Airspace Alchemy: Turning Unused Space into Revenue!
The area under a freeway might look like useless real estate, but to the District 7 Airspace team, itâ€™s a revenue stream waiting to be tapped.
If you’ve ever looked at the space under your bed and decided it would be a great place to store shoes, hide holiday presents or stash reading material, you already know something about airspace leasing. In essence, you’re finding a function for unused space and benefiting from it. The Caltrans Airspace Program does basically the same thing, except instead of stashing shoes under a bed, it puts parking lots under freeways.
The District 7 Airspace and Telecommunications Licensing Program, simply known as Airspace, is within the Division of Right of Way. Don’t let the name fool you: airspace is about terra firma, although the associated air is part of the package. An airspace lease site is any property within the right of way of an existing highway or freeway that can be developed without impacting the transportation use. Airspace doesn’t include property that Caltrans is holding for a future project.
District 7 has 134 airspace lease sites, many of them under the Santa Monica Freeway (I-10). The sites have wildly varying uses – everything from parking lots and storage units to a drug rehabilitation center and a garment manufacturer. What they all have in common is that they provide valuable revenue with little overhead.
“The Airspace Program makes a lot of money for the department,” said Senior Right of Way Agent Paul LaMond, who heads up the five-person team that manages the District’s Airspace Program. “We brought in $7.3 million in the last fiscal year, with $1.3 million of that total coming from 52 cell tower sites.”
Reasons to Love Cell Towers
In the airspace world, cell tower sites are the cream of the crop – no-muss, no-fuss sites that generate substantial income. A storage facility, for example, has to be inspected yearly, as is true of all airspace lease sites. The inspection often means Airspace staff must open hundreds of units, inspect the contents and confiscate anything hazardous, like jugs of gasoline. It’s time-consuming, labor-intensive work. Other sites may require periodic trash removal. But with a cell site, there’s nothing to open, confiscate or clean up.
“We really don’t have to do much to maintain these sites, and they bring in $22,000 to $31,000 a year per site,” said LaMond. It’s a really good program with a lot of potential.”
Going Once, Going Twice …
District 7’s Airspace Program is among the most robust in California, second only to District 4’s as measured by revenue produced. Available airspace sites are appraised and then leased to the highest bidder at an airspace auction, usually held twice a year, at District 7 Headquarters. Most lease terms are five years and contain a rarely used escape clause that allows Caltrans to terminate the lease if the district needs the property. A few tenants with highly developed sites – typically those with buildings on them – have longer leases, up to 50 years.
In some cases, Caltrans enters into a direct lease with a business or organization. These tend to be sites that would be valuable only to the business requesting the lease, for example, a small section of right of way next to a building that the owner would like to use for storing equipment.
How Space Becomes Airspace
Currently, almost all potential airspace lease sites have been developed, although new sights are occasionally identified. Often this happens when District 7 determines it no longer needs right-of-way space that it was using for another purpose, say, parking construction vehicles. Four new sites have been added to District 7’s inventory in the current fiscal year, all of them parking lots under I-10.
Before a new airspace site can be leased, it must be approved by the District Airspace Review Committee (DARC), a group made up of representatives from several Caltrans divisions. DARC reviews the airspace proposal to ensure that leasing the site won’t adversely affect safety or traffic operations. Headquarters and the Federal Highway Administration also must sign off before the site is added to the airspace inventory. And then, perhaps, a parking lot is born.
For LaMond and his team, airspace leasing is about more than parking lots, cell towers and revenue streams. Much of their day-to-day work focuses on managing relationships with renters – the people who were able to look at a charmless tract of land under a freeway and see a business opportunity.
“We have to collect the payments, and after a while, you develop a personal relationship with the tenants, you get to know them,” he said. “That can be very satisfying.”