Why are more higher education leaders interested in public-private partnerships?
Three trends in higher education’s P3 landscape
July 25, 2025, By Nandi Carson, Research Analyst and Fadoua Nabih, Research Analyst
Colleges and universities face significant financial and operational pressures, with rising costs and threats to major revenue sources. These conditions along with rising interest rates, tighter lending conditions, and an increase in building costs make new construction and maintenance expensive.
Meanwhile, evolving campus needs—such as a surge in student housing demand, interest in more collaborative space, and research labs to accommodate more STEM majors—strain existing infrastructure. These pressures highlight a critical need for solutions, prompting many leaders to explore public-private partnerships.
What are public-private partnerships?
Public-private partnerships (P3s) allow colleges and universities to manage escalating costs and meet diverse campus demands for space by working with private partners to finance, construct, renovate, manage, operate, and/or maintain specific infrastructure. P3s inject private capital, accelerate project timelines, and provide specialized external expertise—strengths that enable institutions to develop facilities without overextending their resources or incurring excessive debt.
Below, EAB explores trends in the P3s landscape while sharing promising case studies from institutions pursuing P3 arrangements.
Leadership interest in P3s has grown amid pressure for quicker, lower-risk expansion
With funding constraints and aging infrastructure posing major challenges, P3s have emerged as a strategic solution for institutions seeking efficient, cost-effective development. P3s have become increasingly popular in higher education; between 2003 and 2024, the dollar value of P3 transactions increased by nearly 5,000% from $100 million to approximately $5 billion, signaling growing appeal across the sector. Additionally, 73% of higher education leaders believe P3s are better equipped than in-house teams to deliver speed, innovation, and specialized expertise.
Primary benefits of P3s for colleges and universities
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Financing
Nearly half of university leaders cite the availability of investment capital as a main reason to engage in a P3, as P3s offer access to funding that offsets construction costs. This allows institutions to move forward with capital projects without absorbing the full financial burden up front. This is particularly important as construction costs continue to rise, with an increase of 3.6% year over year.
Bottom line: By sharing costs with private partners, institutions preserve funding and borrowing capacity for other strategic priorities.
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Risk transfer
By working with private sector partners, P3s transfer predevelopment costs, design, construction, operation, and/or maintenance risk. At the same time, they preserve institutional debt capacity ensuring financial returns through ground lease payments, capturing excess cash flow, and achieving credit-positive outcomes.
Bottom line: The P3 structure enables institutions to focus on their core mission of instruction and research while benefiting from private sector efficiency.
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Speed of execution
Traditional campus development is often slowed by competing priorities, but private partners in a P3 bring specialized expertise, capital, and risk management strategies that help deliver projects faster and on schedule. 55% of leaders identify speed of execution as a key driver of interest in P3s.
Bottom line: P3s are often faster because they streamline procurement and delivery into a single process while allowing key activities like permitting, financing, and site preparation to occur concurrently, reducing delays and accelerating timelines.
Case study: University of Tennessee, Knoxville (UTK)
The University of Tennessee, Knoxville pursued a multi-phase student housing P3 in which the private partner assumed full financial risk, marking the first project of its kind in Tennessee.
- Financing:
- The private partners entirely self-funded the project, without financial backing from UTK or the state government. This financing structure enabled the private partners to cover all costs without affecting UTK’s debt capacity.
- The private partner secured approximately $220 million in tax-exempt and taxable bonds, while UTK retained land ownership under a ground-lease model.
- Risk: The private partners assumed 100% of the financial risk for the project. This risk transfer covered financing, design, permitting, construction, operations, and maintenance.
- Speed: UTK and its partners completed design, development, permitting, and financing in just 10 months; an industry-record timeline that allowed construction to start on schedule.
P3s largely focus on student housing, but interest in mixed-use space is growing
While student housing remains the most common use of public-private partnerships in higher education, it is a common misconception that P3s are limited to this area. Today, colleges and universities are expanding P3s beyond housing to develop essential infrastructure and mixed-use spaces that support core priorities such as student success, research, and enrollment growth.
Different types of P3 facilities in higher education:
- Academic, research, and medical facilities that expand instructional capacity, promote interdisciplinary collaboration, and advance institutional research goals. To stay competitive, institutions are replacing and re-purposing aging science and research facilities to support researchers and increase grant funding.
- Student life and campus engagement spaces, including student unions, recreation centers, and dining halls that enhance the student experience.
- Infrastructure and utilities, such as central plants, energy systems, and parking structures that improve campus operations.
- Mixed-use developments that integrate retail, wellness, office, and residential components to serve both campus and community needs.
- Innovation districts and specialty facilities like retirement communities or research centers that create new revenue streams and align with long-term institutional goals.
Case study: Bond Bread Redevelopment, Howard University
Howard engaged in a mixed-use P3 project, enhancing neighborhood retail and commercial presence. This initiative contributed to local economic vitality and created a sustainable income stream for the university.
Projects include:
- Bond Bread and East Campus: Transformative developments that combine residential, retail, and public space to create vibrant, community-oriented hubs while generating sustainable revenue and preserving historic assets.
- Inclusive Innovation Incubator (In3): The U.S.’s first affordable co-working space and incubator dedicated to advancing diversity and inclusion in innovation and entrepreneurship.
University leaders forge strategic partnerships to boost revenue and optimize resources
P3 arrangements often generate revenue for an institution through rental payments, but some institutions have begun to pursue P3s with a greater focus on revenue generation. Facilities with research labs, retail space, and even event spaces can be rented to external businesses and organizations, generating direct rental income. Moreover, universities can offer complementary services like catering, parking, or event planning, further increasing revenue within these facilities.
Case study: CampusParc, Ohio State University
- Ohio State entered a 50-year lease with CampusParc for parking operations. This generated $483 million in upfront revenue for Ohio State, which the university invested into its endowment to support academic and strategic initiatives.
- Earnings from the initial payment have helped fund student scholarships, faculty hiring, and campus infrastructure projects.
The promise of P3s
Universities face pressures from spiraling costs, aging infrastructure, and shifting student needs, creating a gap between available facilities and rising demands. P3s offer a solution by injecting private capital, accelerating project timelines, and providing specialized expertise, enabling expansion and modernization without excessive debt. By sharing risks and costs, universities preserve financial capacity for fundamental strategic priorities.
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