An underbuilt property, also known as an underutilized property, is one where the existing building is built to significantly less than what the zoning allows, leaving unused development rights on the lot

In NYC, when a property is called underbuilt, this means that it is built to far less than what the FAR permits. This leaves development rights that could be of use to other developers or the property owner. The way to determine if it is underbuilt is by comparing the current built-up building to the square footage which the zoning permits, also known as the FAR usage ratio. Developers are able to recognize that properties are underutilized by using the FAR usage ratio.

For an owner, an underbuilt property could be very valuable to sell to a developer as they would want to buy that site and build it to its fullest potential.

A common misconception among some owners is that the only way to create value from this underutilization is to demolish and build out the rest of their allowed floor area. But they are actually able to sell their development rights to nearby properties if they want to monetize those rights without having to build on their own.

Example: A three-story parking garage is built on a 6,000 square foot lot, zoned R8 with an FAR of 6.02, supporting up to 36,120 buildable square feet. The existing building is 12,000 square feet, which leaves 24,120 square feet of unused development rights.