Southern Methodist University | Dallas County
All the work we do intervening in technical standards setting to make educational settlements safer, simpler, lower-cost and longer-lasting does not keep pace with the growth rate of the largest non-residential building construction market in the United States which is presently challenged by international demand; but perhaps not for long.
What do REITs actually build on campus?
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Most university-linked REIT activity is in student housing.
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Publicly traded REITs (e.g., American Campus Communities, EdR before acquisition) invest heavily in dormitories, apartments, and mixed-use retail.
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They typically do not build core academic facilities (labs, classrooms) or administrative buildings.
Why do universities use REITs?
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To outsource capital costs. Universities avoid debt on their balance sheets.
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REITs finance, build, and sometimes operate student housing under long-term ground leases or Public-Private Partnerships (P3s).
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Universities see this as a way to expand housing quickly without issuing bonds.
While REITs don’t “overbuild” in the academic sense, they can fuel:
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Overcapacity in student housing if enrollment projections are wrong or decline.
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Pressure to approve new beds even as demand flattens or drops.
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Long-term financial obligations (e.g., guaranteed occupancy rates in P3 contracts) that burden universities if enrollment falls.
- Some universities guaranteed minimum occupancy in REIT partnerships. If enrollment dipped, they had to subsidize empty rooms.
Most overbuilding in core facilities—labs, classrooms, administrative space—has been driven by:
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Ambitious master plans
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Competition for prestige
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Donor-driven construction
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Misaligned enrollment forecasts
We leave the topic of “Football Field Syndrome” for another day.
