Air rights are a big thing in NYC. Allowing a developer to build bigger (and typically higher) than permitted as-of-right, air rights purchases from adjacent buildings are the next best thing to buying empty land. Since most air rights (the exceptions and convolutions are a post of their own) are transferable only to adjacent buildings, the market for such sales are limited. If your neighbors don't want to buy any excess SF that your property may have, then there is zero market for those SF and they have zero value. It is this kind of math that has kept air rights valued at 50-70% of the equivalent land value.
As we can read in the Full Story below, this is different in Chelsea.
When NYC created the special West Chelsea Zoning District in 2005, the intent was to use the Highline as a point of focus. It was written into the zoning code that unused development rights adjacent to the Highline could be transferred to just about anywhere else in the special district. This would encourage development and preserve the light, air and focal element that the Highline has become.
What it also does, is create a market for air rights that is no longer dependent on whether or not your neighbor wants to buy. By making the air rights more fungible, it also makes them more valuable.
Which is why Sherwood equities can offer their air rights for $500/SF- basically the full cost of land in NYC. In doing so, they can expect to pocket $9.6M or $2.3M more than they paid for the unfinished 4 story shell currently on the site.
All in all, a very smart move by Sherwood that makes for an unusual NYC real estate play- making great deal of money by NOT building something.
Labels: air rights, Chelsea, highline, Sherwood Equities