Air rights development : is it different from traditional land development?

Abstract

The availability of large desirable urban development sites continues to diminish. Air rights development is an innovative way for real estate entrepreneurs to create space for developing large-scale projects. Because a portion of these projects are constructed on air, one would expect the deal structure for an air rights developments to be dramatically different from those used for traditional land developments. This paper examines the how the general development issues - ownership, financing and taxation - are structured for air rights developments. Generic air rights development issues and resolution are identified. These finding are then used as the base for in-depth analysis of three existing air rights developments completed in the Boston area. Each development contains unique components as a result of the different individual characteristics of every real estate project, however, the ownership, financing and taxation components of these deals were structured similarly. This study supported the conclusion that air rights development has little affect on the deal structuring of large-scale real estate developments.