Airport Cities: The Property-Value Strongholds of the 21st Century

Real estate investors should take a special interest in airport cities. I would argue that airport cities and airport accessibility will become increasingly important in the 21st century, as companies rely more and more on air transportation to move people and goods quickly in a global economy and as more and more people join the ranks of the global citizens who expand their lifestyle to several cities around the globe, not only for tourism and leisure but also for several aspects that involve their self-fulfillment as individuals. These megatrends are bound to establish major and secondary international airport cities as the property-value strongholds of the 21st century.

The importance of airport cities in the 21st century is indirectly underscored in a 2006 PWC study about the “Cities of the Future”, which identified globalization as one of the major megatrends that will shape the cities of the future.

As the integration of the global economy continues, local structures are organically integrated with global business. Globalization is bound to continue to reach local economies and localities around the world, as the liberalization of markets, the relaxation of trade barriers, and the establishment of more free economies in a big part of Europe (countries of the former Soviet Union Block) and in giant economies like China continue to shape and reinforce an interlinked pattern of global business.

It should be emphasized that globalization has spread well beyond the business world, as advanced information and communication technologies, and especially, the internet, have contributed to the formation of multinational groups of interest and the globalization of all aspects of life, such as education, science, leisure, culture, etc. Globalization of non-business aspects of the earth’s population is furthermore facilitated by increasing incomes, affordability of air travel to masses of people residing all over the globe, and increasing appreciation of cultural exchange.

Within this context, I would argue that globalization is here not only to stay but to intensify and play a critical role in shaping the world’s urban and property-value landscape through its effect on the structure of local economies, the location of production, the location of businesses, the spatial path of goods distribution channels and the location of households.  Such an effect will intensify in the decades to come, not only as a result of the increasing interaction of local business and populations with global business and foreign populations but also as a result of increasing incomes that will allow increasing population masses to globalize their lifestyle.  By extrapolating this pattern of globalization in every aspect of human life we can only conclude that an increasing number of people will be affected by it in the 21st century, joining the ranks of global citizens and the global way of life.

Technology will certainly advance rapidly in the 21st century, but it is highly unlikely that it will bring to humanity Start Trek’s infamous teletransporter, that will eliminate the need of physical transport through some transportation means. With globalization spreading to more and more localities all over the world and the increasing importance of speed and time savings in business, in particular, and life, in general, there is little doubt that the dominant transportation means of the 21st century will be the airplane. In fact, John Kasarda, director of the Kenan Institute of Private Enterprise at the University of North Carolina-Chapel Hill, has argued that the effect of airports on business location and urban structure in the 21st century will be as profound as the effect of highways was in the 20th century.

Airport Cities and the Urban Landscape

Today’s major airport cities and entry points to the world’s mosaic of nations have tremendous locational advantages over non-airport cities. First, because constructing a new major airport hub of global status requires a tremendous investment not only in terms of money but also in terms of time. Second, these cities have a significant agglomeration of businesses, services, facilities, and infrastructure required to support global business and lifestyle, which has been created through many years of development and urban growth.

Within this context, one could argue that demand for proximity to airports not only by businesses but also by households, will be increasing steadily throughout this century.  However, the supply of land within a reasonable distance around the world’s major airports is fixed. Increasing demand and fixed supply of land within a reasonable traveling distance around airports imply an upward secular trend in land and property values, which is quite likely to follow a steep slope depending on the global popularity of the city considered and the speed by which globalization will advance throughout the world community.

The form of the urban landscape that is likely to be shaped, as globalization intensifies and expand, is perhaps best exemplified by the Denver case where a new airport was built (in replacement of the existing one).  A 2002 study predicted that by 2025, within the 300 square miles surrounding Denver International Airport, spending will increase by 466% (to about $85 billion), jobs will increase by 100% (to 400,000) and population will grow by 66% (to about half-million).

The significant competitive advantage of cities with major existing airports, vis a vis those that don’t have one, is clearly highlighted in the case of Stansted International Airport in the UK, the third busiest airport in UK and the 14th busiest airport in the world as of August 2005 (based on international passenger traffic). In particular, a White Paper published by the British Government in 2003 regarding the country’s air transport policy predicted a massive expansion of air travel and suggested expansion of Stansted International Airport so that it could handle 80 million passengers per annum.

In sum, based on the above discussion, it seems that property investments in airport cities may be less risky from a long-term perspective, all else being equal. You can see the list of international airports by country here.

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