For many years the higher education sector has provided fresh entrants to the property profession and this has been the main focus of the professional/academic relationship. This relationship has recently been broadened, however, to embrace a significant part of the sector as a client, not just as a source of surveyors.
The starting point is the Education Reform Act 1988, which “privatised” 85 polytechnics and higher education colleges with effect from April 1 1989, although certain inner-London polytechnics enjoyed greater autonomy for a short while prior to that date. At Vigers we have been working in the sector for over two years for a number of institutions and consider it timely, 18 months after the relevant legislative provisions came into effect, to review the property issues which the sector is addressing and the contribution that the property professional can make.
The “Reorganisation of provision and funding of higher education” is dealt with in Part II of the Education Reform Act. The Act created “higher education corporations” which were formerly all institutions maintained by local education authorities which, at a certain date, were over a certain size in terms of student population. These new institutions were taken out of the control of local education authorities and were to become self-governing.
In the property context the Act stipulated that the “property rights and liabilities” were to be transferred to the new institutions on the transfer date — April 1 1989. Most of the transfer has taken place without controversy although there are still isolated disputes between the former owners, the local education authorities and the new educational institutions.
A new funding body, the Polytechnics and Colleges Funding Council (PCFC), was created by the Act to administer funds to the new institutions, including the provision of money for project and emergency repair work. PCFC has taken a more “market-orientated” approach towards introducing competition into this sector and encouraging institutions to seek financial revenue from other sources. This is particularly pertinent to property since, for most institutions, it will often only be through a more efficient use of their property asset (if that is possible) that funds will be able to be generated to achieve their accommodation objectives in accordance with their academic strategic plan. However, very recently the Secretary of State for Education has announced an important relaxation of borrowing controls for the polytechnics and colleges sector. Subject to certain conditions and ceilings, institutions will now be able to borrow against their assets.
Professional expertise within the sector
This, then, is the legislative back-drop. Within the sector there is substantial diversity between the institutions. At one end of the scale there are a number of polytechnics — Birmingham and Liverpool, for example — which are larger than many universities. At the other end are small “monotechnic” or specialist institutions such as the West Surrey College of Art & Design or the Camborne School of Mines.
Some institutions already have in-house property expertise, often in the form of a building or estate officer, whose job it is to look after the physical asset base. It is undoubtedly our experience that most of those in position do their job well, often performing in a climate of squeezed maintenance expenditure, fragmentation of sites and, in certain cases, a lack of strategic support from the institution as a whole. This latter point is interesting, since it mirrors one of the main conclusions of the recent, much-publicised, University of Reading research about the lack of position power of many of those with property responsibility within non-property organisations in general.
Having said that, there is now a trend in the sector towards the appointment of a person at directorate level within institutions with responsibility for “strategy” or “resources”. Sometimes these are people with a property background, and there is no doubt that this has added a new impetus towards thinking positively about how best to use the physical asset base in order to further the academic business.
What this has meant, and will continue to mean in the short term, is that there has emerged a new market for the services of property advisers. This point, we know, has not been lost on many professional practices! We now turn to look at some of the areas where the skills of the property adviser can positively assist what are essentially a group of “organisations in change” emerging from public-sector control into a fiercely academic market-place, and where it is the property asset base which they have inherited that so often holds the key to future effectiveness.
Accommodation strategies
Most institutions in the sector are working towards the production of a strategy which expresses their present and future academic requirements in terms of both location and accommodation. Indeed, all institutions are being encouraged by the PCFC so to do, and it is a requirement that the institutions’ annually updated strategic plans explicitly deal with “physical assets” and outline strategic implications and proposals. There are very cogent reasons in support of producing these strategies.
Newly created institutions are often on various sites, possibly several miles apart, and there are moves towards rationalisation on to as few as sites as possible. Multi-site operation frequently involves duplication or worse of library, refectory or other facilities. Coaches are needed to transport students between sites. One institution we know spends £150,000 pa on bussing between sites which are only 2 miles apart. In addition to financial penalties there could also be “qualitative” costs, difficulties in attracting students and staff, problems in maintaining morale and establishing a corporate spirit.
Mergers between institutions can compound the difficulties of running a multi-site institution. In negotiating mergers, institutions will need a full and up-to-date knowledge of their property assets and potential in order that they can negotiate from a position of strength.
Limited funding for academic property development means that all property-related expenditure needs to be carefully directed and controlled. Limited funding also implies that more intensive use has to be made of the existing premises through improved space planning, space utilisation and timetabling. It is quite clear that new space requirements can be significantly reduced if the “timetabled” week is extended.
PCFC will require assurance that individual institutions have adopted properly researched property plans as one component of their academic strategy. Even in situations where little or no capital funding is available for development, institutions will usually require PCFC approval when property proposals are being implemented. Investment in buildings can be undertaken with certainty only if there is an agreed property strategy which gives these buildings a long-term position.
In our work in the sector we have developed a “six-stage” approach for producing property strategies. The overall framework is as follows, but is of course revised to suit particular requirements of individual institutions.
(1)Relating academic and property objectives. It is essential that the latter reflects the former and opportunities in property terms should be entertained only if they are consistent with the overall mission of academic institutions.
