The budget airline model is challenging the traditional airport property market.
‘Every seat, every flight just £0.29 if you fly Monday to Thursday,’ shouts Ryanair on its website. EasyJet informs the reader that it is possible to ‘discover gorgeous Geneva for £22.99’. The growth of cheap flight websites only hints at the impact low-cost airlines have had on the growth of UK’s regional airports.
Following the Department for Transport’s relaxation of landing right restrictions for overseas carriers at regional airports last month, this growth rate is set to continue.
The new guidelines aim to ease strain at congested airports, such as Heathrow. They will allow foreign airlines to handle passengers and cargo at UK regional airports while en route to another destination, as well as pick up passengers or cargo from another country when flying to the UK.
Routes to the Far East and the US, which had previously been bypassed because of the restrictions, are expected to increase, particularly from airports such as Manchester.
The property industry, however, is less sure that the ruling and any related increase in regional airport size and passenger numbers will have a radical effect on how UK’s regional airport property markets will work.
Paul Spencer, director of strategic consulting at Jones Lang LaSalle, says many regional airports are driven by the budget airline model which challenges the traditional basis of an airport-related property market.
‘You no longer need in-flight catering so there is no demand for catering warehouses. Cargo space is limited because many budget operators can’t carry cargo,’ he says. ‘Shorter waiting times for people who are in the budget frame of mind mean they may buy a sandwich, but not a golf club or a Cartier watch.’
He adds office demand around regional airports is limited. ‘EasyJet staff members stand up in most of their meetings,’ says Spencer.
‘All of these factors create less demand than you might ordinarily see around an airport.’
Tim Walder, partner in the aviation sector at EC Harris, says airport retail is different when low-cost operators are in the frame.
‘Budget airlines want fast turnaround times and passengers corralled at the gates, not vast shopping malls,’ says Walder.
However, Jim Bethell, director of Manchester Airport Developments, says regional airports can drive property markets.
‘Manchester airport has had 21 million passengers in this financial year alone and is a significant engine of growth in the regions as well as in the immediate property market,’ says Bethell. ‘There is a 200-bed Travelodge hotel completing in November and the airport’s M6 highway linkage is superb for accommodating several logistics operators.’ An application for a 225-bed budget hotel next to the Travelodge was also submitted last month.
Property development around regional airports depends on the exact nature of airport operations and the amount of available land, says baa Lynton managing director John O’Halloran. He points to increasing industrial activity around Stansted airport which is growing in importance as a cargo airport.
BAA announced in September it will service long-haul flights to New York from Stansted.
BAA Lynton and joint venture partner Morley Fund Management received consent for a 160,460 sq ft (15,500 sq m) second phase at its Site 600 distribution warehousing development at Taylors End, Stansted, in September.
O’Halloran says a 50,000-75,000 sq ft (4,645-6,970 sq m) speculative phase is being ‘actively considered’ at the 27 acre (11 ha) site to the south-west of the main airport terminal (Property Direct, 09.05, p9).
‘The focus at the moment is on Taylors End and air cargo-related developments,’ says O’Halloran. ‘We are also monitoring the office market as we have consent for another 200,000 sq ft at our Endeavour office scheme [which adjoins Taylors End] which we developed three years ago and is fully let.’
Andrew Gilling, associate director at Rogers Chapman, says it is easy to get excited by passenger figures but understanding where demand is coming from is vital.
‘You can put a business park next to an airport and usually it works quite well as there is always demand to a point,’ says Gilling. ‘But you have to know if it is bringing in new investment and jobs or simply allowing the migration and expansion of existing airport-related companies.’
Law firm SJ Berwin, which is advising Luton and London City airport on its non-statutory development masterplans up to 2030, says airport operators are trying to develop an integrated approach to planning which should see them working more closely with the development community.
Duncan Field, a partner at SJ Berwin, says airport operators need to identify supporting infrastructure, developments and land uses needed to deliver airport growth.
‘We can expect to see airport operators working with developers and other commercial interests in a more open and co-ordinated way for their mutual benefit,’ concludes Field.