label’ the space so that it appears that the university is the ultimate landlord, but they undertake all the mechanics of fitting-out, leasing and managing it.

Flexible workspace is not only for offices, although this remains the majority of the market at the moment. We also believe that there is an opportunity for universities to provide laboratory space on a flexible basis as the sector is currently very under-supplied.

Another benefit for universities of considering sharing some of their space with other organisations could be around knowledge-sharing and community. Historically, the higher education sector has been at the forefront of the delivery of incubator spaces on campuses, research and science parks across the world. Many private-sector organisations would value the opportunity to work in closer proximity to students and academic staff and the ability to lease spaces on campus where ideas-sharing could be facilitated would be an exciting new option for companies in knowledge-based industries. Some companies are already delivering such space on their own campuses: Facebook, for instance, already offers incubator space in its offices to start-ups and innovators with whom they would like to work in the future.

Looking beyond office trends, opportunities may also be available for higher education through the broader recessionary effects COVID has had on the property markets. The amount of available office space in many towns and cities has risen significantly over the last year. This might present an opportunity for institutions who have struggled to find suitable space to acquire city centre buildings and integrate further into their surrounding communities.

The scale of the opportunity is significant. For example, in the central London office market the amount of vacant office space available to lease has risen by nearly 60 per cent over the last 18 months. While the rise is not quite as dramatic in the UK’s key regional cities, it has increased almost 20 per cent over the last 12 months. For cities such as Bristol and Cambridge, which have struggled with a shortage of office space for much of the last decade, there will now be a short period when a wider variety of options will become available for institutions which are looking to expand or rationalise into better space.

In addition to having more office options available, the increase in vacant retail units also presents new opportunities for universities looking for more space in their home-town or city. The UK currently has 142 million square feet of vacant retail space, equivalent to 12.6 per cent of units, with even the most successful retail centres seeing an increase in vacancies.

Many of these retail spaces are large and have limited alternative uses. However, they are often centrally located in mixed-use environments and near university campuses. We have already seen interest from medical and life-science companies for redundant department stores in London, Oxford and Cambridge and we believe that universities should also be looking at them to satisfy medium to long-term needs for campus expansion.

While UK examples of large-scale change from retail to education use are limited, the US with its longer-standing oversupply of malls is forging ahead. One of the best examples is Austin Community College in Texas, which took over the failed Highland Mall in its entirety and has since delivered a 400,000 square foot. campus.

The changes wrought by COVID offer the higher education sector a chance to capitalise on delivering new spaces for the future. The desire to make better use of spaces, be more flexible and to integrate better in the community were already well ingrained in many estates strategies. The post-pandemic era has not negated any of these strategies and in our opinion, has made some of them more deliverable.

HEPI has previously published a detailed assessment of the student accommodation sector and a history of student accommodation.

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