‘Air rights’ worth big bucks for Sydney real estate

A newly completed 33-storey tower in Martin Place that leans over the next door St Stephen’s Church.
A newly completed 33-storey tower in Martin Place that leans over the next door St Stephen’s Church.

The sky is no longer the limit when it comes to Sydney real estate – property owners in the CBD are making millions selling air.

Thousands of square metres of air space has sold in the past year alone, with developers last week putting the finishing touches on a $1 billion project in Martin Place involving a pricey patch of sky.

The 33-storey building curves above the neighbouring heritage-listed church because the developers purchased the air rights above it for an undisclosed sum local agents said could be in the millions.

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Completion of the project came hot on the heels of a $20 million purchase of the air rights above the 200-year-old heritage listed Hyde Park Barracks.

Private developers, including Lendlease, bought more than 12,000 square metres of the barracks air space for up to $1500 per square metre.

The air rights for Hyde Park Barracks were sold earlier this year.

The City of Sydney is hoping to sell another 38,000 square metres of air – or transferable heritage space – which includes Qantas House, a heritage building on Hunter St.

The NSW government got $50 million for the air space above the entrance of the Wynyard walk near Wynyard train station in late 2017.

CI Australia selling agent Andrew Hunter says demand for the space “came from everywhere”, including overseas developers.

The government also received $355 million from Macquarie Group for the air rights above the new Martin Place metro station development.

The empty skies above these properties have become valuable commodities because they offer developers a way to increase the size of their buildings in a cramped CBD running out of space.

By purchasing the air rights, a developer can bank the space and transfer it to another building through the City of Sydney’s transferable heritage space scheme.

Planning Law Solutions lawyer Michael Mantei says obtaining the rights helped developers construct bigger buildings than planning controls would otherwise allow.

“Essentially the heritage sites are selling an opportunity for developers to go from, say, 40-storeys to 50-storeys … and as land values go up, so do air rights,” Mr Mantei said.

He adds air right sales will preserve the CBD.

The air rights above the redevelopment of Martin Place were also worth millions.

“There is a value on potential floor space in the same way there is a value in land. It compensates heritage owners for not developing sites and gives them funds to restore buildings,” he says.

Investa commercial development head Mark Tait, part of the property group behind the curved Martin Place development, says air rights add to the commercial return of the building.

“Office floorplates at Sixty Martin Place enjoy more natural light and better views,” he says.

A City of Sydney spokesperson says air rights arrangements are similar to a scheme in New York and are providing a “financial basis for good conservation practice”.

Air space purchasers have included US President Donald Trump, who acquired the air rights above seven low rise buildings surrounding Trump World Tower in New York to ensure the views were unobstructed.

Sydney developers have been known to employ similar tactics to ensure their prized Harbour views remain intact.

This article from The Daily Telegraph originally appeared as “Battle of the skies: developers are paying millions for Sydney air”.