A case for developing life science real estate in New York City

Abstract

New York City, arguably the world's financial capital and the world's biggest real estate market, and home to some of the finest medical and academic research centers houses a little over a million square feet of life science focused real estate. Despite tremendous academic research potential and financial wherewithal, the life science industry of the city is comparatively much smaller to other New York City industries. In addition, it is much smaller in comparison to life science industry in other parts of the country. This thesis investigates the New York City market as a possible location for developing life science focused real estate assets. As a first step, the research will focus on identifying and analyzing the key demand indicators to establishing the demand for life science focused real estate. Next, the thesis will focus on lab space as a real estate product to understand its main components and value drivers. Upon understanding the market and the product, the research will put forward possible strategies for developing lab buildings in the city. Further, in support of the development strategies the research will look to prove the financial feasibility of developing that life science real estate in the city. This would involve financial analysis and contrasting returns from life science assets against office assets. Lastly, through real options framework the study will go on to demonstrate the benefits of applying flexibility to real assets, while financially valuing this flexibility using the Monte Carlo analysis.