Real Estate: The Big Air Grab

With vacant lots all but gone in the downtown areas of many big cities, more and more land-starved developers are literally buying up thin air. The technique is to acquire the right to use the open space over such low-slung installations as roadways, railroad yards and schools, and to fill that space with new buildings. In fact, many of the most dramatic real estate deals in recent years have involved not parcels of land but the so-called "air rights" above them.

The result is a wave of construction projects resembling so many concrete-and-steel layer cakes. Manhattan's new Madison Square Garden is part of a development built on air rights atop Penn Station. Chicago's four-year-old circular Marina City apartment complex, already a city landmark, is built above the tracks of the Chicago and North Western Railway. In Newton, Mass., work began this month on a $40 million development—consisting, to start with, of a motel, a nine-story office building and a 650-car garage—that will straddle the bustling Massachusetts Turnpike.

Fifth-floor Cellar. There is little that is new about the use of air rights for construction; the idea got its first boost in the early 1900s, when railroads realized that there was gold in the sky above their facilities. In Manhattan, the New York Central began leasing air rights over its tracks running north from Grand Central Station. Today, many of Park Avenue's most spectacular glass-and-steel office buildings occupy railroad airspace; also over the tracks is the Waldorf-Astoria Hotel, which, without a basement, keeps its wine cellar on the fifth floor. The 59-story Pan Am Building, which was built five years ago with an 80-year air-rights lease that could bring the railroad a total of $100 million, stands atop Grand Central itself; last February, the newly merged Penn Central Railroad signed an even more lucrative agreement for a companion building that will rise above the terminal.

In Chicago, the 38-year-old Merchandise Mart, the world's largest commercial building, occupies air rights over the former site of the Chicago and North Western terminal. As a national rail hub, Chicago now figures to get a major face lifting because of newer airspace projects. The biggest beneficiary is likely to be the Illinois Central Railroad, which owns air rights above its tracks and right-of-way along Lake Michigan worth at least $185 million. Two of the most imposing structures on the Chicago skyline, the 41-story Prudential Building and the 40-story Outer Drive East apartment building, have already been built on air rights sold by the I.C.