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First, consideration should be given to existing University space that is or soon may become available. Business unit staff responsible for assignment of space should be consulted to discuss programmatic space needs to determine what space could be used. 

When University space is not available, lease or purchase may be considered. Each market differs over time. Some areas have an abundance of low-cost facilities for rent, while in others it is a buyers' market. Before considering the relative advantages of leasing vs. purchase, the properties available in the local market should be compared. Even when other factors dictate a lease or purchase decision, a comparison of available properties should be made. 

If a property offered for sale meets other required criteria, it must be available at a reasonable cost. Usually this is determined by having two appraisals prepared and negotiating for purchase at or below appraised value. 

When considering suitability of space, questions which should be asked include: 

• Is the internal layout of the space appropriate for the program? 
• What modifications would be necessary? 
• What costs will be incurred to prepare the space for use? 

Modifications can result in significant additional costs. If space is being built, or a new facility is to be finished out, it can be designed to suit specific programmatic and/or design specifications. 

However, when existing University facilities are used, or existing space is leased or purchased, any additional costs associated with renovations to retrofit the space to suit programmatic needs should be considered. 

All construction on a University-occupied facility must comply with appropriate codes. Any renovation, build-out or construction with a cost above $25,000 must be done by workers paid prevailing wages if the work is done specifically for the University's occupancy. Work done by the landlord as part of a general finish does not require prevailing wages. 

The relative urgency of the space requirements may drive the decision to purchase, lease or build. Immediate needs may require a lease. If there is less urgency, a longer lead time may allow renovation, purchase or construction. In some circumstances, a combination of these options may be best, with an initial lease while a facility is renovated, purchased or constructed.

Generally, purchase or construction of a facility should not be considered when the duration of the need for space is short or unknown. For new programs, it is often best to lease until the success of the program is proven. The exception would be when there is such a significant general need for space that if the program that initially occupies the space is discontinued, the space would be in demand by another program.

The future growth or contraction of the program should be considered. Generally more flexibility is achieved by leasing than by the other options.

One of the first questions to ask is: Should this program be on or off campus? Proximity to an existing program can have a significant impact on the efficiency of operations. The need to physically interact with other units should be reviewed including the frequency and type of interaction. Costs associated with staff travel and accessing services should be considered. 

If the program seeking space would function most efficiently near existing departments or programs, identifying or building space in the vicinity should be considered. In some cases, this may be one of the primary factors governing the decision. 

Each campus has developed a master plan that identifies campus boundaries and areas to be acquired. If a facility within the master plan is offered for sale, both immediate and long-term needs should be considered. An on-campus facility may be suitable is temporary space until the land is needed as a building site. 

Location in an off-campus facility may be desirable to serve a specific market. Typically, the facilities are leased. 

If an existing program is already occupying a facility in a highly desirable location, but the facility is not suitable in its present configuration or finish, renovation should be considered. However, an alternate site may be needed during the renovation and all associated costs should be included in the Business Plan. 

For lease or purchase of an off-campus facility, the added costs of providing service should be factored into the decision. Installation and ongoing costs of obtaining secure internet access, parking and services for computing, mail, maintenance, utilities, custodial, lawn, snow removal and security should all be calculated. 

In an on-campus facility these services are usually readily available from the campus or contractors already serving the campus. For an off-campus facility, all costs associated with obtaining these services should be considered. 

A full understanding of all costs is essential in developing a budget and determining the optimal solution. Costs to be considered may include: design fees, construction, moving expenses and furnishings in addition to operating expenses for the services identified above. 

A present value analysis should be prepared to help determine the relative merits of renovation, lease, purchase or construction. It is particularly important when considering a long-term lease to also consider the option to purchase if it is available. 

All other factors being equal, the present values analysis of alternatives generally will be the determining factor in the selection of a particular option. 

Departmental funds, income from operations or grant funding are typically used for leases and/or small renovation projects. 

In some cases, a landlord will be willing to provide up-front construction/renovation funds and either absorb the cost over the length of a long-term lease or amortize the funding by increased rent over the life of the lease. Some leases are structured to provide a payment of the unamortized balance of construction costs if a lease is terminated early by the University. 

The Internal Loan Program is useful for smaller dollar, short-term construction or renovation projects. The minimum loan size is $5,000. Amounts over $50,000 or financed longer than five years must have special written justification. Loans exceeding $500,000 and/or five years in length require a complete financing plan and justification, and the System Facilities Committee must approve the loan. The project must generate sufficient revenue to pay back the loan. 

System Facilities Revenue Bonds may be used for large dollar, longer-term construction projects. There must be a debt coverage of 1.5 or better and the Board must approve these projects. In some instances, these bonds can be repaid with facilities and administrative costs (indirect cost recoveries). 

Capacity is becoming an issue, both for System Facilities Revenue Bonds and for Internal Loans. Funding options should be reviewed with the Business Office and/or the Treasurer's Office.