Business Booms When Landside Development is Done Right

Author: 
Ronnie Garrett
Published in: 
January-February
2012

Although they're thousands of miles apart, the landside developments at Pittsburgh International Airport (PIT) and Ted Stevens Anchorage International Airport (ANC) have a lot in common. Both airports successfully developed on-site land to build opportunities, create jobs and better serve the airport and surrounding communities.




factsfigures

Project: Landside Development

Location: Pittsburgh Int'l Airport

Size: 700 acres

Facilities: Clinton Commerce Park

Size: 3 buildings, with 700,000+ total sq. ft.

Cost: $14 million

Funding: About $7 million from the state for site improvements & $5 million from a TIF district set up for the project

Estimated Associated Jobs: 600

Required Infrastructure Improvements: Upgrading 3,000 ft. of roadway, removing 14 acres of abandoned coalmines & grading about 25 acres of land


Project: Landside Development

Location: Ted Stevens Anchorage (AK) Int'l Airport

Name: Alaska CargoPort

Facilities: 120,000-sq.-ft. warehouse & 11 parking positions

Est. Developer Investment: $30 million

Infrastructure Improvements: AIP-funded runway & taxiway

Est. Economic Impact: Hundreds of millions of dollars & 500 jobs

As a medium-sized hub, PIT spent $14 million to develop 700 acres on its northwest side. Since 2006, three buildings totaling more than 700,000 square feet have been constructed and 600 jobs have been created in its Clinton Commerce Park.

ANC, which ranks as the fifth-busiest cargo airport worldwide, invested Airport Improvement Program funds in a new runway and taxiway to prepare its site for a cargo transport operation. Alaska CargoPort, the facility developer, secured approximately $30 million in funding to construct a 100,000-square-foot facility and four wide-body parking positions. Through multiple expansions over the years, the airport has expanded the facility to a 120,000-square-foot warehouse with parking positions for 11 aircraft. Officials estimate that CargoPort's operation has brought hundreds of millions of dollars and about 500 jobs and to the area.

"Airports are important economic engines within their communities," explains Rick Crider, principal investigator of Guidebook for Developing and Leasing Airport Property (see sidebar). "When airports play a role in economic development and bring jobs to the community, they raise their stock value within the community."

Crider was formerly vice president of airport development and management services at RW Armstrong, which authored the study. He is currently airport general manager at Port San Antonio, a successful base redevelopment authority with a rich cluster of aerospace customers.

Randy Forister, senior director of development at PIT, counsels airport managers interested in landside development to "think like an economic development agency and not like an airport." At the same time, however, they also need to keep airport functions top-of-mind.

Site Search

The first step in PIT's landside development trek was identifying all available and developable sites on its 8,840 acres. The study considered topography, availability of utilities, zoning and roadways.

During this analysis, airport officials learned that the Pennsylvania Turnpike Commission planned to improve the highway south of the airport, add another connecting highway into the airport and upgrade and improve nearby freeway ramps. These factors helped the airport narrow its developable land to 700 acres on its northwest side, where the Clinton Commerce Park now sits.

Forister's advice for considering various land options is simple: "Take a long view." He recommends looking well beyond the typical 20-year master planning window. "One of the first things we did in our planning effort is take out the land we thought we might use for aviation purposes within the next 50 years," he relates.   

Crider agrees, noting that landside development requires airports to drill down a bit farther, forecast further out, develop strategic and business plans, and conduct market analysis. Once potential developable land is found, he urges airports to answer the following questions:



  • What are the attributes of the land? What would a potential development layout look like? 


  • What site preparation will be needed?


  • How much will the project cost?


  • Are there potential aerospace activities the parcel could be used for?


  • What are the target industries that might be interested in the land? Are there any operators within those industries looking to expand or move?


  • What makes this site attractive to those targets, and what other sites would they be interested in?

Kenneth Lythgoe, ANC general manager, boils it all down to location: "If you don't have the right location, I don't care how much money you throw at it, it's not going to be successful. There has to be a reason to develop it."

The best location to develop, adds Lythgoe, is often close to the ramp.  While airports often locate warehousing and other service facilities away from the ramp, he encourages airports to take advantage of their taxiways and runways. "That's where the activity is in airports," he explains. "There's a little more value in that than being off the ramp."

