Outlots in the sky!

Posted on June 07, 2010 by Tadd Miller

mixed-use-sky-300x225When we started working on one of our first mixed use development plans in the late 1990’s, one of the CEO’s we were in discussions with said “it is great being able to sell extra outlots in the sky!” Conceptually this is true, however, he internally and immediately put a price tag on it at the same price as the grade level frontage outlots, ran his proforma that way, then was extremely disappointed when the air rights couldn’t meet his proforma. Don’t lie to yourself, there is value in the air rights, but it must be weighed by:

  • Efficiency/Construction Costs – Remember that compared to suburban walk up without double corridor hallways, vertical shafts, etc. depleting value by these increased construction costs
  • Visibility/Views – Rarely have I seen a site that has good visibility in comparison to the frontage outlots, and if so, the views from it disintegrate as it looks over parking
  • Access – Elevators, stairwells, etc., are all space eaters and value degenerates, lowering the value in comparison to any grade level outlot
  • Use – Retail is rarely a marketable use on the 2nd floor and above, and residential is typically lower valuations
  • Complexity Costs – Legal, accounting, survey, as built surveys, etc.

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