(2)Specifying property requirements. There are different categories of requirement, each of which needs to be defined and quantified in detail: academic floorspace; administration and other support facilities; student residences; recreation and leisure facilities; parking and commercial revenue-raising requirements. Requirements made under each heading must then be costed.
(3)Review of existing property assets. The purpose of this stage is to obtain the answer to certain key questions:
- What assets do the institution hold and what is the basis of tenure?
- What is the physical condition of the properties?
- What is the value of the property portfolio and what is its development potential?
- What are the strengths and weaknesses of the property portfolio and how are these changing over time?
(4)Generation of development options. It is essential to think laterally and cover the spectrum of possibilities for each institution. These will range on the one hand from a “do-nothing” or “status quo” option (often untenable) to an option specifying “total relocation to a greenfield site”. For most institutions it is only the rationalisation options in between these two extremes that are going to be achievable, although already certain institutions (such as Sheffield City Polytechnic and the Anglia College of Higher Education) are considering bold relocation proposals.
(5)Evaluation of strategic options. Once the options have been reduced to a manageable shortlist they are subject to both quantitative and qualitative appraisals. The quantitative appraisal uses investment appraisal methodology and considers both capital and running costs. The qualitative factors are those which are derived from the overall academic objectives of the institution. For example, an option which is based upon the relocation of a large inner-city polytechnic to a greenfield site in an adjoining county may not be acceptable if one of the polytechnic’s selling points to the potential student customer is its proximity to the bright lights of the big city. Equally, such a location might not be able to provide the necessary social and community infrastructure to support a large student population.
(6)Selection of preferred strategy. Ideally, the evaluation process will point to one option which is financially superior and which can be readily justified on qualitative factors. Sometimes this is the case, although more frequently there may be a number of closely related options which are relatively indistinguishable. This will require additional work for any clear front-runner to emerge, focussing on further appraisal of funding opportunities; detailed investigation of development potential; and more sophisticated project costing and programming.
Other important property issues
There are many other property issues which are being faced by institutions in the sector, common to most non-property organisations. We would like briefly to refer to three issues where we have been working with polytechnics and colleges, and which we know to be of particular concern to them.
First, at the other end of the scale from accommodation strategy work, are the day-to-day repair and maintenance problems faced by those on the ground, the buildings and estates officers. Quite understandably, faced with 1960s flat-roof problems and, in many cases, a squeezed maintenance budget, these immediate issues are perceived to be of more pressing urgency than a strategic accommodation exercise. PCFC commissioned a building condition survey of all institutions in the sector, a document which has entered property folklore. Each institution was notified of three categories of repair which should be carried out. We have no doubt that there is a real scope for property advisers to assist in sorting out such problems within the context of the production of planned maintenance programmes and maintenance investment plans.
Second, in an era of sharp competition to attract students it is increasingly important for polytechnics and colleges to be able to provide a good stock of modern, residential accommodation for students. Gone are the days when most students will readily accept the somewhat spartan accommodation of previous eras with communal washing and we areas at the end of long corridors. A great deal of effort is now going into the provision of quality student accommodation. In theory this type of accommodation can be provided on a self-financing basis, subject to the right assumptions being able to be made about feasibility components such as rental levels, the cost of land and vacation lettings. On this last point there is a clear connection between the student housing stock and the realistic opportunities afforded by institutions to gain additional revenues from the conference and summer school markets.
Third, most institutions have inherited playing fields, either related to the main building areas or in a physical separate location. There is a very real requirement for outdoor activities, but increasingly the demand is for built facilities such as indoor sports centres or swimming pools. This means that traditional playing fields, as such, are often not essential to the institutions.
Additionally, playing fields represent perhaps the most easily identifiable parcels of the physical asset base which can either be disposed of to raise capital to provide new academic facilities or, conversely, can accommodate new academic or student housing development. One of the real problems here is planning; the loss of playing fields has, for some time, been a concern to local planning authorities, and many a planning appeal has been fought over proposals to develop.
Conclusions
It is quite clear that substantial potential exists for external property advisers to assist those within polytechnics and colleges who have responsibility for creating an efficient property asset to support the requirements of the academic business. However, our experience has made it equally clear that to operate effectively in this sector certain key points must be understood by property advisers.
First, as in any new sector, a proper understanding of the corporate or organisational objectives and concerns is a prerequisite towards giving effective advice. It is essential, in this case, to understand the nature of the educational business.
Second, property advisers will have to think laterally about their range of expertise. To be really effective and useful to this new breed of client requires in many cases a preparedness to get involved in assisting in some of the areas which formerly one might have assumed to be the province of other experts, for example, the management consultant or architect. We have in mind, for example, calculation of floorspace requirements and investment appraisal work to compare strategic accommodation options.
Third, the advice to be given to those in the sector needs to be “top-down”. Often there is no property context or strategy, and there is little logic in dealing with isolated property issues if they have implications at a strategic level. There is a clear dilemma here, not unique to this sector, between on the one hand a requirement for “nuts and bolts” advice on urgent maintenance issues and, on the other, the need to get an agreed accommodation strategy in place before maintenance investment decisions are made. There must, ideally, be consistency between the two.
Finally, it must be recognised that institutions will be looking to outside property advisers to work with their own staff and to provide them with property expertise and systems which can be put in place and function effectively once the adviser’s job is over. In that sense, one of the tasks of any professional person is to work themselves out of a job as soon as possible!
