loader image

Leveraged Breakdowns

Life Science and the Urban-Suburban Multifamily Divide During COVID-19


To the casual observer, “real estate” may seem to be one single asset class. Perhaps your personal account is exposed to some tech, some healthcare, and maybe some REIT stocks. After all, within real estate, the gist is that landlords charge their tenants rent. How much variance can there be? But when you pry a bit deeper, you begin to realize that real estate sectors can be quite different from one another.

Understanding current trends is a critical component of the real estate private equity interview process. This post will highlight how those sector differences have panned out in the midst of a global pandemic for two sectors: Multifamily (urban vs. suburban), and Life Science.

Urban Multifamily

Gateway market multifamily (San Francisco, New York, DC, etc.) is perceived as a bedrock asset class for stable cash flows. Two chief demographic trends supporting its reputation are that:

  1. The propensity to rent has been climbing and extending into more age brackets across America, and
  2. The proportion of city populations against suburban populations has been steadily increasing

Yet as the pandemic has proven, neither of those trends are guaranteed. For starters, major metropolitan areas have likely been experiencing population declines. This is due to a confluence of factors, such as teleworking de-necessitating the average white-colar Jane to live in her cramped city apartment.

Anecdotally, many urban workers facing lease renewals can’t justify the expense. There are many other stories at play here, all contributing to decreased rents in Manhattan, the Bay Area, and many other metropolitan areas. Why pay to live in a cramped city apartment when everything is shut down?

Suburban Multifamily

On the flip-side, suburban multifamily has experienced a muted reaction to the pandemic when compared against its urban counterpart. Though the data show a stoppage in growth, the overall decline in suburban rents is far less stark than urban rents. Many theories would explain this, but perhaps you could summarize in saying that the draws for urban rental (close to work, fun restaurants, night life, plays, concerts, etc.) have dissipated more substantively than the draws to suburban rental (cheaper, more space, close to family).

Life Science

Already a hot sector, Life Science has continued its feverish climb throughout the pandemic. For the uninitiated, Life Science is where all the fancy biotech work gets done. It’s lab space. It’s similar enough to office in the way it leases, via multi-year contracts to large, creditable tenants with stipulations for free rent periods, tenant capital allowances, and such. (If you aren’t comfortable with these concepts, maybe check out our guide for technical real estate private equity interview questions.)

There are some managerial headaches that, to date, have been absolutely worth the effort. For instance, you can’t just tour your own assets sometimes because the labs have privileged access, and you must maintain rigorous standards of air quality and other safety standards. Yet if you bought life science before the pandemic, you’re probably grinning.


To a casual outsider, real estate might seem homogeneous. But in the same way the risks facing a TSLA share are vastly different from those facing an ADP share, so are the risks that distinguish the various real estate segments. The recent upheaval wrought by COVID-19 has highlighted the ways in which the devil of real estate investing is in the details.

Looking to learn more? Why not check out our educational resources! Whether you’re yet to begin a formal real estate private equity interview process or are crunching through real estate private equity interview questions at the last minute, we have what you need. All you need to bring is your effort.

Leave a Comment

Scroll to Top