By: John Carver
As air cargo loses ground to ocean transport, a lingering debate continues on: What to do with excess airport land?
U.S. airports have long struggled with how to optimize their land assets. With FAA regulations in most cases requiring utilization of airport acreage exclusively for aviation-related uses, airport authorities and private development interests find themselves restricted from alternative development that could otherwise satisfy a resurgence of local market demand. While surplus real estate can be considered a strategic asset for a given airport system, it often fails to be viewed in the same light as other airport elements, which may require a more tactical approach and a more immediate emphasis. The result is that in countless airports across the country large tracts of quality land remain underutilized, or simply sit idle altogether.
Compounding this situation is the unpredictable nature of today’s air freight industry, which has historically represented the highest and best aviation-related (and thus permissible) industrial use at major U.S. airports. As such, long range master planning of airport land inside and outside airport gates has become a growing challenge for airport development officials and their advisors.
Heading further into 2013, air cargo executives are slow to forecast growth or significant change overall. Barring a major consumer electronic product release, most insiders expect little uptick in air cargo traffic, resulting in limited demand for new aviation-related real estate. Furthermore, traditional air freight commodities such as electronics, automotive and apparel products are seeing volumes shifting toward lower cost ocean transport save for product launches and peak season spikes.
Despite the limited optimism within the industry, there are a few bright spots. Gateway markets with strong passenger counts, particularly those able to capture the growing trade with Latin America, are proving to be the exception. As can be seen in both Miami and, to a lesser extent, Houston, perishables including flowers and fruit are driving positive growth. These markets are capitalizing on their “center of the hour glass” position connecting Central and South America to U.S. population centers. Hopefully, on the reverse side, continued growth in demand for fresh U.S.-grown produce among Asian consumers can begin to stimulate new opportunities for U.S. airports like LAX able to drive export activity, driving demand for near-airport consolidation facilities, re-packing, trans-loading and other logistics operations.
Another positive trend to watch for: trucking regulations. With a new round of regulation set to further reduce the amount of time truckers will be able to operate, this and other legislative changes are bound to have a dramatic impact on air freight dynamic and a potentially positive impact on near-airport warehousing. As with the integration of logistics centers alongside intermodal rail hubs, aviation-focused logistics strategies can be expected to seek out more streamlined solutions, decreasing trip times between warehouse and the tarmac, along with a greener supply chain as a whole.
Overall, the air freight market today must be viewed as one of continued instability. With the few exceptions as noted, underwriting long-term investment into aviation related real estate will remain a challenging task, at least for the near term.
Senior Director, Research
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