[Real Beat] Despite Concerns Over Real Estate Slump... Why US Universities Are Buying Office Buildings

How Changes in the Workplace Have Transformed Cities⑦

Editor's Note[Jjinbit] is a shortened form of 'Jeong Hyunjin's Business Trend' and 'Real Business Trend,' a segment that showcases trends in changes in work.

As hybrid work, combining remote work and office attendance, spreads in the United States and companies reduce their office spaces, an increasing number of universities are purchasing buildings.

It appears that many are taking advantage of the current decline in commercial real estate prices to cheaply acquire properties to convert into classrooms or dormitories. There is also analysis suggesting that some are engaging in a form of investment by purchasing properties without a predetermined purpose.

Trust Building purchased by UCLA (Photo by UCLA)

According to a report by the New York Times (NYT) on the 4th (local time), citing real estate service firm JLL, since 2018, dozens of higher education institutions across the U.S. have purchased buildings formerly used as corporate offices, including 49 private four-year colleges and 16 public four-year universities.

A representative case is UCLA, a prestigious university in the U.S., which purchased the 11-story Trust Building located downtown in June. UCLA plans to use the building for lectures starting at the end of this year as part of its campus expansion. Previously, UCLA also acquired two buildings from the now-closed Marymount California University last year and is using them to expand its campus.

Another university in California, the University of Southern California (SCU), announced in March that it would create a new campus in Washington DC by purchasing a building. The building SCU decided to buy is the Dupont Circle building, constructed in the 1960s for use by the National Broadcasting Association, and the university had already been leasing it for several years. The university invested $49 million (approximately 66.22 billion KRW) in this purchase.

SCU stated that it aims to establish a university campus in Washington DC where professionals, researchers, and students can engage in dialogue. They expressed expectations that in a city where government, research institutions, and embassies gather, the university will connect these entities and create more academic opportunities.

The Dupont Circle building in Washington DC, purchased by Santa Clara University (SCU) (Photo by SCU)

Not only are schools purchasing office buildings to convert into classrooms, but some have also bought hotels to secure dormitory space. Flagler College in Florida purchased the riverside hotel Sebastian House near its campus in June and plans to renovate it for use as a dormitory.

However, the NYT reported, "Many institutions are showing interest in inexpensive office buildings even if they do not immediately need the real estate."

George Washington University, a private university based in Washington DC, purchased a 10-story office building last December that was owned by a World Bank (WB) subsidiary. According to the NYT, the asset was valued at $230 million, but the university acquired it for $11.5 million. Currently, the building is leased to the U.S. Department of State's Consular Affairs Bureau under a contract until 2028, and the university has not yet decided on the building's long-term use.

Although universities are increasingly buying office buildings formerly used by companies, experts believe this will not prevent the downturn in the commercial real estate market. Dror Polek, an American author who has studied technological innovation and changes in the real estate market, predicted, "Repurposing offices into academic spaces will not solve the problem of vacant offices caused by the shift to remote work."