As It Goes With Aviation, So It Goes With Aviation Real Estate
Aviation Real Estate Article written by John Meyer – for the May 2014 Scottsdale Airpark News magazine
By John Meyer – Airport Property Specialists
World War I flying ace Billy Mitchell said it well in 1929: “To measure the heartbeat of your city, take the pulse of its airport.”
The economic impact of an airport is the measure of the benefits it provides to the community, including jobs, wages and expenditures. The effects of expenditures moving from hand to hand through the community continue to enhance economic activity far from the airport itself. This is called “induced impact” or the “multiplier effect” – a dollar once spent does not disappear, but moves through the local economy until it is incrementally exported from the community.
As noted by Daryl Williams, a Phoenix aviation attorney, “Many airport sponsors miss the point that an airport can be an economic engine rather than a source of money for the sponsor, and thus some airports become a ghost town with the concomitant loss of benefits that came from an airport.”
A good example is Virginia, where 80 public-use airports allow the state’s business community to participate in national and international markets. Public and private funds invested in the commonwealth’s airports produce economic returns far exceeding the cost to operate and maintain the facilities.
This is modeling by Boeing, which employs 2,600 local people and works with 560 vendors. Boeing’s supplier/vendor purchases in Virginia exceed $675 million, and the company has donated $8.6 million to charitable organizations in the state. Talk about a great landing for the commonwealth.
Another example is the Scottsdale Airport, which is one of the busiest general airports in the nation and serves as a destination airport for many corporations.
Over the past several decades, the Scottsdale Airport and the Greater Scottsdale Airpark has grown to become a strong economic engine for the city, rivaling other economic districts in the Southwest for its impact.
Scottsdale Airport permits “Through-The-Fence” (TTF) access to and from the airport to private land. The six TTF gates at the airport provide access to 140 privately owned lots, ranging from one to ten acres parcels, with development of 110 hangars ranging from 1,500 square feet to 24,000 square feet with direct airport access. These aviation properties typically command a higher premium than non-aviation real estate.
The aviation industry in Arizona accounts for $58 billion in economic activity annually. Over the past decade, airport sponsors have shown greater interest in increasing nonaeronautical revenues. Development of airport land for nonaeronatucal uses may represent a significant untapped source of revenue. Commercial uses, such as retail, hotels, and entertainment are often compatible with airport noise and height considerations and can take advantage of an airport location’s typical combination of good transportation access and large land site.
There are instances when the owner of a public airport proposes to enter into an agreement that permits access to a public landing area by aircraft based on land adjacent to the airport property, such as in Scottsdale.
There are five FAA-sponsored airports in Arizona that have TTF access, and another airport applying for the use. Once such airport, Chandler Municipal Airport has an approved and ready-to-develop 23-acre TTF property with direct airport access.
Although the FAA discourages TTF agreements, any airport contemplating a TTF permit is strongly encouraged to submit the proposal to the FAA for review and comments prior to executing such agreement. Any agreement for a TTF operation must include provisions making the operation subject to the same federal obligations as tenants on airport property. The airport owner must ensure that the TTF operators contribute a fair share towards the cost of the operation, maintenance and improvements of the airport, and that they do not gain an unfair competitive advantage over airport operators.
The Way Forward
With this understanding, airport sponsors are showing a greater interest in the economic impact achievable through careful master planning and working hand-in-hand with private investors and developers, both aeronautical and nonaeronautical. Development of airport land for nonaeronatical uses may represent a significant, untapped resource of revenue.
Having worked in aviation real estate for more than 25 years, I strongly recommend that the airport sponsors retain a real estate advisor with airport experience to help with the planning and to attract investors, developers and tenants.
Qualified real estate advisors can provide an element of credibility to the process by giving an evaluation of a potential development or concept, enhancing communication among all parties involved, as well as increasing market exposure. By hiring a firm, the airport sponsor sends a signal to the development community that it is serious about getting results.
The Right Approach
Aviation real estate is seeing improved and renewed interests by investors and developers. Airports are often the convergence point between vibrant business communities and the airport’s ongoing development initiatives.
Commercial real estate markets across the country have begun to recover from the recent economic recession, making this the right time for airport sponsors and private developers to begin investigating potential opportunities in airport/airpark land holdings to stay ahead of the curve.
Airport sponsors that identify, plan, and effectively market potential development opportunities now will capitalize on those opportunities in the future.
-John Meyer is principal and designated broker of Airport Property Specialists at 14605 N. Airport Dr., Scottsdale. The full service real estate company has extensive experience in hangar sales, leasing and airport land. More: 480.483.1985; www.airportproperty.com