Dozens of schools are picking up vacant office buildings, making the most of the sector’s pain by increasing the size of their campuses and real estate portfolios at a low price.
The group of schools snagging properties since 2018 includes 49 four-year private institutions and 16 four-year public universities, according to The New York Times. The acquired buildings often need renovations, but these improvements are typically less expensive and time-consuming than constructing new buildings from scratch, per the NYT.
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University buyers include top universities like UCLA, which bought The Trust Building, an art deco landmark in Downtown Los Angeles, this year for an undisclosed price, according to the Los Angeles Times.
In March, the University of Southern California paid $49.4M for a D.C. building to use as a satellite campus. The seller purchased the building for more than $31M in 2018 and then spent about $20M on upgrades.
The deals available can sometimes represent significant savings.
In 2022, George Washington University paid just $11.5M for a 10-story office building in the nation’s capital from an arm of the World Bank for a property valued at $230M, per the NYT. A spokesperson for the university said the school hadn’t identified a long-term use for the site.
“Universities are taking advantage of the soft market fundamentals right now in the leverage they have as a tenant, especially in the downtown market, where vacancy is still very elevated at historic highs,” JLL Mid-Atlantic Research Lead Michael Hartnett told Bisnow in May.
The University of Louisville even received an office building at no cost in summer 2022. Humana gave its building to the university after it found it didn't need the space anymore, with many of its employees working remotely.
Colleges and universities buying up buildings vacated due to the rise in hybrid work are unlikely to make a major dent in office woes. The nation’s office availability rate sits at 24%, per Savills, up from 17% before the onset of the pandemic.
“It stands out because almost nothing else is happening on the office market,” economic historian and author Dror Poleg told the NYT.
There is a downside to higher education institutions buying up property: They usually don’t pay taxes on academic buildings and dorms, so the properties they acquire could slide off the tax rolls. But some elected officials don’t mind, as the sales can bring foot traffic and employment to downtown areas in need of a boost, per the NYT.
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