Could The John Lewis Partnership be joining the Class MA PD rights gold rush? ...
Planning rules have recently been relaxed, allowing you to add flats to the area above existing properties known as the ‘airspace’. This could make existing buildings (that meet the requirements) a potential goldmine.
But how can you make this strategy viable? What red flags do you need to look out for? And what are the hidden insider tips and tricks for commercial property developers and investors?
This article will study the 5 best strategies for commercial airspace conversions influenced by the new permitted development rights and show you how you can build your own airspace pipeline.
🔎What is airspace development?
In simple terms, airspace development refers to building new residential homes in the ‘air-rights’ on the roof of an existing building. Changing rules have led airspace development to become an increasingly popular opportunity for commercial property developers and investors.
The existing building must be a purpose-built block of residential flats.
The building must have been built between 1 July 1948 and 5 March 2018.
The new storeys must be flats.
The 5 best commercial airspace development strategies
Commercial airspace development presents a fantastic opportunity for experienced property developers and investors to create new development opportunities in a cost-effective and profitable way.
Here are the top 5 commercial airspace development strategies that we recommend:
1. Choose the right air space approach
First and foremost, with six different categories of Airspace Development under Permitted Development, you need to select the right strategy that will add the most value.
Essentially, you can knock down old buildings to build new ones with additional floors or simply add stories to an existing building.
Here’s a quick summary of the six permitted development approaches:
Class ZA – Demolition & construction of new flats
Class A – Detached blocks of flats
Class AA – Flats on detached commercial
Class AB – Flats on terraced commercial
Class AC – Flats on terraced houses
Class AD – Flats on detached houses
2. Identify low-rise residential blocks
We tend to find that the best opportunities are within urban areas with good transport links. Look for residential blocks that are at least three storeys (including the ground floor).
The reason these types of buildings are ideal for airspace development is that residential blocks are often designed with enough strength to support additional storeys. In addition, they often have car parking. Look for between 2-12 units to keep it under the affordable housing limits.
3. Consider the use of offsite manufacturing (OSM)
Offsite manufacturing or OSM is a brilliant way to build on your airspace. Essentially, it refers to structures or components built at a different location than the location of use.
This helps to improve both quality and speed of development, all while de-risking the construction process. In addition, there’re often fewer tradespeople on-site and less disruption to existing tenants. It’s also far more sustainable than traditional methods.
4. Make sure you gain the right access
Gaining the right access on-site is key for airspace developments. Consider access for cranes and scaffolding. You might also need site cabins or offices, and storage for materials.
It’s also key to get existing tenants on the right side from the start and regularly keep them updated on development progress as maintaining a good relationship will help to make development easier for you.
5. Look for buildings with flat roofs
Finally, for obvious reasons, a flat roof is essential for airspace builds. It’s also key to look out for buildings that are shorter than what’s directly next door. This means you can build in the airspace with fewer issues raised from neighbouring properties.
Now that we know which approaches are worth considering, let’s take a look at a complete workflow for airspace development.
How to approach an airspace development: A complete workflow
🚩Red flags to look out for
While airspace can prove to be a highly profitable opportunity, there are a few red flags to look out for when choosing sites to develop.
A thorough roof examination will need to be done in person - or through drone roof surveyor services to examine any issues such as:
Telecommunication masts - this is a major one, and it’s incredibly hard to work around. So if you do find a telecommunication mast, unfortunately, this can often mean it's a no-go from the outset.
Utility cupboards - we can move these, however, this could cause issues for current tenants. Building a rapport with existing tenants from the outset will especially help here.
Materials that might signify the roof is used by the tenants - this one could be discussed with the tenants depending on usage.
Light shafts - this is a key one, as it might be impossible to move it to a more suitable place.
Surface water drainage systems - this could cause issues and be quite costly to workaround.
Lift shafts - this can also cause issues - as you can imagine, moving a lift is an incredibly expensive undertaking.
Next, let’s look at some of the key challenges you might run into.
Airspace key challenges checklist
While these might not necessarily kill a deal (like the red flags above), they do need careful consideration:
Pipeline: It’s taken some time for freeholders to understand it and want to get involved.
Structural support: A structural engineer will need to check the load-bearing abilities of the building. The process is pretty straightforward once you know what you’re building.
Access: The development will more than likely need a crane to get the materials onto the roof. This could occur over-sail costs.
Negotiating possession: This is where leases and ownership come into play. It’s super important that your solicitor is able to find out whether the airspace can be sold by the freeholder.
Existing leases: These need to be thoroughly inspected to check what rights the tenants have.
Rights for light: Make sure the development is not going to block the light of adjoining properties.
Leaseholders and section 5’s: This means the freeholders are given two months to potentially buy the airspace.
Costs: Last but not least, you need to clearly understand the build costs, including understanding any uncertainties and have a general rule of thumb for the building costs. Also, don’t forget CIL and S106 costs.
How to build your airspace pipeline
Of course, actually finding these sites is one of the main challenges. This is where tools like Nimbus Maps come in.
Nimbus Maps can quickly and easily identify off-market airspace opportunities in your target areas. You can specifically overlay the Class A PD rights on the map to instantly see opportunities you might otherwise have missed. It shows ownership and even gives you indicative pricing.
You can even dive deeper into the data to uncover key information, such as the number of flats, when it was first sold, the square foot of the roof space, who the owner is, and the ownership type.
In addition, you can download titles straight away and easily get in touch with the owners by automating the sending of letters.
Some airspace opportunities are actually super easy to unlock, but generally, people in the marketplace perceive them as difficult. This means that developers acting now can seize the opportunity to scoop up low-hanging fruit.
As a final note, it’s really important to have a ‘power team’ supporting you with this type of development. You’ll need solicitors that specialise in airspace, structural engineers familiar with OSM, planning consultants that have done airspace PD and funders that understand airspace and OSM.
To find out more explore our Land and Airspace package now.