Commercial & Industrial Property News Update

Australia - Airports Turn To Property Development To Prop Up Revenues

August 17, 2012

Increased demand from fly-in, fly-out passengers are forcing regional airports to invest in expensive aviation infrastructure upgrades.

Australia's resources and mining boom is benefiting the property sector in an unexpected way. Burdened by hefty aviation infrastructure upgrades necessitated by increased demand from high fly-in, fly-out (FIFO) passenger numbers, regional airports are turning to commercial and residential property development in order to prop up revenue.

The increase in FIFO flyers can be directly attributed to the surge in the number of miners and other industry professionals flocking to Australia during its largest mining boom in years. Because of this, regional airports are under pressure to serve bigger aircraft to shift larger numbers of people, said Rob Mactaggart, a former real estate agent and founder of Airport Group, an aviation consultancy based in Brisbane.

The surge in FIFO travellers is forcing regional airports to upgrade infrastructure and build larger terminal buildings, extend runways and taxi ways, and accommodate added security screening required by the federal government, said Mactaggart.

Brisbane-based Mactaggart, previously head of real estate at Brisbane Airport Corporation, has advised Gladstone Airport for the past 18 months.

According to Caroline Wilkes, almost 55% of regional airports operated at a loss of about AUD 40,000 a year. The Australian Airports Association chief executive said, "Developing commercial precincts to complement the airport's existing aviation services provides another revenue source and this is a good way for airports to balance their costs and stabilise their income."

"More frequently we're seeing airports explore opportunities to develop commercial precincts that complement traditional aeronautical operations," she noted.

Such developments consist of a mix of logistics, business and lifestyle projects, such as freight and logistics centres, business parks, hotels, shopping, food and entertainment areas designed to service the airport workforce as well as transiting passengers.

"Many major airports have executed this strategy well when there is land available to do so. Canberra Airport is a great example of an airport with successful business and commercial precincts and is now the home of the largest Woolworths in Australia," Wilkes said.

She added that a new dedicated property master plan designed to integrate aviation facilities with supporting commercial precincts had been recently completed for Brisbane Airport.

In addition, regional airports are venturing into residential development, providing temporary worker housing in towns facing a shortage, said Mactaggart. "The provides a revenue stream for local airport owners at Gladstone and Roma. It's like the Australian economy - it's a two-speed situation; those regional airports that have the FIFO workforce are definitely under pressure," he said.

Tags: Real estate investment, Business space, Income properties

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