Aerotropolis is key to global competition
The gold-standard is Dubai International airport, which has a 0.6-mile-long shopping corridor that raked in a cool $1.1 billion in retail sales in 2008.
New York’s John F. Kennedy International Airport leads the United States with $442 million in concessions revenue last year, growing in terminal sales despite a deep recession and air traffic declines. Number two was Atlanta’s Hartsfield-Jackson International Airport at $349 million in terminal sales, also up from 2007. The number of passengers going through Atlanta’s airport terminal was just over 90 million in 2008. That’s more than twice the total number of annual visitors to Disney World, the Grand Canyon and Graceland combined.
Kasarda’s analysis indicates that airport terminals are an increasingly profitable option for higher-end retailers and restaurants, given many travelers’ incomes and greater sales per square foot.
Hospitality development
Another growth opportunity is airport-centered hospitality. Newly affluent BRIC citizens are expected to travel extensively, with the United States as a top destination. Plus, U.S. executives continue to rely on air travel for business development and negotiations.
London Heathrow’s Sofitel Lux Le Grand hotel competes with downtown London five-star facilities. It attracts wealthy international and extended-stay business travelers with 45 meeting rooms and a convention center accommodating 1,700. The property is the U.K.’s third-largest conference venue.
In the United States, DFW’s Grand Hyatt serves as a fly-in virtual headquarters for companies and executives seeking a central meeting location. The hotel has 34,000 square feet of function space, 45 meeting rooms and 20 conference suites. Los Angeles International (LAX) has the largest concentration of hotel rooms on the west coast.
Kasarda’s work shows potential for hotel development or acquisitions on or near airports as the economy recovers. These properties have seen less revenue erosion than their non-airport counterparts, making them strong long-term prospects for return on investment.
The United States lags Europe, Asia and the Middle East in airport-linked commercial development.
But as governments begin investing more in the transportation infrastructure—thanks, in part, to federal stimulus funding—new attention is focusing on airport areas. Opportunities exist for developers and corporate real estate executives to position investments to take advantage of the likely strong rebound in commercial aviation as global economies recover.
Fast Company magazine captured Kasarda’s passion for the aerotropolis, which in turn led to writing a book, Aerotropolis, scheduled for 2010 publication. Read more about his research at www.aerotropolis.com.
What makes a good aerotropolis?
Kasarda says an efficient aerotropolis should:
• Have seamless multimodal surface connectivity between the airport, downtown and major commercial nodes in the region
• Site businesses in relation to their frequency of use of the airport
• Locate noise- and emission-sensitive commercial and residential developments outside high-intensity flight paths
• Create cluster rather than strip development with green space in-between
• Develop mixed-use commercial/residential communities where airport and airport-area employees can commute easily to work while residing in affordable, human-scale neighborhoods. Five questions real estate execs should ask when evaluating on-airport or near-airport projects:
• For on-airport investment, what innovative financial instruments can be developed between the airport and the real estate investor to better share short and longer-term risks and returns to supplement traditional ground leases and concession fees that characterize most airport property investments?
• Since airport accessibility is one key to airport area real estate value, how do various aerotropolis locations measure up in terms of the time and cost of getting to and from the airport?
• What opportunities exist during this real estate downturn for strategic acquisition of commercial properties in the airport area such as hotels, office buildings, and distribution centers?
• For new commercial facility investments, are there sufficient “rooftops” within easy commute to the immediate airport area to ensure that tenant firms can cost-effectively attract the labor supply they need?
• How can airport area real estate investors encourage coordination of complementary investments essential for successful airport area multiuse development?
(John D. Kasarda is Director of Kenan Institute of Private Enterprise and Kenan Distinguished Professor of Strategy and Entrepreneurship)
[This article has been reproduced with permission from research from the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School http://www.kenan-flagler.unc.edu/]
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