Air Rights: Is Your Property Sitting Under a Gold Mine?
Article | 3min read
by JONES REAL ESTATE on November 02, 2023
Could the air above you be more expensive than the ground you’re standing on? For low and medium-rise commercial real estate owners, this may well be the case in the next few years.
Purchasing the air rights above buildings has become an increasingly important consideration for developers and office owners, as it safeguards future development potential. It can also significantly increase the value of your property asset.
What are air rights and why are they important?
As the name suggests, air rights are the legal ownership of the airspace situated above a property or piece of land. These can be obtained by different parties, depending on what the property title and Plan of Subdivision states.
Air rights owners are entitled to use and profit from these often-unoccupied areas via different means, such as adding to existing buildings to increase capacity, or by integrating new structures for critical infrastructure that underpin resources like telecommunications.
For asset owners, obtaining air rights provides an opportunity to on-sell them to another interested party, like a developer looking to stockpile space for their project pipeline.
Why air rights values could go through the roof
Right now, the significance and future investment potential of air rights ownership in the CBD commercial building arena cannot be understated.
In Victoria specifically, we’ve reached a point where declining development approvals, coupled with reduced construction rates, have not kept pace with the volume of new housing needed for our population growth and immigration levels.
These pressures are prompting conversations among councils, the private sector, and peak industry bodies around potentially repurposing vacant low-rise office stock into apartments, which according to the PCA could create 12,000 new homes in Melbourne.
However, with over two-million new residents forecast to call Victoria home by 2041 (an increase of 30 per cent), an intense period of development is required to accommodate for this growth. And instead of adding to Melbourne’s urban sprawl, many experts predict this new wave of properties will be built on top of existing CBD buildings.
As such, ownership of airspace above established city buildings should attract a flurry of investment activity, presenting opportunities for the well-established private sector and institutional corporations.
Purchasing air rights in Australia
A recent example of the sales potential enjoyed by air rights occurred in 2017, whereby developer and landlord Dexus sold the air rights above its ‘The Glen’ shopping centre in Melbourne’s south east to Chinese developer Golden Age Group for $70 million.
Through this deal, which stands as Australia’s largest ever air rights transaction, Golden Age Group went on to build a $450 million three-tower luxury residential development called SkyGarden directly above the new shopping destination.
This landmark property deal was not without its due diligence, and we strongly encourage asset owners to do their research and obtain expert legal guidance before making any major decisions regarding purchasing or selling air rights.
If you would like to learn more about air rights, or would like to discuss a separate property matter, please reach out to us at firstname.lastname@example.org.