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Tapping Into Real Estate Potential

Maximize the Land Use at Your Airport by Answering These Four Questions

From air cargo utilization to nonaeronautical projects, airport operators are turning to real estate to help increase revenue.

At many airports, idle real estate is a hidden revenue source just waiting to be utilized. Often sitting vacant is airport property — thousands of acres, in some cases — that will never be needed for airport operations. With Federal Aviation Administration (FAA) approval, some of this space can be developed to add new revenue streams that help improve airport economics.

Many airport operators have been reluctant to approach the FAA with development requests, concerned that regulators might see these projects as a distraction from the airport’s primary mission. But as operating budgets grow tighter, that is changing. By comparing current landholdings to future operational needs, spaces available for development can be more easily identified. Consider the following as you assess the situation:

 

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At many airports, idle real estate is a hidden revenue source just waiting to be utilized. Often sitting vacant is airport property — thousands of acres, in some cases — that will never be needed for airport operations. With Federal Aviation Administration (FAA) approval, some of this space can be developed to add new revenue streams that help improve airport economics.

Many airport operators have been reluctant to approach the FAA with development requests, concerned that regulators might see these projects as a distraction from the airport’s primary mission. But as operating budgets grow tighter, that is changing. By comparing current landholdings to future operational needs, spaces available for development can be more easily identified. Consider the following as you assess the situation:

Are There Restrictions on How the Land Can Be Used?

All airport property is not treated equally. Land used for aeronautical purposes faces different regulatory scrutiny than land that is not. For example, heights of buildings and smokestacks near runways are limited. So are large drainage areas that might attract migratory birds that could fly into and damage airplane engines. Because regulators require verification that any proposed project will not interfere with current or future airport operations, airports must file land use plans with the FAA demonstrating that the development considers the airport’s operational needs first.

In addition, development options for property purchased for noise mitigation or expansion efforts may be limited by stipulations in the purchase agreement or type of bonds used to finance its purchase. If federal money is involved, a long-term land lease — 30 years or more — may be required for private development.

What Kind of Development Is the Real Estate Suited For?

The most efficient and highest use of airport property may differ from that of other comparable real estate. Creating a dining and shopping destination for nontravelers, for example, typically presents a bigger challenge than developing automated warehouses, cold storage or industrial space for airline-affiliated companies or businesses that seek to be located near intermodal transit. To make a strong business case, an airport development opportunity must be compatible with regional needs, demographics and traffic patterns.

Should We Partner With a Private Developer?

Airport operators often partner with developers on nonaeronautical projects. The challenge is finding development opportunities that deliver acceptable returns to both the developer and the airport. Airport operators that issue requests for proposals (RFPs) to prospective developers can better position themselves to maintain control over the property. When negotiating directly with prospective end users that have shovel-ready projects, airports may reap greater returns, but also lose the ability to influence the development itself.

Can a Development Be Competitive?

To be economically viable, a project must also be competitive with other sites in the region. In some cases, tenants may be willing to pay a premium for a location on airport property. But they will also be comparing lot size and capacity, environmental concerns, utilities, road infrastructure, tax rates and other site selection factors — any of which could impact their final choice.

The good news: Advanced engineering technologies now make it possible to optimize space use, and design-build approaches allow projects to be completed faster and at a fixed cost. Now is the time to discover untapped potential.

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2021 Special Report


Author


Courtney Dunbar

Site Selection Manager