Use Airspace Development Finance to Build Above Existing Structures
Airspace development loans can help you finance the development of property that sits about existing residential and commercial buildings.
If you have at least 3 storeys of an existing building, you may be able to build extensively above this and rent this out to tenants and also increase the value of the property.
Octagon Capital can help facilitate airspace financing from £1 million and above to pay for construction costs, renovation costs and the funds are released in stages.
We can offer funding in a matter of weeks. Simply give us a call today or tell your requirements using the form provided.
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- Borrow £1 million to £25 million
- Loan term of 3 to 24 months
- Covers all construction and renovation costs
- Covers all architect and engineer fees
- Residential and commercial properties
- Available in UK, Scotland and Wales
What is Airspace Development?
Airspace development is an exciting opportunity to build above existing structures and potentially add extra floors to a building. In very popular areas such as London and Manchester where there is a limited supply of property, the potential to add new storeys is very attractive.
The emergence of building into airspace has come after a change in regulation in August 2020 by the UK government which means that landlords and property owners do not require planning permission to build into airspace, provided that they meet certain criteria.
With airspace development loans with our partner at KP Finance, you can have all your construction and renovation costs covered – and this could be used to build additional flats, offices, penthouses, rooftops, gyms and more.
We Cover:
- New builds
- Renovations
- Extensions and conversions
- Part builds
- Residential property
- Commercial property
- Schools
- Council buildings
- Car parks
- Stadiums
- Garages
- Warehouses
- Event venues
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Airspace Development Finance Example
A developer wishes to add 3 storeys to an existing property in London and borrows £2 million over 24 months. All construction costs and fees are covered in this loan and funds are released in stages. At a monthly interest of 0.44% for £2 million, they are charged £8,800 per month and the total interest over 24 months is £211,200. The total repayment is £2,211,200.
Other associated fees include arrangement fee (£20,000-£40,000), broker fee (£5,000-£20,000), valuation fee (£2,000-£5,000), legal fee (£5,000-£15,000) and early exit fee, if applicable (up to £40,000).
What Are The Pros?
The biggest advantage of airspace development is that there is no planning permission assuming you meet the necessary criteria and take all other tenancy and neighbour issues into consideration.
Airspace development loans can be tailored to each project and quite flexible. With the funds released in stages, they can help with cost management and cash flow and all construction and renovation costs are covered as part of the loan.
The decision to make airspace development without planning permission and with permitted development rights has been received with huge optimism in the UK and many believe that it could even solve the UK’s housing crisis.
What Are The Cons?
One has to be sensitive when dealing with local neighbours and existing tenants. The potential noise and interruption on the street may not be well received by those around you. When it comes to carrying out the work, there may be disruptions given that a lot of airspace development happens on narrow roads in the middle of cities such as London. You may find that you have to add roadworks to the street in order to work on things like water and electricity and these are not always straightforward.
With any construction work, one has to be conscious about any set backs and time delays. This can be costly and your loan could incur late fees starting from 1% per month.
What Is The Criteria For Airspace Development?
To avoid planning permission, the building must be:
- Three storeys or more in height
- The extended building must be more than 30 metres in total height
- The height of the extension cannot be greater than seven meters compared to the highest part of the existing roof.
- Any new storeys must be individually no more than three meters in height.
How Much Can You Borrow With Airspace Property Development Financing
- We offer airspace loans starting from £1 million up to £25 million
- All construction and renovation costs are covered
- All engineer and architect costs are covered
Within the construction costs including materials, labour, finishes, electrics, plumbing, skirting, joinery, timber, interiors and more.
What Are The Costs Associated with Airspace Development Finance?
- There is typically a commitment fee of 2% and a potential 2% broker fee
- Your surveyor or solicitor could charge a valuation (up to £5,000) or administrative fee
- Interest rates vary but typically are from 0.44% to 1% per month
- Early exit fees of 1% may apply if you end the loan before its maturity
- Default fee of 1% for late repayment and the existing rate (such as 1% per month) will continue until loan is cleared
- Account review of 1% may apply if loan is overdue
What Can I Use Airspace Development Loans For?
Residential
Add extra floors to your existing property or rent these out to tenants in the building. Not only could you add more rooms and floors, but amenities they might enjoy such as gyms, meeting rooms or breakout areas.
Commercial
For offices, shops or parades, you could add more tenants with extra storeys to your commercial building. More amenities could be added too in terms of meeting rooms, bike storage, fitness suites, rooftop bar or breakout areas.
Hotels
Add extra floors to your hotel or BnB and add more guests or rooms to your existing property. Overall you could increase the value of the property significantly.
What is The Criteria To Be Accepted?
Octagon Capital can provide an initial quote in less than 24 hours, but first we need some key information about your property and your plans for it. Above all, having a clear understanding of costs, financials and an exit strategy is essential to being approved. At the end of the loan term, whether you wish to refinance, get a new mortgage or use existing income from the business to pay it off, it is important to have this prepared from day one.
To apply and proceed with your loan enquiry, we require:
- Full address
- Property valuation
- Your plans for the property and exit strategy
- Construction costs and budget forecast
- Architectural designs
- Financial records and statements
- Proof of funds
- Personal credit reports (subject to applying)
- Business plans
Airspace Development Finance FAQs
Airspace development finance provides you with the funds to pay for all construction work to build into your airspace – which is above your existing property. The purposefully structured loan is designed to assist with all elements of your project, including the releasing of stages and repayment terms.
For property owners, airspace developments offers a great opportunity to add more floors and rooms to their buildings, making the property more valuable, especially in built up areas and generate more income through rent or by selling the overall property.
Your repayments are based on monthly interest at around 1% per month and this is typically rolled up and paid at the end of the loan term upon exit. This could be through selling off the property for a higher fee or refinancing.
The UK law says that you can build up to a reasonable height and this may vary between local authorities, with some allowing a maximum of 500 feet and others as high as 1,000 feet.
A successful loan can usually be transferred within 2 to 4 weeks of approval and funds are usually distributed in stages or tranches, rather than one lump sum. This is to help manage the cash flow of the project and the building costs from overrunning.
Depending on the complexity of the project, funding may be faster or slower.
No, we are a broker for bridging loans and other products such as development and mezzanine finance. We will be delighted to take your enquiry today, better understand your requirements and liaise with our specialist partners at KP Finance.
Start by entering your details into the form provided by Octagon Capital above and one of our advisors will come back to you with more information. The more you can provide about your property, the more feedback we can provide and we can usually provide initial quotes on the same day you apply.
Speak To Our Expert Team
Octagon Capital is made up of an experienced team of associates. We are approachable, customer-focused and results driven – contact us today to see how we could help with your next property financing solution. Find out more about us here.
Amadeus Wilson
Frank Clarke
Dan Morris
