What keeps your estates manager awake at night?

Estates Directors, by and large, are significant net spenders of university income.

While we may also run aspects of our institution’s income-generating commercial services – conferencing and retail for instance – and we know our university built environment can be key in attracting research income, staff and students too, on the whole we sit on the expenditure side of the balance sheet, with buildings second only to people in terms of operating costs.

A recent AUDE presentation to colleagues from our Australian equivalent organisation TEFMA made the point that with a UK HE sector operating margin of around 1 per cent, compared with a historical trend of around 5 per cent, there simply is far, far less money around in the system at the moment than there has been.

Australian jaws dropped by the way, even informed ones as they were. As incoming AUDE Chair, I want to be transparent about some of the choices estates directors are now having to make.

Let me focus on the harder choices the current financial environment forces onto us. Since the start of the pandemic, several main factors combine to create the budgeting knot that estates directors and CFOs are now struggling with.

The cost of everything

The first of these is inflation. At its peak over recent years construction industry inflation was running at 22 per cent. Every boat stuck in the Suez Canal, every pirate raid on international shipping (and the attendant hike in insurance costs, and high cost/long delay alternatives), every raw material cost sent spiraling by horrific events unfolding around the world, logistical operation disrupted by pandemic-related scarcity – it all adds up. The logistical nightmare for our contractors was huge, and many HE projects needed to be renegotiated in light of that reality.

Development plans across the country were delayed, re-worked, scaled back or canceled. A noticeable number of major construction firms folded or are withdrawing from the sector: not enough being spent for them to want to focus here. It would be unrealistic not to mention the ongoing effects of Brexit too, which has had a huge impact on costs, with significant delays and changed processes, such that there is now a form of scarcity for some essential maintenance parts that we’ve just not seen before.

Energy prices are an aspect of this inflation. In the latest year for which we have full figures (2022-23), universities spent over 40 per cent more on energy than in the previous year. You’ll remember that we experienced two significant spikes in the autumn before, and again immediately after, the invasion of Ukraine in February 2022. Many universities do their best to hedge against this kind of unexpected financial hit, and many more are actively engaged in a wide range of projects around energy efficiency, energy generation and storage. The entire subject, already a priority because of obvious links to the push towards our Net Zero Carbon targets, has shot right up the agenda.

Net zero

To focus specifically on sustainability, for a number of years universities have rightly been setting ambitious targets on the goal of reaching a carbon neutral campus. While many admirable things have happened in support of this agenda in many universities – a greater focus on refurbishments ahead of new builds as a way of preserving embodied carbon for instance – the HE estate as a whole does not yet have a conclusive figure of the likely cost of reaching net zero, and without that, planning is difficult. Our Carbon Cost Calculator Tool, launched last summer in collaboration with EAUC and BUFDG, starts to get those estimates on the table.

The likely costs are eye-wateringly large, and we don’t know how to afford them. Inflation hits here too – we know of many projects, costed around 2020-21, that have shot up in likely spend since. We may not be far away from a university stating publicly that they will miss their planned “NZC date”.

Space and people

The efficient management of space in our universities is a further element of the mix. We do not need to aim at levels of occupancy expected in the commercial world. But the building of, and subsequent heating, lighting and maintenance of, empty spaces just cannot be logical at a time of financial scarcity. And our campuses have of course become emptier since Covid, with home-working options now a common part of staff employment expectations. Every argument against the rationalisation of space, whether intended or not, is an argument against undertaking some of the other vital work. Arguing in favour of the preservation of half empty buildings is an argument in favour of missed climate change deadlines.

We face a situation in which recruiting into specialist estates roles is now difficult, partly because of scarcity in qualified candidates, partly because of salary, and partly because of financially tempting alternatives in for instance NHS settings. We do not pay enough because we cannot pay enough. The churn in senior roles is absolutely striking across the sector right now too: good people walking away from good jobs, often with a root cause in the endless salami slicing of budgets.

And finally, backlog maintenance. Essentially, the dullest thing on our list, and the item most difficult to build a head of steam in favour of when finalising a budget round. There always has been a temptation to put this kind of spend off, though AUDE’s annual Estates Management Report (EMR) was noting as recently as two years ago that we might now have reached the highest level of overall estates quality we are ever likely to achieve. We don’t want to think of this as “the all-time apex” in quality, but the reality is it might have been.

Into this knot of competing requirements for budgetary prioritisation, AUDE attempts to create tools that support our members in their choices. A forthcoming piece of work on the management of legacy buildings, and a further tool to help in the development of decarbonisation briefs, are both due in late spring. In its second year, our EMR Digital tool gives universities the chance to benchmark against their chosen dataset of other institutions, with multiple potential learnings attached. Though six years old, the Sustainability Leadership Scorecard remains the best tool we have to help universities look at their net zero carbon plans in the round.

So, with not enough money in the pot, which of the above tasks do estates directors choose to focus on? Recruiting into the roles that will enable progress in vital areas? Fixing the leaky roof as a basic enabler of everything else? Or do we just now have to go hell-for-leather at getting to our carbon goals?

It’s none of them. If there is only a fiver left in the piggy bank we still have to spend that fiver on statutory compliance, and when faced with this reality no-one argues differently. Fire doors, cladding and fire compartmentalisation, for instance. The effects of the Building Safety Act, in operation from 1 April this year, and a response both to Grenfell (2017) and the Hackitt Report on building regulations and fire safety of 2018, will focus us more clearly than ever before on this fundamental issue, with a new Building Safety Regulator to help us do so. The reality is that your alternative wish list spend might well get no funding at all. There is widespread recognition of the challenges that Estates teams face. To the rest of our university communities, we just say – help us find the answers.