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2017 - A year of change or keep calm and carry on?

VWV's Clive Read recaps the surprising outcomes of 2016 and asks, how do universities address those uncertainties?

Posted by Hannah Vickers | March 25, 2017 | Finance, legal, HR

Last year proved to be a year of surprises on all fronts. It was difficult to know what was most unexpected: Leicester City winning the Premiership, the UK voting for Brexit, or, in the US, Donald Trump confounding his many critics by becoming President. When there is so much turbulence about, and paradigms are allegedly shifting, with commentators citing that “profound change is the new stability”, how do universities address those uncertainties?

While it is true there is still more uncertainty to come, as the UK Government looks to trigger Article 50, the fundamental strength of the UK’s university sector remains, and that is certainly true of the real estate which it owns, manages and operates to such good effect. The signs of demand are still there, so what do we expect this year and where should universities be positioning themselves?

Keep an eye on the long term but be flexible

Regardless of the type of university you are, (red brick, chartered or modern university) it is the quality of your property portfolio, facilities and the management of them, that is integral to longevity and reputation. A well-resourced and expertly managed estate, with a deliverable estates masterplan, helps to promote a university to prospective partners, investors and users on a national and international stage, and with all who work for it; thus securing its future growth. 

While setting the scene, a masterplan should also provide a confident route map internally and externally and be used to fashion where next the university is heading. Engagement of your local planning authority is vital, too, as they more readily look to universities to help direct, marshal and fashion the city-scape. Exeter University’s Streatham Campus 2010 masterplan is an excellent example of how and where it looks to expand, while the University of Worcester’s strengths, for example, in disability sport, provide a context for future investment in the physical estate, as well as the other businesses with whom it might partner in the future.

A comprehensive review of your title and planning history and use can be a good early way to identify key issues to inform a sensible and deliverable masterplan. We have done that for a number of universities, picking out title issues which inform where and what impact such issues may have on development, borrowing or even the potential sale of redundant premises. 

It’s also helpful to dispel some myths: a review will clarify what is, in fact, possible. 

It also means that universities can forward-plan and take action in a more timely fashion, without coming up against an immovable deadline. In order to unlock a redundant property for sale for redevelopment, we have recently been taking action to secure vacant possession (as there is an unlawful occupier of part of the site) before it can be marketed for sale. Identifying such challenges at an early stage and seeking commercial solutions is key to universities being able to deliver projects on time and budget.

Partnerships and joint ventures

Levering value out of your real estate will mean a number of things but partnerships and collaborations will continue to play a key part, whether having a team of trusted advisers with whom you work regularly or bringing in third parties to add value to a particular project. We have worked recently with a number of clients looking to establish frameworks, so that they build up a core of professionals with whom they feel comfortable and who can often add value by providing benefits beyond just constructing a new building e.g. placements for students and staff in a real-life working environment can be invaluable. 

For specific projects, universities might seek specific expertise or contacts that private or other partners can bring. Every university will have a legion of stories to tell (good and not so good) as to what works. Good practices attract good businesses over time, as developments such as the University of Warwick’s National Automotive Innovation Centre testify. One of the keys is being clear about what you are looking for in a business partner and understanding how you put a price on that added value. In a real estate context that can be easier to measure, whether through rent or some form of profit share, geared to the successful outcomes of, e.g. a business centre. Addressing such issues at an early stage, will help make your procurement process far more compelling and should provide clarity when you are looking to attract the best bids. And that should apply irrespective of whether you have chosen to come out of the public procurement regime or not. Well-written procurement bids will inevitably attract better quality bidders. You need to be clear how your marking scheme works and how you will be looking to compare competitors’ strengths and weaknesses.

 

While it is true there is still more uncertainty to come, as the UK government looks to trigger Article 50, the fundamental strength of the UK’s university sector remains

Good neighbours 

Universities add significant monetary value to the local economy. This ranges from direct capital investment in new buildings to the cash spent by staff and students in restaurants, pubs and in the locality generally. Town v gown means being a good neighbour, marshalling student behaviour practically in halls or houses in multiple occupation. Behaving responsibly is fundamental to garnering local authority and public support for any expansion plans. Coventry University has recently piloted a scheme where student wardens have been engaging with local residents to patrol and talk to residents about concerns over bin collections and anti-social behaviour and to push campaigns for clothing collections for a local homeless charity. 

There has been a significant shift in the past 3–4 years with a number of private sector operators offering different ways of delivering student accommodation on balance sheet or via a nominations agreement. It is becoming far more prevalent to see those offers as ‘accommodation plus’ additional facilities, which overtly add value and thereby improve student satisfaction. There are a number of issues to remember, not least making sure that any deal is compliant with the public procurement regime. Real estate deals are fine because they fall outside OJEU but as soon as a university starts specifying the manner and nature of the service level agreement being offered, the risks increase that such a deal encroaches into the realms of being a service contract.

Brexit

The impact of Brexit has still to be worked through, but there will be significant implications for universities given their international positioning and engagement with overseas partners/institutions and, of course, overseas students. Whatever the ultimate landscape, student accommodation will remain a key asset for universities, in order to attract and retain the best students. The markets are changing and Brexit is likely to have an impact. If EU students are classified as ‘international’ and thereby subject to visa restrictions and/or higher tuition fees then the consequent impact that may have on accommodation needs has to be addressed. For example, UK students more typically prefer smaller, cluster-style accommodation than international students, who generally prefer larger en suite units. The trick will be assessing projected needs and adapting accordingly, probably in conjunction with private sector providers. 

Whatever 2017 brings, we can guarantee it won’t be dull. Good universities will be keeping their portfolios under constant review, working with their business partners to continue to optimise their estate and make it an exciting place to live, work and play. 

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