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If you own commercial real estate or are looking for property to develop, you’ll also want to look up as you assess the development potential. Why? There’s something called “air rights” that can impact the value of a property and the ability to develop it. Here’s what you need to know about commercial real estate air rights. 

What Are Air Rights?

Air rights refer to a property owner’s legal ability to control and occupy the vertical air space above their owned real estate. The concept goes back centuries but was popularized in the late 18th century. The definition of air rights was amended in the early 1900s to include only the air space “within range of actual occupation,” which allows for free air traffic above a piece of property. 

How Do Air Rights Work?

When you purchase a commercial property, you also get rights to the empty space above the building and the land beneath it. Also sometimes called “Transferable Development Rights,” air rights can be leased, sold, and bought. This value can also be a financial incentive when selling your property or can be sold to an adjacent property. 

Air Rights and Commercial Development Considerations

If you plan to do anything with your commercial real estate air rights, they must comply with any existing zoning regulations. For example, some zoning districts have density restrictions. So, if you have a single-story property, you might be restricted from building a multi-story office or condo building on top of it. 

The density restrictions on a property might be referred to as the Floor Area Ratio (FAR). This is the ratio of the building’s floor area to its lot size. In other words, there may be a maximum square footage allowable for development relative to the lot’s square footage. 

Buying and Selling Commercial Real Estate Air Rights

Some people buy, sell, or even lease their air rights. There are several primary ways air rights can be transferred:

  • Zoning lot mergers — You may be able to transfer the air rights to an adjacent property if the two properties share a minimum amount of footage along the lot line. 
  • Landmark transfers — Some states have landmark preservation laws that allow buildings to transfer air rights across the street or even further distances to other property owners.
  • Special purpose district transfers — It may also be possible to transfer air rights between non-contiguous properties if there is a unique purpose for the transfer. 

The value of air rights can vary greatly. For example, New York City was listing air rights for office space in 2017 with values at roughly $315/sf. 

Get the CRE Guidance You Need on Air Rights

Air rights can be a complex matter, which is why it makes sense to seek the guidance of an experienced professional. If you are thinking of purchasing, selling, or developing commercial real estate in the Charleston, SC, area, Caldwell Commercial Real Estate wants to be your trusted partner. Our team of knowledgeable realtors and property managers has over 80 years of combined experience in the industry and is intimately familiar with the local market. Contact us today to learn more about our services.