May 21, 2015

New hot spots for growth worldwide: aerotropolises

In a global economy, airports can determine which places grow and prosper — and which get left behind.

So in many countries, governments and developers are focusing growth around airports.

Greg Lindsay, senior fellow at World Policy Institute, told the crowd at a NAIOP event Wednesday that in some places, new cities are being built from the ground up to complement a nearby airport.

Lindsay

Lindsay calls these cities “aerotropolises.” He said they are less connected to nearby towns and cities, and more part of the global economy.

One example is Songdo, South Korea. Foreign companies can set up shop close to the airport in Songdo and catch flights all around Asia.

In Schiphol, the city closest to the Netherlands' international airport, rents for office and industrial space are growing faster than they are in Amsterdam, Lindsay said.

In the U.S., most major airports are far from the centers of big cities. For example, Seattle-Tacoma International Airport is about 13 miles from downtown Seattle. Lindsay said new airports won't get built in U.S. cities, so it is up to cities and developers to build around airports.

“We have these tremendous assets, but actually we didn't really understand what airports were about,” Lindsay said. “We thought it was about moving people, and really it's about this tremendous advantage of connectivity. So it's a question of can we do better? Can we rebuild around them.”

Future growth is likely to be focused in just a few cities. Lindsay cited a report from McKinsey Global Institute that says the world's top 100 cities will deliver 35 percent of GDP growth between 2010 and 2025.

These won't necessarily be the biggest cities, but the ones with the best connections, Lindsay said. Airports play a big part in that, specifically international flights.

Sea-Tac was the fastest growing large hub airport in the U.S. in 2014, serving nearly 37.5 million passengers, according to the Port of Seattle. By 2034, the port predicts the airport will see 66 million annual passengers. The port has determined it will need 35 more aircraft gates and another 16 international wide-body gates. Today, the airport has 88 gates and 11 wide-body gates.

Alaska Airlines and Delta are adding new trips here, and Sea-Tac has gotten a lot more international flights in the last few years.

Other cities impacted by international travel include Washington, D.C., where Lindsay said non-stop flights from Beijing led to a $100 million economic impact on the city. He said direct flights to Atlanta from Japan led to several Japanese firms expanding their real estate holdings in the Atlanta area.

Changes in technology and the growth of low-cost airlines have given birth to the “super-commuter,” Lindsay said. Commutes between Houston and Dallas, San Francisco and Los Angeles, or even Portland and Seattle, are becoming more common.

The rationale behind these super-commutes varies. Some people are commuting to London from other major European cities because rents in London are so high and there are plenty of discount flights in Europe. It may be cheaper to have a three-bedroom house in Barcelona and fly to London every day than to have a one-bedroom flat in London, Lindsay said.

“Instead of living, traveling and working in one city, now you can actually spread yourself out in space by living in one place and working in another and telecommuting as necessary,” Lindsay said.