Facing intensely competitive market conditions, the UK’s big retailers are reported to be increasingly focused on ‘sweating’ their property portfolios.

With Tesco apparently leading the charge, one route being explored with growing enthusiasm is vertical development and capitalisation of the so-called ‘airspace’ above existing stores and other buildings. That is said to have potentially major consequences for the prefabricated timberframe sector.

A leading developer in the field is Apex Airspace Development, which was recently reported by the Sunday Telegraph as in talks with Tesco on its upward extension plans. It sees this market expanding exponentially in coming years.

“The growing desire for retailers to capitalise on their property, while retaining ownership, is coinciding with advances in modular, prefabricated construction systems. So we’ve got an increasingly virtuous circle,” said Apex’s business development director Val Bagnall.

“We also see strong prospects for airspace construction in other areas of business and industry and in the public sector.”

The key criteria for airspace construction systems is that they are lightweight, quick-build, robust and scalable. Timberbased solutions tick all these boxes, said Mr Bagnall.

“Steel-frame is also an option we use, but we see it as a huge opportunity for the pre-fabricated timber construction industry and we’re talking to half a dozen companies so we have a sufficient supply chain. This includes both closed timber frame panel, cross laminated timber- and SIP-based systems providers.”

APEX Airspace started as a property development and management business. It then moved initially into smaller-scale airspace development, using modular pod systems to convert attic spaces, and then larger projects. TTJ formerly reported on one of these projects, using timber frame modules, on a high-end London town house neighbouring the Albert Hall.

“This sort of development particularly lends itself to urban centres, where you are often working in a confined space, need to build quickly and cause minimal disturbance, to neighbouring properties,” said Mr Bagnall. “With modular attic and airspace development, you minimise materials delivery and mainly use mobile cranes for erection. It’s also ideal for retailers as they can continue trading in the store below as we add the new building.”

In an Apex project, the company generally acquires the leasehold of the airspace above a building, develops a one or more storey residential and potentially commercial property in the space, then sells or leases it.

“It’s a win-win for all concerned,” said Mr Bagnall. “The freehold owner gets the value of their airspace and more ground rent generated from the new homes. They may also see improvements to the general kerb appeal of their asset, and no longer need worry about roof maintenance.”

The Apex upward extension approach is also tailored to the original property owner’s requirements. It can work with a preferred architect or building contractor, but generally provides the complete turnkey service, managing design, planning and construction. The construction process entails first readying the roof of the building below, then fixing a ring beam on the existing structure, using timber, glulam or other materials as the property dictates, to receive the offsiteproduced modular floor or floors above.

“Depending on the scale of the project, we can go from construction start to finish in six to eight weeks,” said Mr Bagnall. The value of airspace property can be impressive, especially in city centres. “We estimate the value of the roof on a building close to our office in Baker Street alone at £17m,” said Mr Bagnall.

Local authority medium to high-rise housing and municipal premises are seen as further prime opportunities for residential development. Building in their air space, would increase housing stock in the authority’s area directly and provide additional income to build further social developments.

“We’re talking to a number of interested London boroughs and a survey we commissioned concludes that 60,000 new homes, with a value of £20bn, could be built on municipal and housing association properties across the capital,” said Mr Bagnall.

“It could be a key part of the solution for the UK’s housing shortage.”

He added that timber frame housing airspace developments could prove particularly attractive to environmentally minded local authorities due to their minimal carbon footprint in manufacture and construction and low energy performance in use, although said that these factors also appealed in the private sector.

Apex Airspace itself is aiming for 200-300 developments a year and is clearly excited about wider market possibilities.

“Our survey showed that a total of 179,000 new homes, worth £54bn, could be built right now through airspace construction in London,” said Mr Bagnall. “Extrapolate that across the UK and market size is substantial.”

He added that Apex Airspace’s conversation with Tesco “is developing”.