Capital investment in college facilities surged to 11-year high

January 2, 2019

The amount of capital investment dedicated to existing campus facilities by North American colleges and universities reached an 11-year high in 2017, according to a new report from Sightlines, a Gordian company and leader in facilities planning and benchmarking analytics.

The sixth annual “State of Facilities in Higher Education” report found that total capital investment into existing properties on college campuses reached nearly $5 per gross square foot in 2017. This caps a steady climb that began in 2011 and is the highest figure recorded since 2007.

The report is based on comprehensive data collected and analyzed by Sightlines from more than 360 college and university campuses annually, which collectively operate more than 52,000 buildings that serve 3.5 million students.

“Capital investment in existing properties has finally returned to — and even eclipsed — pre-recession levels,” said Mark Schiff, President of Sightlines. “In addition, a larger share of this funding is coming from recurring capital sources, as annual stewardship funds have increased by more than 50 percent from 2007 to 2017. These funds represent a long-term commitment to addressing building renovation needs. Still, the positive trends in capital investment levels and mix of funding are not keeping pace with growing project lists.”

The report also identified a potentially challenging trend for college facilities managers. A deep dive into the ages of existing buildings on hundreds of campuses indicated the coming need for major capital investments.

“Higher education has seen two major waves of building construction, one from 1950-1975 and one from 2000 to present day,” said Schiff. “This profile tells us that within the next 10 years, these two cohorts of buildings will both be demanding high levels of capital investment at the same time. The largest demand for capital investment that higher education has ever seen is bearing down on us, whether or not the resources to meet that demand exist.”

Other notable trends identified in the report included:

Campus expansion continues despite declining enrollment — The educational landscape has become increasingly competitive in recent years, causing institutions to double down on the construction of new facilities. This strategy may pay off for research institutions (14 percent increase in space, 16 percent increase in enrollment since 2007), but it will likely leave many masters institutions (17 percent increase in space, 4.5 percent increase in enrollment since 2007) with swollen campus footprints and declining tuition revenues to cover the costs.

College debt continues to pile up — With enrollment revenues, endowment support and state funding all on the decline, institutions have financed their capital investments by borrowing money at low interest rates for the past decade, compounding existing debt issues. Total debt funding (more than $41 billion in 2016, according to The Atlantic) may prove harder to service if interest rates continue to rise.

There’s no stopping the backlog — Despite positive capital investment trends, funding is unable to keep pace with the mounting list of project needs. Backlogs continue to grow and significantly impact campus operations and the overall experience of students, faculty, staff and guests.

Budget pressures creating staffing reductions — The current pressure on facilities budgets and the imminent possibility of future budget reductions have left institutions reticent about increasing staff levels (no measurable change in daily service personnel since 2014), forcing maintenance and custodial employees to cover more space. To avoid overextending these workers, campus facilities managers are finding new ways to organize their staff and discovering innovative work processes — such as building automation technologies and the strategic use of outside service providers — to increase their efficiency.

The 2018 “State of Facilities in Higher Education” report analyzes new trends in higher education space management, provides insight into the challenges impacting campus facilities and shares best practices for how college leaders can fund and manage their facilities considering these challenges. The full report can be downloaded here.

About Sightlines, a Gordian Company

Founded in 2000, Sightlines, a Gordian company, gives colleges and universities the independent data and perspective they need to make critical decisions about their most valuable assets – their facilities. Sightlines stewards the industry’s most extensive verified database, allowing more than 450 institutions across the U.S. and Canada to benchmark an institution’s facilities against universities and colleges across the nation. Sightlines’ flagship offering for members is ROPA+, a fully integrated solution for facilities intelligence that leads members through a comprehensive process of facilities benchmarking and analysis. Other Sightlines solutions provide higher ed executives with insights to assist with capital planning, space management and campus sustainability initiatives. For more information, please call 203.682.4952, go to http://www.sightlines.com or email [email protected].

About Gordian

Gordian (www.gordian.com) is the leader in facility and construction cost data, software and services for all phases of the building lifecycle. A pioneer of Job Order Contracting, Gordian’s solutions also include proprietary RSMeans data and Sightlines facility benchmarking and analysis. From planning to design, procurement, construction and operations, Gordian’s solutions help clients maximize efficiency, optimize cost savings and increase building quality.