For-profit schools on the move in slow office market

Major for-profit colleges have been prowling the Twin Cities for new office space, despite rising concerns about heavy student debt loads and a pending government crackdown on the federal student aid on which the for-profit schools rely.

Strayer University, National American University, Corinthian College and Walden University are among the for-profits on the move, as the rapidly growing industry takes advantage of the real estate bust, brokers say.

The latest deal: South Dakota-based National American University last week landed a new spot in Burnsville that will be the school's fifth classroom location in Minnesota. It's negotiating for a sixth, this one likely to be just outside the Twin Cities. Strayer University, based in Arlington, Va., and one of the country's largest for-profit schools, is said to be looking to open its first campus in Minnesota, local brokers say.

Except for the for-profit education firms, things have been slow in office leasing over the past year. "That industry is kind of dominating the activity," said Bob Revoir, a NorthMarq senior vice president who is tracking the activity.

He called Brooklyn Center "a hotbed" and speculated the suburb's lower office rents and higher unemployment were factors.

In December, ITT Technical Institute, part of ITT Educational Services Inc. of Carmel, Ind., opened its third Twin Cities location at 6120 Earle Brown Drive in Brooklyn Center. Brown College, part of Career Education Corp. based in Hoffman Estates, Ill., is in the process of moving its Brooklyn Center campus, now at 6860 Shingle Creek Pkwy., to a new undisclosed spot in the city. Last January, National American University shifted within Brooklyn Center, to a new spot at 6200 Shingle Creek Pkwy.

Every school is different, and some offer more online courses. But many of the locations around the Twin Cities have classrooms and labs as well as administrative offices.

Rasmussen College is moving its Eden Prairie campus to Two MarketPointe, a new office building in Bloomington. Last year it moved the school's headquarters from Lake Elmo to the 8300 Tower at Normandale Lake Office Park in Bloomington.

Schools tight-lipped

More than 130 for-profit career schools operate in the state, according the Minnesota Office of Higher Education, which registers them. Many schools are dedicated to specific trades, such as cosmetology, horseshoeing and massage. About 30 schools like Globe, Rasmussen, Phoenix and Brown offer broader career training.

They tend to be tight-lipped about their moves.

Doug Fulton, a broker at Cushman & Wakefield working with Strayer, declined to comment.

Walden University said it's looking but won't say where. The academic headquarters for the largely online school is at 155 5th Av. S. in the Minneapolis Mill District. The school's lease is set to expire soon, said spokesman Jerry Sweitzer.

"Due to our size and the needs of the organization, we've been looking at our options, including different spaces in different locations in the Twin Cities area," he said. "The size of the space required and the date of any move are still being worked out."

Given the glut of office space, the schools would appear to have a smorgasbord of options. Not so, brokers say. The for-profit sector built itself on convenience. Its members seek out major intersections and typically require plenty of parking. They want six to 10 stalls per 1,000 square feet of leased space, compared with the usual office requirements of four to five, noted Gary Ryan, a senior leasing agent for Kraus-Anderson Realty Co. who signed National American University's latest deal in Minnesota -- a 10-year lease for 6,000 square feet in Gateway Business Park at Hwy. 13 and Interstate 35W in Burnsville. They'll start building out the space soon, Ryan said.

Is the boom over?

It's all good business for brokers, and for contractors and subcontractors working to fashion classrooms out of offices. But the level of activity has raised some eyebrows.

Nationally, there are signs demand may have peaked, despite continued high unemployment that sends people back to school. The segment's stocks were clobbered recently when Strayer announced that new enrollments dropped 20 percent for the winter term. Apollo Group Inc., whose University of Phoenix is the largest for-profit school operator, saw new enrollments plunge 42 percent in its first quarter.

J. Michael Locke, CEO of privately held Rasmussen Inc., said it, too, has seen a slowdown in new enrollments. He chalked it up to generally cautious consumer behavior.

The schools also are bracing for potential fallout from new U.S. Department of Education regulations that would tie federal student aid to students' success at repaying their student loans and getting jobs. The regulations are expected to be announced in a few months.

"The concern is about the unknown," Locke said.