One of the topics that we’re most interested in at the moment is air rights development: using the airspace above existing structures to build new homes.
Big businesses like Tesco have long been exploring this strategy as a means of releasing value for their property portfolios, as have Transport for London and Southwark Council in the Capital.
Aside from its money-making promise for investors, air space development has numerous other practical factors to recommend it, not least in helping the country to address the pressing housing shortage.
Why the need to build upwards?
When first faced with the prospect of air rights development, one obvious question presents itself: why? It seems to go against the grain of new build development, leaving many to doubt the suggestion that it could have a very important place in the modern world of construction.
The answer is not a simple one. Air rights development could potentially help to rectify many different problems in our industry, so we’ll start with one of the most pressing – housing demand. The shortage of available properties has long been recognised as an issue afflicting our society, and building upwards is a largely unexplored avenue that could have the potential to aid in reversing this.
Tied to this point is another: development sites are increasingly hard to come by, especially in dense urban areas such as London. With a shortage of available land to buy, building more homes becomes ever more difficult – unless we are to explore building upwards.
This has the benefit of allowing architects and investors to plan developments in areas where adding more property at the current time is next to impossible. Rather than people being forced into less desirable locations, away from business centres and plentiful amenities, they can live in the areas they prefer. This also means less need for greenbelt land being sacrificed to satisfy the countries need for new homes.
Developed land could thus become more developed, whilst untouched spaces could be left well alone, helping to make building a more eco and community friendly option in the long-term.
On the other side of the coin, it could generate a fantastic new avenue of income for those who are currently land rich and capital poor, without them having to sacrifice their existing ownership to generate funds.
The challenges of air rights development
The above has the tendency to make airspace development sound like an idyllic solution to the need for new housing. once presented thus, few can see why there should be any impediment to an option that would help with building new homes and providing landowners with additional income.
But no such suggestion comes without challenges to counterbalance its utility, and air rights development has many.
Firstly, if we look at it from a practical perspective. It is far more complex than traditional forms of construction, purely because you are building on top of an existing structure or use, and so must factor this and its added complications into your scheme. This presents numerous design challenges, not least that you have to generate a solution that creates a useful space without impeding the form or function of the existing development.
Legal issues could also present themselves. Case law shows that there have frequently been challenges made when third parties, whether neighbouring landowners or tenants, feel that their rights have been infringed by similar activities, such as the installation of wind turbines.
Where these compromise light or air, obstruct telephone or internet signal, or so on, they have often been decided in favour of the complainant – a complication that could equally arise when dealing with air rights development.
There is one more obvious problem: who is going to fund such developments? Money cannot be conjured out of thin air, no matter how compelling the argument in favour of such a solution. Either traditional development financiers need to be brought on board, and first convinced of the arguments for choosing this avenue over traditional builds, or else alternative sources of capital such as crowdsourcing or collective investment schemes must be secured.
Advantages of air rights development
With regards to funding, the arguments are certainly there to be made for those who have the confidence and commitment to bring them to the fore. Firstly, for those funding such a venture, it’s worth noting the advantages attached to nominal site costs, which leave more money in the bank for other uses, as well as creating greater profit margins once the development begins to deliver returns.
The greatest potential is arguably best realised with a collaboration or joint venture between the various stakeholders. With a site or building owner, developer, leaseholder and finance partner working together, there is scope for a mutually beneficial development, with much lower risk compared to the challenges of taking a new build development out of the ground.
Another benefit of air rights schemes is there is no ‘change of use’ required, clearing the road of any red tape or legal challenges this may pose. This thus saves the parties involved both the funds necessary to combat such issues and the time such actions naturally demand.
As if this were not enough, there is no marketing requirement to prove lack of demand for existing use, as is the case with buildings where this needs to be changed, such as industrial warehouses that are converted into living accommodation.
This helps to reduce both the costs and the complexity associated with more traditional methods of development, making air rights projects an enticing option for those with an eye to enhancing any potential profits.
Our experience with air rights development
We have long been convinced of the value of building upwards, not least because we have delivered and are currently working on exactly these types of schemes.
Our clients at Sunbury Lane in Wandsworth wanted to turn two one-bed flats into two duplex apartments by building on the roof of the existing structure. The photograph below shows the result, which added significant value to the two flats. Not a large scheme by any means, but certainly very profitable for the clients.
We are currently working on a scheme in Central London where our developer client wants to add six new penthouse apartments on top of an existing mansion block. It has been a challenging project with a significant number of roadblocks to overcome in preparing to take the project on site, including difficulties with mobile telephone mast lease agreements and numerous planning constraints.
The developer has also had to look at creative ways to finance the project – with senior debt finance proving difficult, a joint venture was established with the contractor to help them realise their vision.
Lastly, we have devised a mixed-use commercial and residential scheme for a local authority for how they might use the space above an existing car park. We’re calling the scheme the Peckham Ryeline as we look to fuse the New York Skyline scheme with a car park in Peckham Rye. You can see a sketch of the scheme below.
We have also been exploring much larger schemes too, where supermarkets and local authorities could work together to make much better use of their existing property assets and infrastructure. The potential is huge, but it needs a team capable of exploring all the options creatively. We believe that Architects are very well placed to lead the conversation.
The conclusions we ought to take away from such points are compelling. Offering not only massive development potential for existing buildings and underutilised sites, especially in areas such as London, but also reduced overheads, options for joint ventures between developers and land owners, and the potential to creatively finance such projects, airspace options could arguably be the solution that the construction industry has spent so very long looking for.
If you’re interested in learning more about air rights development and our views on it, the Granit team are running two workshops on this in the autumn. For additional information or to register your interest, please click here.
Alternatively, if you wish to speak with a member of our team, we would also be delighted to hear from you and can be reached on 020 7924 4555.