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Opportunity in the face of uncertainty: how the education sector will adapt and thrive

  • United Kingdom
  • Education
  • Education - Briefings
  • Education - Coronavirus

10-02-2021

In the age of the pandemic, change in the way we now occupy and use space is a consistent theme and this is especially true for the higher education sector. With severe disruption to how students learn and live, universities have had to strive to react nimbly to a constantly evolving landscape, often in the glare of the media spotlight.

Despite the challenges and uncertainty of the past year, the acceleration of change brought about by the pandemic will provide opportunities for institutions. Here, we explore how the education sector can gain an advantage and where some of the key opportunities lie.

Student accommodation – a flexible portfolio approach

The prospect of declining overseas student numbers has raised questions about the viability of swathes of student accommodation stock. How successfully institutions can navigate this uncertainty and the financial risks associated with it will depend on the level of flexibility they can build into their accommodation portfolios. Institutions may find they are in a stronger position to re-gear and renegotiate existing nominations arrangements with third party providers, or enter into new arrangements on more favourable terms. This may help re-balance the risk of shortfalls, where the institution would traditionally underwrite that risk.

Capital projects – alternative funding options

With many already underway or in the immediate pipeline, capital projects remain at the forefront of educational institutions’ strategies and they will be keen find ways to reduce the development risk and financial exposure of these schemes. Rather than traditional bank finance or bonds issues, alternative funding options, such as forward-funded income-strips, may provide institutions with the right balance of risk; where bonds or bank finance aren’t appropriate.

Estate consolidation and financial returns

The rapid shift to remote working and learning has accelerated the process of estate consolidation, with institutions trimming their estates to be more efficient, sustainable and aligned with their overall strategies. Increased financial pressures make it more important than ever that institutions maximise returns from their estates. They may also look to the use of joint ventures for development, the creation of “investor-ready” income-generating assets, commercial lettings and other uses of additional space, such as residential schemes such as build to rent and affordable housing, logistics or decentralised energy projects, to generate income, enhance commercial offerings on campus or foster closer links with industry and the community.

Lessons for the future

Two recent UPP Foundation papers proposed that English universities should play a significant role in revitalising economically and socially disadvantaged areas hit hardest by the pandemic. This could see institutions bidding in partnership with local government for a proportion of the £3.6bn Towns Fund, to develop dilapidated retail space or build new community assets, to accommodate teaching, research or community activities.

As we emerge from the pandemic and look towards a better future, it is clear that the higher education sector has a key role to play in our economic and social recovery and, as part of that, institutions and investors alike may reap the benefits.