Some DMZ’ers may have heard the term ‘Airspace Development’ before.
Maybe you feigned knowledge and nodded when it was mentioned at a networking event, “yes, I know it’s based around building in the airspace above properties and it seems really exciting”, praying that no follow up questions would follow.
Well, we sort of feel the same: we understand the basic concept, but it is really a viable investment? How big is the market, what exactly is involved in the development, is financing a nightmare and what does the government have to say?
What exactly is the airspace market?
Airspace development is the use of existing rooftops to create new homes for London and beyond. Whilst there was much anecdotal conjecture on the potential of this market, in 2016 I commissioned the most in-depth study of this market.
It projected that in London alone there was sufficient developable space on London’s rooftops to deliver a minimum of 180,000 homes, worth approximately £54bn.
How did you get into the airspace market?
I was always intrigued as to why more was not done with London’s rooftops, in contrast to other capital cities around the world like Paris and New York, especially given the constraints on new land supply and the cost of new homes.
Accordingly, I decided to test this and in 2013 I bought my first freehold property in Camden which looked like it had additional capacity for an additional floor.
12 months later I had completed my first airspace scheme, which helped solidify my thinking on how best to deliver a true ‘rooftop development’ project.
The scheme was very successful and gave me the confidence to consider scaling the concept. At the end of 2015 I set up Apex Airspace Development with the ambition to grow a business that could deliver up to 300 homes a year.
What is the Apex business model?
Our model is acquiring the rooftop development rights from freeholders on a long-term lease, and turning a liability into a valuable asset.
We then share the newly created value with the freeholder, whilst generating a range of benefits for leaseholders. In our model we de-risk the whole process for freeholders, providing a 360 degree solution.
All of our homes are manufactured offsite in UK factories and delivered to site 95% complete, which minimises disruption to existing building users, shortens project capital cycles, and overcomes labour and quality issues in an already overstretched London market.
What is your biggest success story so far?
I am lucky enough to reflect on a wide range of successes that we have achieved over the past two years, my favourites include:
However, the standout moment for me and the team was the invitation to No.10 Downing street last month to attend a round table discussion on housing, chaired by the Prime Minister.
This was a massive endorsement of our efforts in promotion of the concept of airspace development and the contribution it could make to new housing supply. Personally, as I stood on the steps of No.10, it was a moment of real pride that my vision of 4 years ago was now shared by the PM and the Government.
What are the main challenges you typically face on airspace developments?
There are, like any form of development, a wide range of challenges; legal, construction, structural and financial, that we have had to overcome.
It has been a steep learning curve for us but we consider that we have now a proven delivery model that avoids many of the pitfalls. However, It does bring home to you that every great idea is about 5% of the journey and 95% perseverance, hard work and sleepless nights!
Is it easy to get financing for airspace developments, seeing as it’s such a new market?
We have encountered a range of views from funders on the concept, ranging from ‘not interested’ to others who get the concept immediately and are happy to fund.
There is a the potential for further education on the funding side, not just around the concept but the construction itself too. Offsite construction tips the traditional project approach upside down and investors and lenders have difficulty fitting it into traditional scheme proofing systems.
Can anyone move into this market, do you need any special licenses?
Technically yes anyone can move into this market but there is a steep learning curve and a lead period of at least 18months that needs to be funded.
Over the past 2 years I have invested some £2m to get us to our current position.
What new developments have you got lined up?
We have six projects ready to go worth in the region of £30m that should deliver 82 homes. We have diverse range of clients, from Tesco’s to local councils and major private freehold investors. In addition, we are negotiating on projects that could deliver a further 275 homes or £100m of GDV.
What other London developers do you admire or look up to?
I love innovators across the sector and those seeking to disrupt and create greater choice in the property market. For me, homes aren’t necessarily a product for life but something that reflects a persons life transitions.
Thanks to Arshad for the overview.
If you would like to contact Apex Airspace about development or funding opportunities, contact them here.
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