Oct 255 min read

Investing in Air Rights: A New Frontier in Real Estate Wealth

As the world becomes more vertical with skyscrapers, drone deliveries, and even air taxis, a new type of real estate investment is gaining traction: air rights. These refer to the legal control, purchase, or leasing of the space above a property. Historically, air rights were primarily used by developers to build taller buildings in dense urban areas like New York City. But with the rise of technologies such as urban air mobility (UAM) and drone logistics, air rights are evolving into a highly valuable, standalone investment opportunity.

For investors looking to diversify their portfolios, investing in air rights offers an exciting chance to get ahead of a rapidly growing market. Whether you’re considering adding air rights to your portfolio through self-directed IRAs (SDIRAs), exchange-traded funds (ETFs), or mutual funds, understanding the opportunities in this emerging market is key.

Bob Waun, co-founder of DIRT Realty, sees this as a natural evolution of real estate investment. “Investors need to start thinking beyond just land and buildings. Airspace is the next big frontier in real estate, and owning air rights, whether through direct ownership or a fund, could deliver significant returns in the coming years.”

Why Invest in Air Rights?

Air rights offer several compelling reasons to become part of your investment strategy, especially as cities become more vertical and technology reshapes how we use the skies. Here are some key factors driving the value of air rights:

Limited Supply in Urban Areas: In dense cities like New York, Los Angeles, and Miami, space is limited, and air rights allow developers to build upward. As urbanization continues, the demand for vertical space will only increase, making air rights more valuable.
Drone Delivery and Air Mobility: With companies like Amazon and Uber investing in drone delivery systemsand air taxis, airspace is becoming essential for future transportation infrastructure. Air rights over buildings that could host drone landing pads or air taxi routes will see substantial value increases.
Sustainable Urban Growth: Cities are looking for ways to grow sustainably. By using air rights to allow for vertical development and new transportation networks, governments and businesses are incentivizing the use of airspace in a way that creates long-term value.

"Air rights aren't just for developers anymore," says Waun. "With drones and air taxis on the rise, the skies above our cities will be just as valuable as the ground beneath them. Investors who get in early stand to benefit as this market grows."

How to Invest in Air Rights

There are a few ways to start investing in air rights, depending on your risk tolerance, investment goals, and financial strategy. Here’s a look at the various options available:

1. Direct Purchase of Air Rights

If you’re interested in purchasing air rights directly, your best bet is to focus on properties in major urban markets where vertical space is limited and highly valuable. In cities like New York City, Chicago, and San Francisco, developers routinely buy and sell air rights to construct taller buildings. Buying air rights over a property with future potential—whether for development, drone corridors, or air taxis—could deliver substantial returns.

“Investors in direct air rights need to think long-term,” explains Waun. “The value of air rights may not be fully realized for a few years, but as urban air mobility expands, you’ll be ahead of the curve in a market with limited supply.”

You’ll need to work with a knowledgeable real estate broker or attorney familiar with air rights transactions, as the process can be complex due to zoning laws, property boundaries, and other regulatory hurdles.

2. Investing in Air Rights via Real Estate Funds

While directly purchasing air rights may require significant capital and expertise, investors can also explore real estate funds that focus on air rights or urban development projects that integrate them. These funds often pool investor money to purchase air rights and other real estate assets, offering a more diversified and lower-risk entry into the market.

Unfortunately, as of now, there are no specific ETFs or mutual funds solely dedicated to air rights. However, many real estate investment trusts (REITs), particularly those focused on urban real estate development, could indirectly expose you to air rights. Some REITs, especially those investing in high-density cities, may acquire air rights as part of their property portfolio.

ETFs like the iShares U.S. Real Estate ETF (IYR) or the Vanguard Real Estate ETF (VNQ) hold a variety of real estate assets, and while they do not explicitly focus on air rights, their exposure to urban real estate and large-scale developments could include investments in this area.

Waun believes that as air rights become more mainstream, we may see funds dedicated to this specific asset class. "I wouldn’t be surprised if we start seeing ETFs or REITs focused on airspace investments in the next few years," he says. "The demand is there, and the technology is moving fast enough to create value in this market."

3. Using a Self-Directed IRA (SDIRA) to Invest in Air Rights

One exciting option for individuals looking to invest in air rights is through a self-directed IRA (SDIRA). Unlike traditional IRAs, which typically limit your investment options to stocks, bonds, and mutual funds, an SDIRA allows you to invest in alternative assets such as real estate, private businesses, and even air rights.

For investors interested in air rights, an SDIRA can be an excellent way to gain exposure to this growing market without relying solely on publicly traded assets. By purchasing air rights or investing in real estate projects that incorporate air rights, you can potentially diversify your retirement portfolio with an asset class that has strong growth potential.

"Air rights are a perfect fit for SDIRAs," says Waun. "They offer long-term growth potential and can complement other real estate holdings in a retirement portfolio. Plus, you get the flexibility to invest in emerging technologies like drones and air taxis, which traditional IRAs don’t offer."

You’ll need to work with an SDIRA custodian who can guide you through the process of investing in air rights. uDirectIRA is a leading provider of SDIRA services and can help you navigate the complexities of alternative investments in real estate.

The Future of Air Rights Investments

As urban air mobility, drone delivery, and sustainable vertical growth become more prevalent, the value of air rights will continue to rise. Globally, cities like Dubai, Shenzhen, and Singapore are already leading the charge in monetizing their airspace, and the U.S. is quickly catching up.

According to a report by Morgan Stanley, the global urban air mobility market could exceed $12 billion by 2030, and this growth will drive up the value of air rights in cities and rural areas alike. The rise of drone technology and air taxi services will create demand for rooftop drone hubs, charging stations, and flight corridors, transforming the value of the skies above our cities.

“For investors looking for the next big thing in real estate, air rights are where you want to be,” Waun concludes. “The demand for vertical space is growing, and the technologies that will use that space—drones, air taxis, even green energy—are moving fast. Now is the time to explore this new frontier.”