Finance of the fallow firmament : valuing air rights in contemporary Manhattan

Abstract

Two tall residential towers in midtown Manhattan were under construction in 2014, prominently setting records for both height and for the early sale prices of their condominium units. These are to be followed in the next several years by at least five more such luxury skyscrapers in the same district. This phenomenon has renewed public interest in the use of air rights in New York City. Despite widespread media attention and studies by community groups, examination of transferable development rights usage in New York has not included the application of rigorous financial analysis. This paper first provides a comprehensive account of the history of various forms of air rights in New York City, particularly chronicling how such air rights have developed and changed over time to the present day. Following on this understanding, and using these two recently-constructed residential towers as examples, this paper provides detailed narratives describing how these projects assembled their development rights, and how this spatial envelope was used. The paper concludes with a canonical comparison of the acquisition prices of these development rights with their final sales prices and a regression of the price on floor height and size.