According to Cushman & Wakefield, Airport Realty Report, approximately 78 million square feet of real estate space, across retail, commercial and hospitality, can be expected in the country by 2015 with the modernisation and upgradation of the 47 airport projects. These projects cover a total of approximately 40,000 acres of airport area, including 40 brownfield and 7 greenfield projects across tier I, II and III locations of India.
At a time when the global growth rate of the airport sector has been about 9 per cent per annum, India has seen an average annual growth rate of 35 per cent over a period of six years. According to Cushman & Wakefield, if the current privatisation trend continues and all airport projects under development, as specified in the 11th Plan, are modernised as per schedule, then non-aeronautical revenues might increase from the current 35 per cent to 54 per cent by 2015. It is estimated that rent from retail, office and hospitality space will constitute approximately 45 per cent of the total non-aeronautical revenue by 2015, and the rest of the income would be generated from other non-aeronautical sources like trading concessions, public admission fees and miscellaneous income, i.e., advertising, car parking, etc.
Anurag Mathur, joint managing director of Cushman & Wakefield, says, “Globally airports derive a large portion of their income from non-aeronautical revenue sources; Heathrow, San Francisco, Vancouver and Brisbane bring in as much as 50 per cent of their revenues from retail and other non-aeronautical resources. With the greenfield projects in Hyderabad and Bengaluru taking their maiden steps, India is soon to replicate this potential revenue-earning model.”
According to Cushman & Wakefield research’s estimate, space for retail accounts for 18 per cent of the total real estate space projections made for airport projects. Most of this supply is concentrated at tier III towns and cities as it comprises tourist destinations. The highest supply is, however, expected to be in Hyderabad, which accounts for 1.8 million square feet of the total retail space projected. The research estimates office space to be more than 50 per cent of the total real estate space projected for the airport projects.
The direct correlation with the travel industry is the high point of the hospitality sector. It is estimated that the country’s total international passenger boarding would increase from 25 million last year to 45 million by 2010. According to the research estimates by Cushman & Wakefield, space for the hospitality industry accounts for nearly 30 per cent of the total airport real estate space projection. This hospitality space will be spread across roughly 27,525 rooms, which includes 10,050 five-star properties, 12,270 four-star properties, and 5,205 three-star and other budget properties across the country.
Mathur observes, “The new-generation airports are expected to bring about holistic real estate development encompassing retail, commercial as well as hospitality. The modernisation or development of the airport is a matter of public convenience and gives a facelift to the city’s image. While it is expected that prospects of the property market near airport zones will remain promising, exactly how much these markets develop further will, to a large extent, depend on a number of factors like the ability of the government to deliver adequate infrastructure to support growth, overall urban planning as well as the timely provision for infrastructure and other support systems for each property sector to progress successfully.”
Airport real estate supply in the form of commercial office space, retail space and hospitality space, clubbed with other planned supply for the region, is likely to put pressures on rentals over the long term. One reasoning would say that with adequate infrastructure support and demand, the new projects are likely to command a premium; however, there could be a scenario where in these projects offer competitive prices to attract end-users.
