New York City Buildings | Photo by pexels.com via Steve Derodar
With all the skyscrapers surrounding us, many of us could be wondering if air rights are unique only to New York City. Well, as far as I know, only a few metropolitan cities and a few countries have strong regulations about air rights. Air rights are not unique to New York City but are most commonly associated with the city. But what are air rights? Is it something that can be sold? Does it pertain to the potential increase in the height of a building? Who owns it? How are they regulated?
Air rights refer to the right to build above existing structures, which also exist in other cities and countries. However, the regulations and laws governing air rights can vary depending on the jurisdiction, and the specific rules and limitations may be unique to each location. The scope of air rights can vary depending on several factors, including the location, zoning regulations, and property specifics.
Air rights can be used to build taller buildings than what would otherwise be allowed under zoning regulations. For example, a property owner may sell their air rights to a developer who wants to build a taller building on an adjacent property. Air rights can also build public spaces such as roads or railways. This is often called a “deck” or “platform” and can provide valuable additional space for development in urban areas where land is limited.
Air rights and development rights are similar but not the same. At times interchangeably used, both refer to the legal ability to build on or above a piece of property, but there are some differences. The former typically refers to the right to build above the ground on a property, while the latter can include both air rights and the right to build below the ground (such as a basement or underground parking). Development rights can also refer to the ability to build higher than current zoning laws allow, while air rights usually refer to the space above existing structures. In addition to development rights, air rights can include other rights such as access to sunlight, air circulation, and views. These air rights are often negotiated between property owners and can be protected through easements or other legal agreements.
Edna Ferber maybe refers to air rights in her comments about New York City – “In New York, the sky is bluer, and the grass is greener, and the girls are prettier, and the steaks are thicker, and the buildings are higher, and the streets are wider, and the air is finer than the sky, or the grass, or the girls, or the steaks, or the air of any place else in the world.”
Ever heard of New York City being a different animal in real estate? Well, it is. Air rights allow developers to build taller buildings without taking up more land, which is particularly valuable in the city’s more crowded neighborhoods. Air rights are prevalent for various reasons:
Limited Space: New York City is a densely populated and built-up area, so there is limited space for new development.
Zoning regulations: New York City often restricts the height and size of buildings. By purchasing air rights, developers can exceed these limitations and build taller and more significant structures.
Profitability: Air rights can be a lucrative investment for property owners with unused space above their buildings. Selling air rights can generate substantial income without requiring the owner to sell their property.
City Incentives: The city of New York has implemented several programs to incentivize the sale of air rights, including the Transferable Development Rights (TDR) program. This program allows developers to purchase air rights from buildings designated as landmarks or historic sites and transfer them to another site for development.
Indeed, limited space, zoning regulations, profitability, and city incentives make air rights a popular option for developers and property owners in New York City.
The most expensive air rights sale in New York City occurred in 2014 when SL Green Realty Corp. purchased the air rights above the One Vanderbilt development for $210 million, or approximately $524 per square foot. The One Vanderbilt development is a 77-story office tower adjacent to Grand Central Terminal in Midtown Manhattan. The purchase of air rights allowed the developer to exceed the zoning regulations and build a taller building.
What if I tell you that in 2015, JDS Development Group purchased the air rights above a nearby synagogue for $52.5 million, or approximately $368 per square foot? The developer used the air rights to build a 73-story luxury residential tower known as the American Copper Buildings.
Also, in 2018, Tishman Speyer purchased the air rights above the Chrysler Building for an undisclosed amount. The purchase allowed the developer to build a taller building adjacent to the iconic landmark. Unsurprisingly, In line with air rights ownership, Google bought Chelsea Market from Jamestown for an astounding $2.5 billion. The purchase allowed the tech giant to expand its New York City office space.
Several other factors, including size and zoning restrictions of the property. The air rights cost in New York City can be quite high, particularly in sought-after locations like Midtown Manhattan. In some cases, air rights can sell for hundreds of dollars per square foot, while others may not be available for purchase at all. For example, in the Midtown Manhattan area, air rights have sold for upwards of $500 per square foot, while in other areas, such as the Lower East Side, prices have ranged from $150 to $250 per square foot. In some cases, air rights sales have topped $1,000 per square foot in highly sought-after locations.
It’s worth noting that the sale of air rights is typically negotiated between the seller and buyer. It can be influenced by various factors, such as the seller’s willingness to sell, the buyer’s desired use of the space, and market conditions at the time of sale. Air rights, as a unique concept as it can be, can provide several benefits to property owners, including:
Building Density: Air rights allow developers to construct taller buildings, which can increase the density of property and maximize the use of the land;
Additional Revenue: By selling or leasing air rights to another party, property owners can generate additional revenue streams without having to sell the property itself;
Preservation of Landmarks: Air rights can be used to preserve historic landmarks or buildings by allowing developers to build over them rather than demolishing them to make room for new construction;
Enhanced Views: By developing air rights above an existing building, property owners can enhance the views from the building by creating unobstructed sightlines;
Public Benefits: Air rights can be used to create public spaces, such as parks, plazas, or pedestrian walkways, which can improve the quality of life for residents and visitors.
The cost of air rights in New York City can be pretty high, but it ultimately depends on the specifics of the property and the market conditions at the time of sale. Air rights provide property owners with valuable development opportunities and can be a lucrative investment in areas where land is limited.
Money in the skies. It is undoubtedly true.
(Stevenson’s experience in Philippine Real Estate spans more than 15 years. He has been involved in horizontal, vertical, vacation, and commercial properties. He has worked as an International Property Specialist for markets in Asia, Europe, and North America with Ayala Land, Federal Land, and Century Properties. Through PhilHouseHunters, he offers real estate investment opportunities, marketing, and consultancy with a key focus on Metro Manila and Mega Cebu areas. Visit www.philhousehunters.com. Email at email@example.com.
In New York City, Stevenson is affiliated with Elegran Forbes Global Properties as a Real Estate Advisor and Licensed Real Estate salesperson. Forbes Global Properties is a global network of elite real estate professionals, including brokers, developers, and agents, who specialize in luxury properties. It is a partnership between Forbes and several leading international real estate brokerages, including Leading Real Estate Companies of the World and Luxury Portfolio International.
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