While travelers await their flight’s departure they don’t often think of the investments made on the basis of their travel needs. Real estate investment is a hot topic among commercial investors and it’s easy to see what all the attention is about. A rise in air freight demand has led to higher rental rates and bigger returns for astute investors. The 4.5% increase in air freight in 2014 and another 5% increase in 2015 initiated a blur of leases and developments in and around key U.S. airports.
In 2015 Miami, (MIA), Los Angeles (LAX), and Chicago’s O’Hare (ORD) ranked as the top dogs for these blooming investments. The low vacancy rates and high returns paired with the cheapest form of transportation makes this a powerhouse for investors. It would be simple to assume these growing rates are due to location when in fact the primary driver here is intermodal connectivity. Simply put, intermodal transportation relies on the ability to switch forms of transportation (via train, air, ship) without handling the product directly. Imagine passing a shipping container using a ship, plane and then train. No one need touch the supply however it is shipped using variable affordable methodologies.
Both Dallas (DFW) and Indianapolis (IND) airports feature multi-modal options. The use of these multi-modal options allows for a reduction in supply chain interruptions. Indianapolis has 13.7 million square feet of warehousing space around the airport while Dallas has another 11 million square feet. A few of these top contenders have additional baseline benefits based on location and work force factors as well.
What about investments inside these airport terminals? The money generated from kiosks and restaurants within airports are just as coveted. The top ten purchases made by travelers is dominated by beverages, namely waters. In fact, 8 of the top ten are bottled water. The top snack, was far and away, Peanut M&Ms and Coke products round out the remaining spots. Only one product on the list is non edible, The Wall Street Journal. Coming in at number ten The WSJ is followed by other newspapers including New York Post, The New York Times, and lastly USA Today.
Bookstores within airport terminals are dominated by number one seller Hudson, previously Hudson News until their 2014 rebranding. Hudson has begun conducting studies on more healthcentric foods including non-GMO, gluten-free, vegan, and high protein options due to an increase in demand. Even with society’s focus on technology, food seems to have shown enough growth for Hudson’s CEO to evolve their brand to draw in more food-specific consumers .
Snack purchases aside, Hudson still relies on book sales for their foundation. Hudson’s CEO has cited “print revival” as a key factor in both airport and train station bookstores. Industry-wide trends and an uptick of over 300 member stores (per the American Bookseller’s Association) within the last 5 years combine to ensure investors they’ve placed the right bet in the clouds.
Since 2011 American airport investing accounts for 9% of all transactions. Europe is currently leading these statistics with an enormous half of all transactions being airport investment related. The dual income stream of airports is a huge draw for an investor who have the capacity to recover lost funds from elsewhere in the investment. Income from both aeronautics (carrier contracts) and travelers (parking garages, hotels, shops) provides investor solace in their ability to adjust variables to benefit stability and protects returns.
Which favorite do you reach for during a layover?