This article has been revised and corrected from the original version.
At a time when overall real estate transaction volume is slim, one interesting player has emerged active – universities.
“Universities need real estate to function,” Stuart Gabriel, professor of finance and the Arden Realty Chair at UCLA Anderson School of Management as well as the director of UCLA Ziman Center for Real Estate, said. “And as the capacity and aspirations of universities expand, they typically need more real estate.”
While University of California, Los Angeles has made headlines over the past few years with its numerous real estate acquisitions, other universities have expanded their campuses too such as University of Southern California and even out-of-state schools including Arizona State University have tapped in for a slice of Los Angeles real estate.
“Each university has its own particular story and rationale,” James Birkey, a senior vice president at Jones Lang LaSalle Inc. who leads the firm’s dedicated government, education and nonprofit practice group in the Western U.S., said. “However, to generalize or at least speak about some certain things that we’ve seen is that a number of universities are looking at the ways that they can expand their reach and their economic capabilities.”
Some schools are landlocked
Take UCLA for example. With 48,000 total students – including 33,000 undergraduates – enrolled in the 2023-2024 academic year, UCLA is the most attended university in California and was recently ranked the top public university in the U.S. for the eighth year in a row by U.S. News & World Report.
Yet, out of all the nine University of California schools offering undergraduate programs – University of California, San Francisco is the exception in that it only offers graduate degrees – UCLA has the smallest campus by far.
The campus sits on 419 acres at the base of the Santa Monica Mountains, just 5 miles away from the Pacific Ocean. It’s not even half the size of the next smallest UC campus, University of California, Merced, which is 1,026 acres.
“UCLA is the most densely developed of the University of California campuses and there’s literally not a square foot left on campus for significant new development,” Gabriel said. “By definition, universities have to go beyond what is oftentimes their initial footprint to further these strategic goals.”
In doing so, UCLA has racked up an estimated $820 million worth of real estate in trying to achieve that expansion to meet the needs of its increasing student body, most notably by acquiring non-adjacent parcels. Although hefty, experts estimate this is likely more cost effective and efficient than pursuing ground-up construction on campus.
“It’s way more expensive to go up than it is to go out,” Mark Tarczynski, an executive vice president at Colliers specializing in downtown Los Angeles and urban redevelopment, said. “Finding good real estate outside of your campus to bring the class to the people rather than vice versa I think just makes all the sense in the world. I think the biggest challenge is finding good real estate.”
UCLA buys satellite buildings
In September 2022, UCLA bought its first ever real estate asset of scale in a string of numerous to come when it acquired the former Marymount California University campus for $80 million in Rancho Palos Verdes, set to become UCLA South Bay, a satellite campus focused on sustainability and climate change.
Less than a year later, in June 2023, the university purchased the historic Trust Building downtown, an 11-story Art Deco building which sold for $40 million. In March, it announced the 31 entities selected to move into the new UCLA Downtown site – many of them centered around civic engagement, social justice and advocacy.
And in January of this year, UCLA was in the limelight after spending $700 million on the former Westside Pavilion Mall, set to become the UCLA Research Park. It is the most expensive acquisition in UCLA’s history. Funding also came from the state and other donors.
Google was originally set to lease the Westside building for 14 years, converting it into a 584,000-square-foot office campus, but decided it no longer needed the space. UCLA was able to take advantage of market softness and acquire the building at a discounted rate, according to experts.
“One of the issues we always face is how to keep up with the growing demand to come to UCLA,” Darnell Hunt, interim chancellor of UCLA, said. “I think these recent acquisitions are really an important change for us that allow us to thrive as we move forward.”
And not only does expanding its footprint promote longevity from the university’s perspective, but the choice to purchase real estate in areas other than Westwood inevitably opens the pool of students and increases educational access to those neighboring communities.
Sonnet Hui, general manager and vice president of Project Management Advisors Inc., said this model could be very attractive for mid-career professionals hoping to sharpen their resumes and pursue additional education.
“I think what UCLA is doing is really encouraging because part of their goal for the year is to be able to provide access to the local community,” Hui said. “They’re expanding their reach to other parts of Los Angeles to not be just a silo in West Los Angeles.”
In October last year, UCLA released the “UCLA Strategic Plan 2023-28,” a five-year plan that outlines the modern goals of the university – including deepening its engagement with Los Angeles, expanding its reach as a global university, enhancing its research and creative activities, elevating its teaching and becoming a more effective institution – all of which funnel into making real estate decisions.
Hunt said UCLA’s Westwood campus isn’t going anywhere and rather the satellite campuses are geared toward specific programs and tracks – intended to expand the university’s reach and amplify its expertise at large.
