Value of incorporating flexibility in lab buildings : a real options approach

Abstract

This thesis investigates flexibilities in commercial lab buildings with the help of the real options theory. The qualitative component of the thesis explores the development of the lab building as a building typology and its relationship to economic value creation for developers. It also investigates various strategies employed by developers during the design and development of lab buildings to hedge against the downside risk. The quantitative component builds upon that hypothetical lab building development case and creates a Real Options case as a framework for applying and valuing flexibility in this complex building type. Through this demonstration, valuation of flexibility employed in the current practice is derived.