When the economy began to implode last fall, the Hub’s powerhouse lineup of colleges and universities, in the midst of an unprecedented building boom, looked like they just might carry us through the downturn.
Everyone from elite private schools like Harvard University to public colleges like the University of Massachusetts Boston were pushing plans for billions upon billions in new dorms, labs and academic buildings.
But what was supposed to have been an historic college building boom, the likes of which Boston and maybe even the nation had never seen, has gone bust with the stock market and the economy.
Instead of a surge in new building projects, the number of colleges and universities pushing ahead with major expansions and renovations has plunged dramatically, falling to just a fraction of boom-time levels, new figures from MassDevelopment show.
Since the stock market and global financial crisis that erupted in mid-September, the state authority has done just a single college bond deal.
This sudden retrenchment, in turn, is raising some serious concerns about the future of one of Greater Boston’s key economic drivers.
Maybe our prestigious constellation of top colleges and universities will handily bounce back from the shock of last fall and winter’s stock market collapse.
Yet the recent decision to cancel and postpone myriad projects may also signal a new era of more modest ambitions on part of college presidents and boards.
‘A Very Big Fall Off’
The jury is still out on that question, but I am not sure it’s realistic to expect a swift return to the giddy days of boom-time college expansion.
“It’s a very big fall off and its directly related to the stock market and the fall of endowments,” notes David Begelfer, chief executive of Massachusetts NAIOP, which represents the local development industry. “This is something that across the board has affected Harvard on down to the smaller colleges.”
The numbers tell a pretty clear story here.
This past May, the state authority helped float $94 million in tax exempt bonds for Boston College, which is in the middle of a major campus expansion.
That, however, was the sole college bond deal since the collapse of Lehman Bros. back in mid-September, which ushered in the economic crisis we are still digging out of.
That compares to $1.5 billion in college and university bond deals the state authority handled during the last half of 2007 and the first half of 2008.
Eighteen of the 24 bond deals that went through the state authority that year included money for new projects.
Boston University floated $535 million in new bonds; Babson $132 million; Bentley $60 million; Brandeis $62 million; and Wentworth $64 million. Outside the Boston area, Smith College floated $72 million and Holy Cross $111 million.
But all that was just an appetizer for the huge crush of major college and university expansion projects that were supposed to hit all at once in 2009 and 2010.
Full Speed Ahead?
Even as the economy slowed in the summer of 2008, Harvard was preparing to push full-speed ahead with a multibillion-dollar expansion into Allston, including a new science complex that was to have created hundreds of new jobs.
BC was teeing up a $1 billion plus construction program of its own, and BU as always had an expansive menu of new projects in the pipeline.
But it was not just the elite schools that were on a building tear. UMass Boston was talking up plans for dorms, while Suffolk University was hammering out a 10-year master plan that involved a major expansion downtown.
Last fall’s stock market slaughter and global economic recession overnight changed all that.
If this were just a mild economic slowdown along lines of the 2001 downturn, a number of colleges would have likely pushed ahead with their building plans.
But with its endowment having fallen 30 percent to $28.7 billion, Harvard has halted construction in Allston and is reviewing its long-term plans there.
Boston University, for years a giant player in the local construction market, has also put a freeze on new projects not already in the works.
Meanwhile, Boston College finally won City Hall approval last month for a $1 billion expansion of its own. But while BC appears to be going forward for now with its big plans, it also saw its endowment plunge 25 percent, to $1.3 billion.
The big question now is whether all these construction freezes and delays are a temporary phenomenon or part of a longer-term shift to a more conservative stance by local universities and colleges when it comes to new construction and expansion.
Richard Doherty, president of the Association of Independent Colleges and Universities in Massachusetts, takes a brighter view.
He offered up a list of several small and mid-sized colleges across Massachusetts undertaking significant construction projects, from American International in Springfield to Lesley College in Cambridge.
While some of the bigger schools have had to deal with the fallout from shrinking endowments, other colleges and universities have traditionally relied more on tuition to pay their bills and finance new construction.
“The schools are still cautiously optimistic that they will still be in the construction business,” Doherty said.
And some argue that if the stock market continues to rally and the economy pulls out, local colleges and universities will be back in the construction game soon.
Maybe not this year, but certainly by the end of 2010, the optimists argue.
There’s even an incentive for early starters, with construction prices, after years of double digit increases, having fallen hard back to Earth.
“I would not be surprised to see, maybe not right away – by the end of 2010 – to start seeing colleges get back onto track,” said NAIOP’s Begelfer.
Certainly, nothing would be better than that for a city and a region so dependent on the higher ed sector.
Yet I wonder how deep the scars go from the trauma of the market collapse last fall and winter, which shook up not just our colleges and universities, but our entire economy.
Certainly it offered a brutal lesson to local college trustees in the risks of overly relying on endowment income, and by extension the stock market.
Harvard and the caution it is showing now are a good test case here.
The university has not just paused construction, but appears to be taking a broader look at its expansive Allston plans.
My bet is other college presidents and boards are also likely to become a bit more introspective about their plans.
In the end, that may be the kind of caution that keeps some local institutions alive to teach another generation of students.
But it may also be time to say goodbye to that sweet dream of a Beantown college building boom.
