Dive Brief:

• As colleges scramble to carve out space online, Capella University has claimed some on the ground, announcing it will develop its first brick-and-mortar administrative facility for students, in Atlanta.
• The 26-year-old for-profit online university, which enrolls about 40,000 students across 53 degree and 42 certificate programs, said the Campus Center will provide space for local students to meet, study and access enrollment counselors and academic advisors.
• The center is the first of several Capella has said it will set up. It plans to open a second location in Orlando, Florida, in the coming months.

Dive Insight:

Highly visible shifts and strategic jostling have in recent years characterized business in the online and for-profit education arenas, the two spaces Capella occupies.

That includes moves by several for-profit college operators to become educational service providers, attempts by smaller nonprofit colleges to expand online, and the brisk pace of growth by online giants such as Southern New Hampshire (SNHU), Arizona State and Western Governors universities, which are nearing or have surpassed 100,000 students each.

Online-only enrollment rose 38% from 2012 to 2017 and is expected to continue to increase despite a slowdown in college enrollment overall, according to an April report from Moody's Investors Service. The analysts note online will continue to be "a key enrollment strategy" for some, but not all, colleges.

To be successful online, the report continues, colleges will need to differentiate their offerings based on factors such as price, delivery model, faculty service level and perceived value.

For-profit colleges, however, are finding themselves on a back foot in this area, and as a result are downsizing, merging and in some cases converting to nonprofit status. That includes Capella, whose parent company merged with that of for-profit Strayer University last summer in a $1.9 billion deal expected to harden each institutions' competitive edge with a play at scale.

Earning reports show the decision is paying off. Enrollment grew at both Capella and Strayer for the quarter ended March 31. At Capella, enrollment rose 2.9% year-over-year to 39,271 students.

Company leaders credited Capella's FlexPath subscription-based delivery model, which uses competency-based assessment, for the gains. One-third of Capella's nondoctoral students are enrolled in FlexPath.

While some online colleges such as the struggling National American University are shrinking their brick-and-mortar footprints, others are expanding them. The nonprofit SNHU earlier this year announced it will add a West Coast operations center to ensure its services are more available to students in those time zones, and Strayer said it plans to open between six and eight new campuses in 2019.

Despite the momentum, the challenges ahead for Strayer and Capella reflect those affecting all for-profit colleges. In its latest quarterly report, the pair's parent company indicated concerns over pending regulations coming out of the recent negotiated rulemaking on accreditation, as well as the "increased focus" of regulatory oversight on the sector.