Most university leaders favor P3s

A strong majority of university leaders expect to see an increase in partnerships with the private sector as higher education continues to face headwinds.

That's according to the latest annual survey from The Chronicle of Higher Education and P3 EDU.

Seventy-four percent of university leaders said they expect to see P3s increasing at their schools, a 1% downtick from last year's poll and higher than the 2022's figure of 71%. Another 4% predicted a decrease and 22% said P3s would likely stay at the same level.

Higher education has been among the P3 sector's fastest-growing areas in recent years. Many colleges and universities face pressure from enrollment that has failed to rebound to pre-pandemic levels coupled with higher project costs and the depletion of federal stimulus. Schools also face a so-called enrollment cliff, with peak enrollment of high school students predicted as soon as 2025, according to Deloitte's April 2024 Higher Education Trends. University leaders "increasingly recognize the value of collaboration with the private sector," the report said. While P3s "have revolutionized higher education, transforming how institutions function, innovate, and deliver value," Deloitte warns that they bring potential challenges, including financial and reputational risks.

Of those polled, 28% said they were interested in pursuing P3s for student housing and 24% said real estate development marked another potential area of interest. The P3 student-housing sector makes up a small niche in the muni market, often offering relatively high yields. Last week, a $70 million University of Memphis student-housing deal, with BB-plus ratings, proved popular among investors and was strongly oversubscribed, according to Birch Creek Capital's weekly commentary.

The P3 survey found that 72% of leaders cited loss of control as their top reservation for entering into a P3, and 63% cited cost as a barrier. Of those that already have private partners, 74% reported being satisfied with the state of their fee-for-service partnership, while 61% reported satisfaction with their revenue-sharing P3.

Universities are most interested in partnering with the private sector for workforce development and health services.

Nearly three-quarters of leaders said they're interested in P3s because the private sector brings "unique competencies/superior service" to in-house service, and 40% said the availability of investment capital drives their interest.

The group released the survey ahead of its annual event for university leaders to share best practices around P3s. The invitation-only conference will be hosted by the University of Colorado, Denver Oct. 7-9.