Higher Education Market Trends Q4 2023
by Greg Fraikor
Enrollment decline, reinvention, and division between the “have’s and have-not’s.”
Continued declines in enrollment, lingering inflation, and high interest rates have resulted in ongoing stress for financially challenged institutions. Mergers, acquisitions, and consolidations continue. Smaller institutions reliant on lower return-on-investment (ROI) degree tuition for revenue are being forced to reinvent and critically reduce costs. Repurposing and renovation opportunities are growing through divestiture of underutilized assets and consolidation of programs into spaces delivering higher utilization and facility efficiencies.
Despite ongoing issues in the stressed sectors, there is plenty of good news associated with R1 Research Institutions and other highly selective institutions. This group remains competitive both for student enrollment and financial stability, with endowments and alternative revenue sources (research, housing, athletics, etc.)providing ample capital for robust facilities programs. Specifically, research facility funding continues to exhibit positive year-over-year growth. These institutes will continue to produce graduates with superior employability, economic and social influence.
Unfortunately, a byproduct that is unfolding is a widening gap between what can be characterized as the “haves and have-not’s”. An unintended consequence has forced demographic change impacting historically marginalized students and DEIB programs.
of all research space need upgrades, fueling the renovation and new construction trends heading into 2024.
Address Growth in Research Facilities
Over the last decade, research space has increased by a remarkable 32M square feet and planned construction starts in this sector exceeded 10M square feet and $13B in FY22/23. Agricultural, Computer Science, Biological/biomedical, and Health sciences continue to dominate the space types. Over 20% of all research space needs upgrades, fueling the renovation and new construction trends heading into 2024.
The size, scope, and complexity of the projects demand more sophisticated design and construction contracting capabilities and increased collaboration with multi-stakeholder project teams. Interest in collaborative and early integration delivery methods is on the rise. Progressive Design Build (PDB) is one such method that is growing in popularity.
DBIA-WPR recently sponsored Progressive Design-Build (PDB) legislation (SB 706) expanding the authority for the use of PDB by state and local agencies in California. “PDB supports a collaborative project approach between partners, allowing design and constructibility to develop until the guaranteed maximum price is agreed upon. This process requires cost transparency while the project is collectively shaped to the Owner’s unique criteria.”
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Despite continued global economic and political uncertainties and generally flat construction trends, notable strengths in research facility segments are a continued source of brightness. Philanthropic investments continue to increase ($6.6B) with 12.1% to research universities. Reinventions, revenue diversifications, and top-to-bottom financial evaluations are front and center for stressed institutions. For select institutions, P3s and student housing opportunities continue, as do some financial closing delays, inherent with the complexity of this delivery method.
As all this transpires, the debate and impact of artificial intelligence (AI) rages on with one unified area of consensus—AI is here to stay and in a big way. Higher education facilities and faculty must be prepared to develop responsible, AI-ready students and provide the technological infrastructure to support their learning. The next 3-5 years are poised to be incredibly interesting, characterized by groundbreaking innovation and invention, turmoil and change. Advice? Put your seatbelt on, be nimble, and ready to adapt.
How Can We Help?
DPR is a leader in collaborative project delivery methods with experience in IPD, ILPD, DB, and PDB. We are a top 10 ENR builder of Health Care, Advanced Technology, and Life Science construction projects employing over 9,000 experienced builders and subject matter experts that we routinely leverage to deliver challenging interdisciplinary, research, and technical Higher Education projects.
College and University projects are unique, and the family of DPR companies offers unique prefabrication, supply chain, and self-perform capabilities to deliver challenging projects with strict schedule and budget challenges.
Our early integration and cost modeling services provide critical project design, construction alternatives, and information to help inform and execute successful procurements and projects.
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Posted on November 1, 2023