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The Aviation Industry and Aviation Real Estate


The aviation industry is sensitive to economic cycles. When times are tough people fly less often than in good times. This is true for both general and corporate aviation. This characteristic is exemplified by the industry’s abrupt change of fortune in the years just before and after the global crash of 2008. To better understand what happened, we need to understand the psychology of a market cycle.

By the end of 2008, the outlook for the global economy and the aviation industry had deteriorated to an extreme not previously experienced. The whole world was turned upside down with the melt down of the housing market, financial institutions, and consequently several free-world countries. Confidence was lost. In fact, in early 2009 some aircraft manufacturers reported that cancellations of existing aircraft orders were exceeding new ones.

As it Goes with Aviation, so it Goes with Aviation Real Estate

2010 began much the same for aviation real estate as economic conditions dampened real estate demand to the point that the high number of vacancies caused negative absorption. 2011 did not start any better for landlords and owners of aviation properties including airports; however, the vacancy rates began to level off in the last quarter of 2011 largely due to no new construction. While existing spaces began to be absorbed modest growth was taking place with a number of companies. Many believe that in the psychology of the market cycle we are currently between Hope and Recovery.

Airports, Large and Small, are Historically Economic Engines for a Community

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 expenditures1. 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 well-respected 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.”

The multiplier effect can best be depicted as follows:


A good example of the above is a recent study by an independent, international consulting firm for the Commonwealth of Virginia2. Virginia’s 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 air- ports produce economic returns far exceeding the cost to operate and maintain the facilities. This is modeled by Boeing employing 2,616 local people and working with 564 vendors, which in turn supports an estimated 20,000 direct and indirect jobs. Boeing’s supplier vendor purchases in Virginia exceed $675 million dollars and the company has donated over $8.6 million dollars to charitable organizations in Virginia. Talk about a great landing for the Commonwealth.

Another example is the Scottsdale Airport in Arizona, 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 of Scottsdale rivaling other economic districts in the Southwest for its impact. There are currently over 2,800 companies with more than 50,000 employees. Scottsdale Airport also permits “Through-The-Fence” (TTF) access to and from the Airport to private (fee-simple) land. The six TTF gates at the airport provide access to 140 privately owned lots ranging from 1 to 10 acres parcels, with development of 110 hangars ranging from 1,500 SF to 24,000 SF 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 non-aeronautical revenues, such as revenues derived from sources other than those directly related to aviation activity. Development of airport land for non-aeronautical 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 site3.

There are instances when the owner of a public airport proposes to enter into an agreement which permits access to a public landing area by aircraft based on land adjacent to, but not part of, the airport property, such as previously mentioned with the Scottsdale example. There are five FAA sponsored Airports in Arizona that have TTF access with another airport applying for such use. One such airport, Chandler Municipal Airport, has an approved and ready to develop 23 acre TTF property with direct air- port 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 such 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 toward 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, air- port 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 non-aeronautical. Development of airport land for non-aeronautical uses may represent a significant, untapped resource of revenue.

Having worked in aviation real estate for over 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 providing 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 is a critical tool of commerce and productivity pro- viding quick and efficient access between communities. The collective value and benefit the aviation industry uniquely provides, and the exponential positive impact on so many communities across the country, can create prosperity on the curve toward Recovery and back to Optimism.

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 airports’ ongoing development initiatives. They are a number of logistically combined elements that reinforce each other. 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.

Meet John Meyer... “Aviation’s Best Kept Secret!”

John Meyer is founding Principal and Designated Broker of Airport Property Specialists, LLC in Scottsdale, Arizona. With over 30 years of experience in the Corporate and General Aviation Industry, John has served as Vice President and General Manager of Corporate Jets (currently Landmark Aviation FBO, SDL) and General Manager of Turbofan Aircraft Programs with Honeywell.

John is actively involved in aviation real estate, specializing in the development of airpark and airport properties for both general and commercial aviation in the Phoenix area, Arizona, the Southwest, nationally and internationally. He provides consulting on airport expansion and through-the-fence operations, and has served as an expert witness in legal proceedings.

1 Aircraft Owners and Pilots Association. 2012. “Guide to Obtaining Community Support for Your Local Airport.”

2 Virginia Department of Aviation. 2011. VirginiaAirport System Economic Impact Study.

3 Lynch, John. 2011. “A Developing Trend:

Nonaeronautical Land Development is a Hot Topic,but Success Depends on the Right Approach.” Ricondo & Associates Point-to Point (December):

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