News
The economic outlook may be sour for Wall Street's investment banks and for homeowners who took out mortgages they couldn't really afford, but campus planners and architects say that—so far, at least—colleges' construction plans are largely unaffected by the downturn.
Some colleges, in fact, are trying to speed up projects to limit the damage done by rising construction costs. And Arizona's three public universities have pitched a creative "economic stimulus" plan in which the institutions would spend $1.4-billion on construction and renovation projects over three years, creating what the universities say will be 31,000 jobs and helping the state weather the downturn. State legislators and the governor are considering the plan, for which the state would pick up much of the cost.
Only a handful of institutions have postponed construction projects—among them California Baptist University, which put a parking garage and a 662-bed residence hall on hold. But public institutions in a number of states, including California and Colorado, are keeping a close eye on their legislatures. Colorado recently made headlines by pulling $37.5-million in state funds out of a $120-million science-building project at Denver's multi-institution Auraria Higher Education Center, leaving a hole in the ground that center officials said they were determined to fill with a building, whether or not the state contributed. (The state, red-faced, ponied up.)
Most colleges and universities are forging ahead with new buildings and renovations. To cite just a few: The University of Akron has just broken ground for a $61-million football stadium. Butler County Community College, in Pennsylvania, is about to start building a $6.2-million student-services center. The University of Massachusetts at Amherst is continuing with a $50-million recreation-center project. Western Carolina University has broken ground for two residence halls with 800 beds. And Colby College, in Maine, is planning both a major museum expansion and a new 30,000-square-foot science building.
But architects and planners say that colleges are increasingly working with partners when they build instead of going it alone. Student housing is now often built by for-profit companies, which pay for construction in return for charging students rent. Emory University, for instance, just signed a $27-million, 398-bed deal with Campus Apartments Inc. And college buildings in cities are likely to include street-level retail space and even office space that can be rented out until the college needs it. New university research facilities may be shared with private-sector scientists, as will be the case at a new nanotechnology-research center announced last month by the University of Notre Dame. Its partners are the Semiconductor Research Corporation and IBM.
"There's a burgeoning amount of privatized college and university construction," said Tony Aeck, a principal at the Atlanta architecture firm Lord, Aeck & Sargent. "Those projects seem to be holding up and continuing." Among the firm's recent projects are two mirror-image buildings—one completed, one under construction—for a new campus of Georgia Perimeter College, a two-year institution that serves students on the east side of Atlanta. The campus, which has come together through a public-private partnership, is adjacent to a 450-acre site on which a new town is planned.
Over all, Mr. Aeck said, "we haven't seen much downturn." But he said one institution the firm works for—which he would not name—has pulled back on construction plans to spend more of its endowment income on student aid and to compete with other colleges that are reducing students' costs.
Cost Concerns
Even for institutions whose endowments have prospered, however, rising construction prices are a worry. "We've been projecting significant construction-cost escalations for the past several years," said Michael E. McKay, Princeton University's vice president for facilities, "and unfortunately we've been right." Princeton has forecast price increases at 7 percent to 8 percent annually, he said, and he expects those increases to continue for at least the next few years. Steel and concrete prices, which have climbed significantly, have had the most influence on overall costs.
"We can afford to do less with the same resources"—even though the university's commitment to sustainability means it would like to do more, Mr. McKay said. That's particularly true because university officials worry that skyrocketing energy costs will make buildings more expensive to operate over coming decades. "We always think about the long-term life-cycle costs of a building," he said.
Brandon G. Sprague, marketing associate at Boora Architects, in Portland, Ore., said the rise in construction costs was partly the result of "demand for materials from economies that are not slowing down," including China's and India's. "We're seeing projects get fast-tracked," he said. "There's an incentive to get it done now." But he said the firm had seen no fall-off in projects.
At SmithGroup, an architecture firm with offices in 10 cities, the higher-education market "is still going strong," said Thomas Butcavage, who heads the firm's education practice. But he noted that college building projects have long gestation periods, making the campus-construction market slow to respond to economic fluctuations. The increase in nontraditional financing schemes for buildings like residence halls adds a further layer of insulation, he said.
Conversations with architects at SmithGroup and other firms, he said, leave him with the impression that among public institutions, pessimism pervades in some states, such as Michigan and Minnesota, and uncertainty is widespread in some others, like Arizona and California. Meanwhile, the outlook for some other states—Mr. Butcavage singled out North Carolina—remains strong. Private colleges, he said, "have some projects on hold for fund raising."
In Maine, where the state government is facing a serious revenue shortfall, the seven-campus University of Maine system is benefiting from a $23-million bond measure approved by voters in November. The system is adding $6-million of its own and will tackle construction and renovation needs, said Eduard A. Dailide, the system's director of facilities management and planning.
Maine's economic slowdown means the university is getting good bids from contractors eager for work, he added, although he says high gas prices are "going to have a significant impact."
The economic-stimulus plan that Arizona's public institutions have proposed—with help from an association of contractors—would help Arizona State University, Northern Arizona University, and the University of Arizona catch up on some $500-million in deferred maintenance, according to Virgil Renzulli, Arizona State's vice president for public affairs. The universities would also add buildings that the regents have already approved but haven't been able to find money for.
Under the plan, the universities would pay the initial debt service on 25-year bonds, Mr. Renzulli said. After 2010 the universities would pay 20 percent of the debt-service costs, and the state the other 80 percent.
