Vacant Airport Properties – Where Are All The Tenants? (Cont’d)
Well for starters it means in general that aviation spaces stay vacant and remain on the market for longer periods of time compared to other commercial spaces.
In our last newsletter we spoke with Jon Wenrich of Centrex Construction and he mentioned that the average time-on-market for an aviation space ranges from 18-36 months or more, longer than most residential and other commercial properties. This was confirmed by Katrin Gist of CBRE and Bill Mears of Coldwell Banker Commercial, Hangar Network commercial/aviation broker-clients who provided additional thoughts and insights for this article.
There are currently a number of large spaces listed on the Hangar Network site, here are just a few:
- 106,000sf at Bozeman Yellowstone Intl KBZN, Belgrade, MT
- 406,000sf at Clinton National/Adams Field KLIT, Little Rock, AR
- 120,000sf at Westchester County/White Plains KHPN, White Plains, NY
- 125,000sf at Wilson Industrial Air Center KW03, Wilson, NC
- 190,000sf at Chicago Midway KMDW, Chicago, IL
- 97,000sf at General Mitchell Intl KMKE, Milwaukee, WI
Just as there are many types of aviation/airport spaces, so too are the reasons for their vacancy.
Local or regional conditions are prominent: A charter operator goes belly-up. A community college decides to terminate an A&P program and consolidates its classrooms and labs off-airport. An airline goes bankrupt and needs to sell off assets to satisfy creditors. A corporate headquarters relocates to another city or state, vacating a large office space. Hangars are built on spec and sit vacant while waiting for a tenant or buyer.
In addition to microeconomic factors, macroeconomic forces are also in play.
Ms. Gist provided a credible scenario for the current vacancy situation: During the period leading up to the 2008 recession, both aircraft development and hangar construction were strong. Very strong in fact – many hangars were built with signed tenants in place but quite a few were built on spec. When the recession hit, there was likely already an oversupply of hangar spaces around the country.
As the recession took hold and deepened through 2010 – 12, numerous corporations divested their aircraft or delayed purchases. With fewer aircraft needing hangaring, the vacancy rate climbed with divestment, lower purchases, and canceled leases.
By 2013 the national economy began to recover, and the aircraft market stabilized followed by beginning a slow recovery. In 2014, sale and order figures were the strongest since prior to 2008. As the economy continues to strengthen and aircraft sales advance, hangar vacancies should begin to decline.
But because of the lag time between the economy and the aircraft market impacting hangar occupancy, the current oversupply will only gradually be absorbed.
To summarize: The overall market size for aviation spaces is much smaller than other commercial real estate. Local, regional, and national economic forces impact hangar vacancy rates. The state of the economy directly influences the aircraft market, which in turn impacts the hangar market. There are lag times between the economic cycle and its effect on the aircraft market, and subsequently the hangar market. Pre-recession aircraft orders and sales, and hangar construction were robust, leading to an oversupply when the recession of 2008 developed. The economy began to recover in 2012, as did aircraft orders and sales in 2013-14. Hangars are in oversupply but stable, and vacancies will gradually be absorbed as the economy continues to recover and strengthen.
Hangar Network will continue to stay abreast of the situation, and we’ll keep you informed as we conduct additional research on this topic.
-Mike Straka, PhD
HN Staff Writer & Technical Support
Chairman, Colorado Aviation Business Association
- United States Department of Transportation, Bureau of Transportation Statistics. http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_03.html
- Slicing, dicing, and scoping the size of the size of the U.S. commercial real estate market. April 26, 2010. From the CoStar Group: Andrew C. Florance, Norm G. Miller, Jay Spivey, and Ruijue Peng. http://www.sandiego.edu/business/documents/sizeofthemarketdraftApril26.pdf
- Statista, the Statistics Portal. http://www.statista.com/statistics/244702/us-vacancy-rate-forecast-for-commercial-property-by-type/
- CoStar Group website. www.costargroup.com
- Loopnet website. www.loopnet.com
- US Commercial Real Estate Outlook. Deloitte University Press. March 6, 2013. Bob O’Brien, Surabhi Sheth, and Saurabh Mahajan. http://dupress.com/articles/us-commercial-real-estate-outlook-2013/
- Telephone conversation with Mr. Jon Wenrich, Centrex Construction Inc. 24 Apriil 2015
- Telephone conversation with Ms. Katrin Gist, CBRE. 22 May 2015
- Telephone conversation with Mr. William Mears, Coldwell Banker Commercial. 26 May 2015