Large-Scale Construction Activity Set to Continue in the Education Sector in 2013
Deloitte’s annual real estate predications report for 2013 shows that the Higher Education sector is currently one of the biggest drivers for the UK’s construction activities. There have been high levels of activity and investment within this sector in recent years, and 2013 looks set to be an even bigger year. This is the result of a number of key factors, and each factor shows no sign of slowing down.
Many universities slowed down their construction activities in 2012 to protect themselves against the ‘Olympic Effect’ on construction tender prices. As such any pre-Olympic activities that were postponed would have since been resumed. This is only one reason for growth in 2013, and by no means the most significant.
The effects of the UK recession have been felt in every area of construction, though one area of the market that has consistently flown in the face of the recession has been the Higher Education sector. Previously intense, both national and international demand has increased even further, and with the increase of higher education fees, colleges and universities are under increasing pressure to provide the best facilities, the best housing and the best educational experience. Expected to shell-out £5,000 – £9,000 each year, it is absolutely no surprise to see students expecting more from their institutions; for both education and lifestyle.
London is the seat of much activity in this sector and there are a big number of academic institutions in talks over large real estate strategies. Away from the City, large institutions such as the University of Manchester, Manchester Metropolitan University and Aston University are involved with major construction schemes.
Much of the funding for these construction schemes has come from the taxpayer, which is a result of the coalition’s aim to support institutions that are promoting economic growth or have the potential to do so. In late 2012 the government’s declaration was to provide support for the development of new technologies such as energy storage, Big Data, advanced materials and synthetic biology to increase the UK’s competitive advantage. This support includes the UK Research Partnership Development Fund 2012-15, which has already delivered £300m into universities that focus on research; primarily Russell Group universities.
In accordance with the increasing aim of providing the best ‘student experience’, increased activity within student accommodation has also emerged. This aim, alongside increasing demand and high shortages of purpose-built accommodation, is leading to a healthy investment appetite. Specifically, private investment is becoming an increasingly dominant force, as this is a potential source of non-public sector capital and allows institutions to hand over the responsibility of housing management to specialist private businesses. Private investment schemes for university accommodation are coming with a large number of deal structures tailored to the level of control the institution wants and the amount of capital it needs.
Not every institution is feeling the benefit of extensive public and private investment, and many are under pressure to reduce costs. However, with the predicted increase in land values, many of these institutions are planning strategically to ensure future prosperity with the development of promising planning permissions and the construction of new facilities to free up land elsewhere.
The UK Research Partnership Development Fund will continue to fund research-focused universities until 2015. Across the board there will be continuing efforts to improve the student experience, and as very significant part of this, student housing will remain an increasingly attractive prospect for investors. Accordingly we can expect to see increasing activity for all areas of construction within the Higher Education sector in 2013.