In a city where physical land is scarce and at a premium, developers look increasingly to the skies for building opportunity. Air rights measured by the square foot are transferable, zoning regulation-permitting, from one lot to another. Developers tailor blueprints not just to the plot of land, but also to airspace that can be annexed above and around the property.
How do air rights work? Every lot in the city has vertical zoning potential. As an example, if you own a lot that can be a maximum of fifteen stories, you can either construct a building that will be fifteen stories or construct a shorter building and sell the remaining feet as air rights. Air rights can be redistributed in two ways: via zoning lot merger (the consolidation of two or more adjoining lots, allowing rights to be shifted within the enlarged site) or a transfer from one zoning lot to another.
Generally, transfers of air rights are permitted between adjoining lots in the same zoning district. Transfers between non-adjoining lots may be allowed if they promote the preservation of historic buildings, open space or unique cultural resources. What if all of the buildings adjacent to you have reached their maximum building potential? For many landmark buildings, who can also transfer air rights to buildings across the street and catty corner to the landmark building, this is the case. Recently, however, St. Patrick’s Cathedral, St. Bartholomew’s Episcopal Church and Central Synagogue proposed a plan whereby landmark buildings would be able to transfer their air rights to less built-out areas east of Fifth Avenue.
Some buildings make millions of dollars in profit selling their air rights. The Door, a social service agency, sold the air rights to its building on Broome Street to a real estate developer for $325 per square foot, for a total of $32 million. Katz’s Deli recently sold its air rights for an undisclosed sum to real estate developer Ben Shaoul, enabling the development of a new 10 story building at 196 Orchard Street, just down the street.
Some condo and co-op buildings have done the same, and if your building is thinking about selling its air rights, a mark in the “positive” column can be found by considering the following example: a co-op at 152 West 58th Street sold its air rights for $200 per square foot for a total of $4.1 million. The building then used the proceeds to pay off the outstanding $1.9 million on its mortgage, lower maintenance payments, pay for required Local Law 11 repairs and pay off $1.9 million in taxes and closing costs. Liquid assets are not the only benefit: your condo or co-op could also use a sale of air rights to negotiate access to a nearby health club or dictate the developer’s construction schedule.