Air Rights Appraisal

[B A Hoffman]

A colleague has asked me to ask if anyone has a formula for appraising Air Rights. This will be only the 3rd type of ownership in our city. No comps here. Any help appreciated.

 

[Meandering]

New York City.

Check with CGs there.

.

 

[Pittsburgh Pete]

there is no "formula" per se. AI has some good articles on appraising air rights.

 

[Lost Cause]

Here in NYC where they are commonly traded, they are valued by Sales Comparison. I doubt that will be of much use in (I presume) Huntsville.

One could consider the value of the air rights to the owner of the receiving site. How would the additional potential space impact the value of the receiving site? The value to the receiving site is one way to begin objectively quantifying those air rights.

We are seeing air rights valued as much as $600/SF in many Manhattan locations these days.

 

[PL1957]

You could always do a "land" residual based on development potential/plans ...

 

[Kali the Boston Terrier]

You could always do a "land" residual based on development potential/plans ...

That is what I have always done, usually the air rights = the lost development potential. Its probably not quite fair to compare it to what it adds to another property...but rather what the property selling them loses...although I could see how it might be valuable to the buyer, and supply and demand might push the price tag higher than the loss to the other property.

 

[Lost Cause]

That is what I have always done, usually the air rights = the lost development potential. Its probably not quite fair to compare it to what it adds to another property...but rather what the property selling them loses...although I could see how it might be valuable to the buyer, and supply and demand might push the price tag higher than the loss to the other property.

My experience with air rights is limited to NYC where they are common. So common that there is sufficient market data to use sales comparison to value them. Residual techniques are not typically required.

That said, I have to question your point. On virtually all of the air rights sales I've examined, the selling property generally cannot use them at all. Therefore the "lost development potential" is nil. But that doesn't mean there's no value there. The value to the receiving site is clear and can be calculated.

 

[GregoryK]

Many years ago, a friend had the "opportunity" to appraise the estate of an enterprising gentleman that purchased the rights over various properties in Chicago. At the time, everyone thought the deceased gentleman was crazy, and would sell the air above their businesses for a song. Check around with the appraisers who work in downtown Chicago or New York. I am sure there are rights traded, especially in areas being redeveloped with taller buildings. I wish I could remember who it was that had that assignment,

 

[Kali the Boston Terrier]

My experience with air rights is limited to NYC where they are common. So common that there is sufficient market data to use sales comparison to value them. Residual techniques are not typically required.

That said, I have to question your point. On virtually all of the air rights sales I've examined, the selling property generally cannot use them at all. Therefore the "lost development potential" is nil. But that doesn't mean there's no value there. The value to the receiving site is clear and can be calculated.

I usually see them for facade easements, in which there is a considerable use to the seller, but would rather donate them and get a huge writeoff.

 

[Pamela Bukys]

It may be that it is similar to a "taking". As PL1957 mentions it could be a "land" residual problem. The FAA required increases to the runway protection zones at smaller airports a number of years ago. I was involved in appraising some agricultural land that fell within the new zone. The taking precluded building or growing anything higher than 5 foot.

What is the property currently used for and how much of air is impacted?