“We think each of these new acquisitions – UCLA Downtown, UCLA Research Park and UCLA South Bay – will build on our strengths as a university, create opportunities for our students to have unique experiences and really redefine what a great public research university is the 21st century,” Hunt said.
Branching out beyond L.A.
And while UCLA is surely making its mark on Los Angeles’ landscape, some local universities are geographically expanding even further – such as USC, which recently opened a campus in Washington D.C. called the USC Capital Campus.
The USC Capital Campus acts similar to a study abroad experience for USC students – where they can spend a semester or full academic year – specifically designed for students pursuing degrees related mostly to the following fields: political science, international relations, public policy, communications, journalism, music, theater, film, screenwriting and business.
The school acquired the 60,000-square-foot D.C. building for $49.4 million in March of last year and opened it in April, planting its flag.
“USC is a brand and so exporting your brand to new markets is only logical from a business standpoint,” Tarczynski said, stating D.C. is a target-rich environment for the school.
D.C. marks USC’s first out-of-state real estate purchase, although it also has properties in downtown, Boyle Heights, Playa Vista, Marina del Rey and Catalina.
“Everything that we do within our real estate department and portfolio is with the university’s mission and strategic goals in mind,” Laurie Stone, associate senior vice president of real estate and asset management at USC, said.
Smaller schools expand, too
Some smaller Los Angeles universities have also been active in expanding their campuses.
In 2020, Pepperdine University purchased the Miramar office complex in Malibu, marking its own first-ever commercial real estate purchase. Occidental College has made several real estate purchases over the last decade including purchasing five housing structures in 2018 and a commercial building in 2015, all within Eagle Rock.
Although Loyola Marymount University purchased a small adjacent parcel in Westchester for $5.75 million last year to reportedly be used for administrative offices, and also has campuses downtown and in Playa Vista, Jeffrey Zychowski, director of real estate and property management at LMU, said the university is not right now looking to scale its footprint but is instead interested in expanding nearby affordable housing solutions to the university’s faculty.
Other schools buy in L.A.
And while some are expanding out, other out-of-state schools are filtering in, namely Arizona State University which acquired the Fashion Institute of Design & Merchandising last year and has three downtown properties, including the former FIDM building itself.
“Los Angeles is one of two global cities in the United States, really two in North America,” Michael Crow, president of ASU, said. “Phoenix is in the economic orbit of Los Angeles. We’re trying to take strengths that we have and overlaps that we have and desires to grow that we have and bring them together by a deep connection in California.”
In 2018, ASU announced its plan to renovate and move into the former Herald Examiner newspaper building downtown, now known as ASU California Center Broadway. The university is a major tenant and investor in the property, which houses its Walter Cronkite School of Journalism.
And in July last year, ASU acquired the 200,000-square-foot downtown property from FIDM it took over in April. The building now goes by ASU California Center Grand. It also leases 21 units at Broadway Palace, a luxury housing complex for ASU students downtown.
“It elevates the offering of the institution at the same time as gives them access to professionals that work in Los Angeles and would be interested in teaching but may or may not be willing to do that from Arizona,” Birkey said on ASU’s decision to enter the Los Angeles market.
According to Crow, these acquisitions allow ASU to expand its reach while also deepening its connections to certain areas of study that are more accessible in Los Angeles, namely the fields including fashion, film, television, communications and aerospace.
“Between Phoenix and Los Angeles, we can build a global footprint for the areas of education that we’re working in,” Crow said. “What we’re trying to do in Los Angeles is be a part of a vibrant unbelievably important, global city that happens to be a few hours away.”
Mutually beneficial
Despite a range of intentions, many experts believe all this real estate play is mutually beneficial, in terms of promoting healthy competition among universities as well as making education more accessible by broadening its reach.
“Education leads to a much better society,” Tarczynski said. “I think we’re going to see a lot more competition amongst universities. Universities are understanding the value of their brand, and they are looking to grow by exporting their brand.”
“It would be a dream to compare Los Angeles to Boston, for example,” Birkey added. Boston, one of the biggest college towns in the U.S., is home to more than 30 colleges and universities in its metropolitan area.
ASU’s President Crow, on the other hand, denies claims of competition.
“We’re not in California to compete with anyone,” he said. “We don’t have competitors. We’re trying to advance a national university called Arizona State University. We have a very different view of universities. We believe that universities should not be bounded. They should have technological capability to project themselves.”
Nonetheless, universities are generally seen as making positive impacts on their surrounding communities – in terms of fostering community engagement, driving economic development and contributing to increased safety – and some experts believe all further university expansion should be welcomed.
“I think that the roles of these institutions in our communities hopefully will also become more politically important to us in Los Angeles,” Birkey said. “We want to be able to elevate the things that make our city successful. And I think being able to appreciate and respect that we have may go a long way for us in terms of our local identity around the universities that we have.”