Forister reminds airport officials to keep their expectations realistic. Long-range views must consider the near-term capital investments required to generate revenue later. PIT's chosen site required upgrading 3,000 feet of roadway, removing 14 acres of abandoned coalmines and grading approximately 25 acres of land. "Though these sites were difficult to develop, in 25 years they're going to be generating significant revenue for the airport," he notes.

Perfecting the Purpose

Successful landside development projects are compatible with their communities, advises Crider.

In ANC's case, the owner of Alaska CargoPort's parent company identified the need. When Ray Brimble noticed there were no airport facilities in place to accommodate cargo flight traffic coming through Anchorage each day, he started looking for property to develop on or near the airport. Ultimately, the company bid on a 20-acre parcel of land at ANC to build all-weather aircraft parking and a warehouse, maintenance building, offices and crew quarters.

The need Brimble detected helped make the project a success, Lythgoe explains. "If you live in Minot, ND, and decide you want to be an international cargo hub, God help you, because it isn't going to happen. But if you're in Alaska and you're on a route half way between Asia and America, you're going to be successful," he says. "You need to ask yourself if what you're hoping to do will be absorbed economically by the area."

"Development has to be compatible with the airport's other uses," adds Crider, noting the wide range of aeronautical and non-aeronautical uses possible. "Airports need to consider both land compatibility and community compatibility. Airport development needs to be appropriate for that city, that county and that region."

Gathering Support

PIT worked closely with economic development agencies, real estate developers, its local governments and the public at large to gather support for its project before proceeding with any plans.

"We had the neighboring communities involved in helping us craft a plan to develop the airport," Forister recalls. "When we got through that process, everybody had an idea of where we were headed. You have to bring your stakeholders into the process and let them help you."

Educational and marketing efforts can also tip the scales in a project's favor, notes Crider.

ANC already had freighters coming in for fuel stops. The challenge was to leverage that opportunity beyond fuel sales - and to educate a spectrum of stakeholders about the opportunity. "You need to demonstrate how something good for the community can come out of the project," Crider advises. "How can coming together as a community bring jobs and economic opportunity to the community?"

Communicating openly can also help drive funds to the project, adds Forister, noting that PIT received about $7 million from the State of Pennsylvania for site improvements and $5 million from a tax increment financing district established specifically for the project. "If you have a well-thought-out plan, you stand a good chance of getting some financial help," he says. "If they can see that you're going to generate additional jobs and private investment in the community, it will generate interest."

Communication also helped in Anchorage, where Alaska CargoPort secured approximately $30 million in financing on its own, but required more for the project. In a unique agreement, ANC took ownership of the facility to obtain tax-exempt financing then leased the facility back to Alaska CargoPort.

Forister recommends continuing the marketing and education after the site is developed. Having good relationships in the economic development and real estate communities helps airports fill spaces with tenants, he notes.

While the development at PIT offered some inherent advantages, such as foreign trade zone benefits and proximity to the freeway, the airport's relationships with economic and real estate developers helped spread the word about the sites themselves.

Knepper Press, a printing company, chose PIT's commerce park because the site was shovel-ready. It built a 100,000-square-foot facility and leases an additional 60,000 square feet in a neighboring building.

"We had sites that were ready to go," Forister explains. "We had a road, water and sewer lines, gas, electric, telephones and sites that were completely graded. With the topography in Pennsylvania, that's a pretty rare commodity."

Flabeg, a solar panel manufacturer, occupies a 225,000-square-foot facility on the property while real estate development firm, The Buncher Company, constructed a 400,000-square-foot building and leases it to Fed Ex, American Tire Distributors and Knepper Press.

"Our buildings are 100% occupied, and we're looking to expand the park," reports Forister, emphasizing the importance of close community relationships, particularly with economic development agencies. "You need to be very visible in the real estate and development community," he stresses. "Just attending airport events isn't going to get it done."

Lease Language

Because build-ready sites attract attention, it's important for airports to arm themselves with lease agreements that fully protect their interests. Attracting tenants should be the lease's secondary, not primary objective, notes Forister.

FAA requires stipulations that lease terms not exceed 50 years, that the airport maintains the right to fly over the site, and that the lessee will not interfere with airport operations. But airports should also include clauses that address their own interests, says Forister. PIT, for instance, includes clauses that ban residential use and bar lessees from subletting the site without airport approval.

Above all, Forister recommends keeping priorities straight: "You need to remember you are an airport first. Don't let real estate developments take over your facility."

Subcategory: 
Landside Development

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