The outlook for education real estate this year: schools, further and higher education

Policy changes continue to affect schools

The application of VAT on all private and independent school fees is now in effect, but from 1 April, English private schools with charitable status will also see the removal of charitable business rate relief, adding to the financial pressures many face. Consequently, schools will likely look to their estates to identify opportunities to cut costs, diversify income, or raise capital via the disposal of surplus property or land. Schools will also be seeking operational efficiencies, and we may see the greater sharing of facilities, such as sport centres, playing fields and theatres, with nearby schools and/or the wider community. 

However, for some schools these changes could unfortunately be a tipping point. If a school closes and its estate disposed of, it’s most likely to be for an alternative use; most recently, closed school sites have been sold to be Special Education Needs and Disabilities (SEND) schools or for residential or mixed development.

The Government is aiming to raise funds for public services, including education. The last Budget increased state school capital spending from £6.3 billion to £6.5 billion in 2025-2026 (around the same range it’s been for the past 10 years) to help to address a backlog of maintenance issues, challenges with reinforced autoclaved aerated concrete (RAAC), and England’s delayed School Rebuilding Programme. With funding likely to remain constrained, we expect a continued trend of schools, multi-academy trusts and local authority academies exploring development opportunities across their estates to unlock capital to reinvest in (for example) new or improved buildings. We also anticipate the continued expansion of multi-trust academies, enabling schools to share facilities and consolidate management functions.

Every school estate has a different set of challenges, and there are financial pressures on all, whether private or state. While disposing of assets can raise significant capital to address immediate challenges, in most cases, it doesn’t deliver a sustainable long-term solution. Effective and efficient operation of the core school estate is key.

Further and Higher Education put an emphasis on training and R&D

The Government unveiled its new Invest 2035 Industrial Green Paper last October which, with its emphasis on delivering the skills agenda, R&D and innovation, gave a high priority role to FE and HE. It’s likely to encourage more institutions to cluster with wider industry, deliver more mixed-used opportunities, and move beyond campus boundaries to orchestrate a greater mix of users, partners, customers and ‘big thinkers’ in one place.

Increased skills delivery to support industry remains a priority, with devolved and local authorities looking to increase training opportunities for 16 - 19 year olds through local education institutions. The Budget committed £300 million to maintain and improve FE estates, which will help this in the short-term, but long-term growth and life-long learning support requires further funding and likely greater integration with HE institutions. Against this backdrop, we may see more college-to-college mergers this year, following the 82 since 2015.

HE institutions will look to partner more with developers and investors to deliver capital projects. This will go beyond student housing to considering alternative delivery models for core assets, and how universities can deliver their estate strategies in an agile and resilient way against continued funding constraints. We’ve seen lots of activity in London and regional cities from HE institutions taking former offices in new strategic central locations, principally on leaseholds; alternative means of delivery may start to be more prevalent.

Alongside, or in addition to, partnerships, universities may look to ‘rightsize’ their estates, with the pressure of running costs, sustainability targets, student numbers and space utilisation, compelling estates teams to instigate change. Ultimately, this this may see more selling buildings or land, however the majority of discussions we’re currently seeing are focused on using surplus spaces to diversify income, promote an institution’s civic role, deliver on R&D or key growth sectors, ensure a university’s legacy, and improve students’ experiences and workplace wellbeing. Lastly, while mergers between HE institutions aren’t new, with continued headwinds, we may see more explore this route.

Further information

Contact Sadie Janes or Olivia Haslam

Sectors: Education