Stories

Higher Education Market Trends Q4 2025

by Greg Fraikor 4 minute read

Adverse Weather Conditions Continue, With Occasional Breaks in Cloud Cover

Last quarter's market conditions report featured a hook title with three words “Chaos, Disruption and Uncertainty”. As we approach the end of 2025 and head into 2026, stormy seas still persist, and the Armada that is Higher Education- has seen some ships damaged, with additional turbulence in the forecast. The Armada is vast, however, and the bulk of battle ships in the fleet are navigating passage and adapting tactics and strategies to weather the storm, some more successful than others.

Continued Turbulence Key Issues Impacting Higher Education

Financial Pressure and Affordability

Across the country, the affordability of higher education remains a growing concern as tuition and fees continue to outpace inflation. This trend puts increasing pressure on students, families, and institutions especially in regions where household incomes have not kept pace with cost-of-living increases. States such as California and New York, with large college populations, are particularly affected due to high demand for financial aid and ongoing reductions in state appropriations. The scrutiny of higher education’s value proposition is intensifying everywhere, as students, parents and legislators are demanding clearer evidence of outcomes like employment prospects and ROI.

Institutional budgets are under stress nationwide. State and federal funding are declining or remaining flat, and endowment returns are unpredictable and for the larger R1 institutions increased taxes on endowments envisioned for 2026 will inflict additional pain points. This financial strain is forcing many colleges to prioritize essential programs and reduce capital spending, while also seeking alternative revenue streams, partnerships, or new tuition models.

Maintenance Backlog, Aging Infrastructure & Workforce and Staffing Challenges

A large proportion of U.S. campus facilities are aging, with deferred maintenance accumulating into the billions. Regions with older universities—such as the Northeast and Midwest—are especially burdened by legacy infrastructure needing extensive repairs or modernization. The backlog includes everything from basic safety upgrades to the replacement of mechanical systems, roofs, windows, and accessibility improvements. Funding shortfalls make it difficult to keep pace with these needs, resulting in growing maintenance deficits and operational risks.

Facilities operations nationwide are experiencing workforce constraints, driven by an aging labor pool and heightened competition for skilled trades and management roles. Urban regions, where labor markets are competitive, face additional challenges in recruiting qualified staff. Technical advancements require ongoing employee training and adaptation, adding further complexity to workforce planning.

Seeking Pockets of Sunlight

Construction Opportunity

Universities are moving to align with workforce and technology trends making strategic investment in key facility types. STEM and research labs, student housing, health/wellness complexes, and technology-rich learning spaces continue to dominate strategic construction spending strategies, particularly in regions experiencing growth or concentrated innovation hubs. Institutions prioritizing these categories for competitive positioning are seeking creative financing solutions, and leveraging regional strengths. Headwinds and uncertainty still exist regarding substantial critical federal grant funding terminations as well as the 15% cap issued by NIH for indirect costs. Although the courts have issued an injunction on enforcement of the cap, and court rulings that some of the grant cancellations were illegal, whether NIH / HHS appeal and what stays or modifications might result is unknown and could impact strategies moving forward.

As such, collaboration with industry partners, adoption of new technologies, and alignment with evolving educational models, workforce needs and technological change (AI) will be essential for sustaining campus excellence. The only thing that is certain, is that the future of higher education offers a dynamic landscape—full of both challenges and unprecedented opportunities for growth and modernization.

Higher Education Construction Opportunity
by Facility Type

Facility Type	Opportunity Level	Notes
STEM & Research Facilities	Higher	R1 universities and private research-focused institutions.
Health Sciences / Medical	Higher	Population growth and workforce needs drive demand.
Student Housing	High	Especially in sunbelt/mountain west growth regions.
Infrastructure Upgrades	High	Renovation-heavy campuses and net-zero initiatives.
Academic Buildings	Moderate	Focus on flexible, hybrid learning ready spaces.
Athletics & Amenities	Moderate	Private & competitive universities focus on student experience.
Mixed-Use / Community	Moderate	Urban campuses, public-private partnerships.

Looking Forward

Stamina coupled with perseverance and innovative thinking and action are still in high order, and the higher education community needs to be prepared to batten down the hatches for whatever the next storm throws in our direction.

We face a complex array of financial, infrastructure, political and workforce challenges that demand innovative responses. As we grapple with affordability concerns and aging campuses, we must prioritize strategic investments and adapt to evolving student and workforce needs.

Collaborating with industry, adopting new technologies, and embracing flexible educational models will be vital for future success. By proactively addressing these issues, we can not only maintain but enhance competitive edge, ensuring our higher education institutions continue to deliver value and opportunity in a rapidly changing educational landscape.