How are rent levels for your premises determined?
Akademiska Hus – a HEI landlord
On average, Akademiska Hus has a market share of 62 per cent, which means that we are one of many participators on an open market where customers can negotiate a solution that best meets their needs. The centres of education can rent from anyone they want and today there are more than 300 other property companies that also rent premises to the higher education institutions. In other words, far from everyone rents from Akademiska Hus; we do not even have a presence in some college towns.
Part of Akademiska Hus’ remit is to charge market rents. The grant from the Swedish state to the higher education institutions is adapted to cover the cost of premises, which in 2020 accounted for 12.4 per cent of the total costs that colleges and universities have, regardless of who is the landlord. If a state-owned property company were to start subsidising rents, the result would skew the competition in relation to other private property companies, which cannot deviate from market rents in their operations. This in turn would affect the many higher education institutions that do not rent from us. Such skewing would also be in violation of current competition law.
Transparent rental model
Akademiska Hus’ rents comprise a basic rent that is intended to cover operating, maintenance and capital costs, and sometimes a supplement for tenant adaptations. Our rental prices are in line with other landlords for colleges and universities in Sweden. We weigh in the risk and costs associated, for example, with construction and management, in the same way as other property companies. We also take into account general market rent levels for the particular city, location, type of property and lease length.
Like most property companies, we have a clause in our rental agreements that entails an increase in rental prices based on inflation measured in the consumer price index (CPI). Over the past ten years, when inflation has been low, the rent increase based on the CPI has averaged 1 per cent. The current increase in inflation is having an upward effect on the levels for Akademiska Hus’ rental prices, just as costs and price levels are affected in society at large. The latest forecast for the CPI in October, compared with October the previous year, provides an indication of rent hikes of just over 10 per cent for 2023.
We have developed a transparent rental model that we have discussed with representatives of colleges and universities for many years and openly report the current rents. Through our long experience and effective collaboration with our customers, together we can often achieve smart use of premises with high resource efficiency.
Internal rental arrangements at the centre of education
The rent that Akademiska Hus charges the centres of education is usually divided among the various departments of the colleges and universities within each centre of education, along with other expenses for facilities, which are not charged by Akademiska Hus.
The departments are then charged an “internal rent” that often also includes costs for central premises. The internal rent that departments pay per square metre can therefore be higher than the price per square metre that Akademiska Hus has agreed with the centre of education.