Land here is taking off

Land here is taking off

Total Property - Issue 5 2016

It’s been dubbed the “golden age of travel” with air traffic climbing close to 6.5 percent last year when 3.5 billion passengers flew.

However, this aviation surge being felt well beyond the runway with non-aeronautical revenues also climbing for airport companies and property investment opportunities growing.

International capacity at Auckland Airport has grown by nearly 10 percent in the past five years. The number of Kiwis travelling was up 6 percent last year to about 2.4 million.

Inbound tourism grew even faster, with the number of overseas visitors above 3.2 million a year and total visitor arrivals for the year ending April up 10.6 percent.

But it’s not just people that airlines are moving in bigger numbers. Last year, imports to New Zealand airports totalled nearly $10.36 billion while exports were close to $6.75 billion.

Freight is key for many airlines, providing between five and 10 percent of revenue.

Globally, property income and rent are tied with vehicle parking as the second-largest source of non-aeronautical income, at 20 percent each.

According to Airports Council International, retail is the leading source of non-aeronautical income for airports, at 29 percent of the total among its 800-plus members.

New Zealand airports with land not tied up are looking for ways to use their property with the ‘magnet effect’ of airports being clear.

While aviation is the core business of airports they attract numerous other enterprises.. First it’s flying schools, followed by hotels and motels; freight, warehousing and logistics companies; and then businesses serving a growing population of residents and workers.

A good example is Auckland Airport which processes 16.7 million passengers annually and which recently celebrated its 50th birthday by releasing details of an enlarged international departure area to double the current space. A mooted second runway is now back on the table along with a future railway line and station.

The growing airport has created significant opportunity for non-aeronautical business. Total retail income for Auckland Airport in the 2015 financial year was $132 million (out of total revenue of $508 million), an increase of $4.9 million or 3.9 percent on the previous financial year. Passenger spending in specialty stores grew 25 percent and the terminal’s expansion will open up even more retail opportunities.

Auckland Airport has landholdings of about 1,500ha, and with 900 businesses and 20,000 people working at and around the airport.

The company says it has developed and managed in excess of 300,000sq m of new facilities, encompassing logistics and distribution warehouses, office buildings and hotels. Property rental income grew 10.8 percent in the 12 months to June 30 last year. In its last annual report, the company said occupancy in its $763 million property investment portfolio was 99.9 percent.

New Zealand Airports Association CEO Kevin Ward says the big airports - Auckland, Wellington and Christchurch - have finished or are undertaking work on infrastructure that runs into billions of dollars. “But, it’s not just the major gateways. Airports from Invercargill to Blenheim along with Nelson, Napier and New Plymouth, are expanding terminals or planning them,” Ward says.

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