Cherie Akers moderated the panel titled ADC Presents: Sky-High Potential: Exploring Real Estate Development Opportunities at Airports during the 2024 ULI Fall Meeting at Resorts World Las Vegas. Featured panelists included Ken Cope, senior vice president of real estate development for the Denver International Airport; Steve Forrer, chief investment officer, Aviation Facilities Management Company; Kent Hindes, managing director, Cushman & Wakefield, leading the firm’s Aviation Practice group; John Terrell, managing partner with Hunter Chase Development Partners.
Hannah Miet
“Investors are increasingly looking at airports as lucrative opportunities,” said Steve Forrer, chief investment officer at Aviation Facilities Management Company. “When you position an airport development correctly, it can draw in a wide range of businesses, from tech startups to established global firms,” he said.
Forrer spoke during the 2024 ULI Fall Meeting at Resorts World Las Vegas in a session titled Sky-High Potential: Exploring Real Estate Development Opportunities at Airports. The panel discussion, moderated by Cherie Akers, client service leader at Barge Design Solutions, covered opportunities and challenges in current airport development. The conversation focused on master planning, transportation infrastructure, economic opportunities, and the challenges that arise from the public/private collaboration and financing required to get large-scale airport developments off the ground.
Economic opportunities
Panelists highlighted how airport development can catalyze regional development and economic growth. John Terrell, cofounder and principal at Hunter Chase Development Partners, said a functional airport is a major consideration for corporations when assessing where to relocate their headquarters. An updated airport that provides passengers with ease of access to surrounding areas is more likely to spur economic development in those communities.
Ken Cope, senior vice president of real estate development at Denver International Airport, said his airport’s ambitious expansion projects will drive regional economic growth by creating jobs and enhancing connectivity. “Airports are economic engines that can transform local economies,” he said, pointing to the ripple effects of increased passenger traffic and business activity.
Unlike in most sectors of real estate, private entities cannot purchase airport land outright, Forrer said. All such developments operate under ground leases, which typically last 30 to 40 years in the United States. Investments must be planned within this finite time frame, as there is no guarantee that the private companies or developers and the airport administrators will agree to renew the lease.
The ground-lease structure makes financing more complex in comparison with traditional real estate investments—but that complexity can be a boon to those who have the stomach for it.
“Financing . . . is much more challenging . . . and that makes it a niche business,” Forrer said, stressing the importance of risk assessment. “It can be [rewarding], but it’s . . . a different risk proposition.”
Regional coordination and master planning
The success of airport development hinges on effective coordination among regional entities, including councils of governments, Terrell said. Multiple stakeholders—cities, counties, and federal agencies—must collaborate and create a cohesive strategy to achieve such success.
Cope said regional collaboration maximizes federal funding opportunities and streamlines the development process, ensuring alignment on such things as rail and highway infrastructure, which enable airport access and connectivity. He detailed Denver International Airport’s strategic plans, which include a comprehensive roadmap to accommodate projected passenger growth through 2045. “We are planning now for what will be needed decades later,” Cope said.
Terrell said that the backbone of profitable airport development is master planning, as it “stabilizes discussions” with the public and private sectors. It should incorporate learnings from the surrounding region and align with broader regional planning efforts. “Without a robust master plan, you risk missing opportunities to attract diverse industry players,” he said.
When airports do more upfront planning and analysis to strip risk from projects for developers, they are more likely to find the partnership they seek, which can include a separate commercial development plan within a master plan, according to Terrell. He added that airports need to structure development deals in ways that work for the plethora of public entities and for the private developers involved—rather than assuming that the developer is a “charitable institution,” acting out of pure benevolence without expecting returns.
Election cycles are shorter than long-term airport development plans, which poses challenges, Forrer said. “When you’re talking [about] 30-year plans, it’s a multiple of the local, regional, and national election [cycles],” he said. “So civic engagement . . . is really important.”
Transportation and infrastructure
Akers said transportation infrastructure—which includes roads and rail—is an essential part of any airport master plan. “I do a lot of master planning for property in and around airports, and I always tell our clients [to] unlock the infrastructure” by ensuring that roads, rail, and other connective tissue grow alongside new development, she said. “That’s the number one thing to attract an end user to your site and to attract investment.”
Although it’s essential to plan ahead, Terrell said infrastructure planning must also be “flexible enough to adapt to technological advancements and changing market conditions.” He urged developers to consider sustainability and innovation in their infrastructure investments to future-proof their projects.
Garnering investment for infrastructure often proves harder than doing so for food and beverage amenities, according to Kent Hindes, a managing director at Cushman & Wakefield. “Airports tend to invest where they can see a return quicker,” he said. “[That’s where] people buy lunch, people buy cocktails, people buy snacks.”
Looking ahead
When asked to forecast future trends, Cope said airports are likely to become large power generators in the future, driven by intensive energy demands and sustainability initiatives that require electrification. As power generators, airports could serve their own needs and, potentially, regional requirements, he said.
Forrer agreed, noting that energy production at airports may include such sources as hydrogen, nuclear, and solar. Battery storage at airports will become critical for managing energy supply and demand, he said.
Cope said the outcome of the U.S. election will also greatly affect the future of airport development. “I think we’re probably going to have to rely more and more on private market support [if] bipartisan infrastructure [legislation] sunsets in 2026,” he said. “There’s been a lot of money spent on that, and so it’s been a very good time for the government to invest in our infrastructure, but that [phase may be] coming to an end.”
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