"Our recessions are deeper than other states' because we're overly dependent" on the construction industry, he said. "We've got to get construction labor back to work as soon as we can."
Some colleges, in fact, are trying to speed up projects to limit the damage done by rising construction costs. And Arizona's three public universities have pitched a creative "economic stimulus" plan in which the institutions would spend $1.4-billion on construction and renovation projects over three years, creating what the universities say will be 31,000 jobs and helping the state weather the downturn. State legislators and the governor are considering the plan, for which the state would pick up much of the cost.
Only a handful of institutions have postponed construction projects—among them California Baptist University, which put a parking garage and a 662-bed residence hall on hold. But public institutions in a number of states, including California and Colorado, are keeping a close eye on their legislatures. Colorado recently made headlines by pulling $37.5-million in state funds out of a $120-million science-building project at Denver's multi-institution Auraria Higher Education Center, leaving a hole in the ground that center officials said they were determined to fill with a building, whether or not the state contributed. (The state, red-faced, ponied up.)
Most colleges and universities are forging ahead with new buildings and renovations. To cite just a few: The University of Akron has just broken ground for a $61-million football stadium. Butler County Community College, in Pennsylvania, is about to start building a $6.2-million student-services center. The University of Massachusetts at Amherst is continuing with a $50-million recreation-center project. Western Carolina University has broken ground for two residence halls with 800 beds. And Colby College, in Maine, is planning both a major museum expansion and a new 30,000-square-foot science building.
But architects and planners say that colleges are increasingly working with partners when they build instead of going it alone. Student housing is now often built by for-profit companies, which pay for construction in return for charging students rent. Emory University, for instance, just signed a $27-million, 398-bed deal with Campus Apartments Inc. And college buildings in cities are likely to include street-level retail space and even office space that can be rented out until the college needs it. New university research facilities may be shared with private-sector scientists, as will be the case at a new nanotechnology-research center announced last month by the University of Notre Dame. Its partners are the Semiconductor Research Corporation and IBM.
"There's a burgeoning amount of privatized college and university construction," said Tony Aeck, a principal at the Atlanta architecture firm Lord, Aeck & Sargent. "Those projects seem to be holding up and continuing." Among the firm's recent projects are two mirror-image buildings—one completed, one under construction—for a new campus of Georgia Perimeter College, a two-year institution that serves students on the east side of Atlanta. The campus, which has come together through a public-private partnership, is adjacent to a 450-acre site on which a new town is planned.
Over all, Mr. Aeck said, "we haven't seen much downturn." But he said one institution the firm works for—which he would not name—has pulled back on construction plans to spend more of its endowment income on student aid and to compete with other colleges that are reducing students' costs.
Cost Concerns
Even for institutions whose endowments have prospered, however, rising construction prices are a worry. "We've been projecting significant construction-cost escalations for the past several years," said Michael E. McKay, Princeton University's vice president for facilities, "and unfortunately we've been right." Princeton has forecast price increases at 7 percent to 8 percent annually, he said, and he expects those increases to continue for at least the next few years. Steel and concrete prices, which have climbed significantly, have had the most influence on overall costs.
"We can afford to do less with the same resources"—even though the university's commitment to sustainability means it would like to do more, Mr. McKay said. That's particularly true because university officials worry that skyrocketing energy costs will make buildings more expensive to operate over coming decades. "We always think about the long-term life-cycle costs of a building," he said.
Brandon G. Sprague, marketing associate at Boora Architects, in Portland, Ore., said the rise in construction costs was partly the result of "demand for materials from economies that are not slowing down," including China's and India's. "We're seeing projects get fast-tracked," he said. "There's an incentive to get it done now." But he said the firm had seen no fall-off in projects.
At SmithGroup, an architecture firm with offices in 10 cities, the higher-education market "is still going strong," said Thomas Butcavage, who heads the firm's education practice. But he noted that college building projects have long gestation periods, making the campus-construction market slow to respond to economic fluctuations. The increase in nontraditional financing schemes for buildings like residence halls adds a further layer of insulation, he said.
Conversations with architects at SmithGroup and other firms, he said, leave him with the impression that among public institutions, pessimism pervades in some states, such as Michigan and Minnesota, and uncertainty is widespread in some others, like Arizona and California. Meanwhile, the outlook for some other states—Mr. Butcavage singled out North Carolina—remains strong. Private colleges, he said, "have some projects on hold for fund raising."
In Maine, where the state government is facing a serious revenue shortfall, the seven-campus University of Maine system is benefiting from a $23-million bond measure approved by voters in November. The system is adding $6-million of its own and will tackle construction and renovation needs, said Eduard A. Dailide, the system's director of facilities management and planning.
Maine's economic slowdown means the university is getting good bids from contractors eager for work, he added, although he says high gas prices are "going to have a significant impact."
The economic-stimulus plan that Arizona's public institutions have proposed—with help from an association of contractors—would help Arizona State University, Northern Arizona University, and the University of Arizona catch up on some $500-million in deferred maintenance, according to Virgil Renzulli, Arizona State's vice president for public affairs. The universities would also add buildings that the regents have already approved but haven't been able to find money for.
Under the plan, the universities would pay the initial debt service on 25-year bonds, Mr. Renzulli said. After 2010 the universities would pay 20 percent of the debt-service costs, and the state the other 80 percent.
"Our recessions are deeper than other states' because we're overly dependent" on the construction industry, he said. "We've got to get construction labor back to work as soon as we can."
