The land of opportunity is just an airport away. And you don’t have to board a plane to get there.
The aerotropolis, a concept created by John D. Kasarda, is a new form of airport-centric
commercial development that has transformed city airports into airport cities. Kasarda, the Kenan
Distinguished Professor of strategy and entrepreneurship and director of the Kenan Institute of
Private Enterprise, is the leading developer of this idea.
It positions airports as 21st
century drivers of business location, urban economic growth and global
economic integration. And it can spark an ailing real estate sector.
As Kasarda has researched this development around the world, he has seen how airports are
evolving from transportation and supply chain-focused areas into mixed-use commercial centers.
They meet the needs of both consumers and businesses: hospitality, entertainment, retail, office,
meetings, exhibitions and conventions. And as a result, real estate professionals are taking a more
strategic look at emerging opportunities in airport areas.
Aerotropoli are most prevalent in Europe, Asia and the Middle East. They are taking hold in the
United States as Atlanta, Detroit, Memphis and Philadelphia leverage their airport areas with
strategic, multi-use developments.
Interest is fueled by the huge numbers of people—often up to 300,000 including passengers and
airport employees—who converge on airports every day. But the needs of business might be the
most powerful driver, Kasarda’s research shows:
- Supply chains that move the world economy
- Projected growth in tourism from Brazil, Russia, India and China (BRIC)
- Continuing need for face-to-face business meetings
- Increasing demand for fast-shipping and fulfillment
The aerotropolis is the physical Internet that ties these together. It connects a metro region to the
global economy, especially flows of time-sensitive products such as microelectronics,
pharmaceuticals, aerospace equipment, medical instruments, and high-value perishables. The
airport and its immediate environs are central nodes in such national and global movements.
Ready for HQ or mixed-use development
Choosing to locate near an airport that has extensive flight networks makes sense for a variety of
organization types. Time-critical manufacturing, repair and distribution facilities are better able to
meet their speed and agility requirements. Corporate headquarters, trade offices, professional
associations and information-intensive firms with frequently traveling business people value the
Amsterdam Zuidas (AZ), located six minutes from Schiphol’s terminal, houses the world
headquarters of ABN Amro and ING banks. The city of Las Colinas, just east of Dallas-Fort Worth
International Airport (DFW), is the global headquarters of four Fortune 500 companies and 2,000
other firms. The Dulles International Airport area contains more Class-A office space than
downtown Washington, D.C.
Employment growth and demand for commercial space in airport areas is as strong as any part of
the metropolitan area, and stronger than most, Kasarda’s research shows. This creates
opportunities for new development.
As more businesses set up shop near the airport, demand increases for employees. And those
employees need places to live, shop and eat.
In addition to its 20-million-square-foot commercial space, AZ has more than 9,000 multifamily
residences. More than $6 billion has been invested in creating residential density and commercial
property in the airport area of Memphis–one of the first American cities to adopt the aerotropolis
With a growing number of airports employing 50,000 or more workers, Kasarda’s works confirms
that airport areas present a clear opening for mixed-use and multifamily developers.
Big box retailers and wholesalers traditionally located near airports because land was cheaper.
Today, these sites are in demand for another reason: affluent visitors. About 30 to 90 million
people visit large airports annually, which significantly outweighs the 8 to 12 million who visit malls
each year. And most of them have incomes considerably greater than the national average. As a
result, major airport retail sales-per-square-foot are up to five times that of malls or central
Airport terminals have immense commercial potential, Kasarda’s research shows. Concourses are
evolving away from newsstands and fast food restaurants. Now they include high-end retailers,
upscale eateries, meeting space and other amenities that cater to hundreds of thousands of visitors
daily in the largest airports.
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 higherend retailers and restaurants, given many travelers’ incomes and greater sales per square foot.
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 fordevelopers 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
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 highintensity 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
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
- 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
- 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?