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1uly 26, 2006

Airport Cities and the Aerotropolis
Dr. 1ohn D. Kasarda

Airports have historically been understood as places where aircraIt operate, including the
runways, control towers, terminals, hangers and other Iacilities which directly serve aircraIt,
passengers and cargo. This historical understanding is giving way to a broader, more
encompassing concept which recognizes the Iact that in addition to their core aeronautical
inIrastructure and services, virtually all major airports have increasingly developed non-
aeronautical commercial Iacilities and services.

No longer restricted to magazine shops and Iast Iood outlets, passenger terminals now
Ieature brand name boutiques, specialty retail, and upscale restaurants along with entertainment
and cultural attractions. Singapore Changi, Ior instance, has cinemas; Beijing Capital Airport,
banks; Hong Kong International, dozens oI designer clothing shops; Las Vegas McCarran, a
museum; Fraport, a hospital; Amsterdam Schiphol, a Dutch Masters art gallery; and Stockholm
Arlanda, an intensively utilized chapel where over 400 weddings occurred in 2005.

Given the signiIicantly higher incomes oI airline passengers (typically three to Iive times
higher than national averages) and the huge volumes oI passengers Ilowing through the terminals
(oIten in the tens oI millions annually) it is not surprising that retail sales per square meter
average three to Iour times greater than shopping malls and downtown shops. As a result,
terminal commercial lease rates tend to be the highest in the metropolitan area.
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In additional to incorporating a variety oI commercial Iunctions into passenger terminals,
airports are developing their landside areas with hotels, oIIice and retail complexes, conIerence
and exhibition centers, logistics and Iree trade zones, and time-sensitive goods processing
Iacilities. Consequently, many airports today receive greater percentages oI their revenues Irom
non-aeronautical sources than Irom acronautical sources (e.g., landing Iees, gate leases,
passenger service charges). These non-acronautical revenues have become critical to airports
meeting their Iacility modernization and inIrastructure expansion needs, as well as being cost-
competitive in attracting and retaining airlines.

The growth oI non-aeronautical activities at airports not only Iavorably impacts their
Iinances. Airport-centric commercial development is also making them leading urban growth
generators as they become signiIicant employment, shopping, trading, business meeting and
leisure destinations in their own right. The evolution oI these non-aeronautical Iunctions and
commercial land uses has transIormed numerous city airports into airport cities.

The New Airport Management Model
Consistent with their growing non-aeronautical roles and Iunctions, airports are altering
their operational management. Numerous airports (both public and private sector operated) have
established real estate or property divisions to develop their landside commercial areas as well as
Ioster development beyond airport boundaries (e.g., British Airports Authority, Aeroports de
Paris, Dallas-Fort Worth International Airport, FrankIurt Airport |Fraport|, Amsterdam Schiphol,
Singapore Changi). These new operational structures oIIer testimony that airports are evolving
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Irom basic aeronautical inIrastructures into complex multiIunctional enterprises serving both
aeronautical needs and commercial development. The current trend in airport management is
thereIore to complement traditional technical airport Iunctions with terminal and landside
commercial activities. Such activities include, among others;

duty Iree shops
restaurants and specialty retail
cultural attractions
hotels and accommodation
business oIIice complexes
convention and exhibition centers
leisure, recreation, and Iitness
logistics and distribution
light manuIacturing and assembly
perishables and cold storage
catering and other Iood services
Free Trade Zones and Customs Free Zones
gold courses
Iactory outlet stores
personal and Iamily services such as health and child daycare

To many not Iamiliar with the new realities oI airports, the Airport City model might
appear to be a deviation Irom the norm. But it is in Iact becoming the new model oI international
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airport development and management. Airports Irom Amsterdam to Zurich and Irom Beijing to
Seoul have embraced this planning model to develop their terminals and landside areas as a
pivotal means to Iinancing airport operations and contributing to their own competitiveness. To
note just a handIul:
Beijing is rapidly proceeding with its highly ambitious Capital Airport City, whose
master plan takes an expansive deIinition oI appropriate Iunctions including, among
others, shopping, entertainment, education, sports and leisure, light manuIacturing,
Iinance, trade, and housing.
Aeroports de Paris established a real estate division in 2003 to act as the developer,
general contractor and construction project owner and manager oI landside commercial
properties at Charles de Gualle and Orly International Airports.
Dallas-Fort Worth International Airport management has been in the real estate
development business Ior three decades, leasing land to commercial tenants.
Hong Kong International Airport`s SkyCity is opening a 1 million square meter retail,
exhibition, business oIIice, hotel and entertainment complex near its passenger terminal.
The Iirst major phase will be in Iull operation by the end oI 2006.
Kuala Lumpur`s (KLIA) new Airport City will be commercially anchored by its large
Gateway Park that, in addition to retail and oIIice development, includes motor sports, an
automobile hypermarket, and leisure venues drawing on the local as well as aviation-
induced market.
Incheon`s 'Winged City encompasses international business areas, logistics zones,
shopping and tourism districts, as well as housing and services (e.g., medical) Ior Airport
City workers and residents.
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The new Bangkok International Airport (Suvarnabhumi) is expected to open in late 2006.
Its master plan includes the development oI an Airport City within airport boundaries to
include an international business center, international conIerence and exhibition center, a
shopping center, oIIice buildings, hotels, car-parks, hospitals, restaurants, an
entertainment center, and an international resident community.
Amsterdam Schiphol, through its Schiphol Real Estate Group, has been involved Ior well
over a decade in landside commercial development. These developments include
business oIIice complexes, hotels, meeting and entertainment Iacilities, logistics parks,
shopping, and other commercial activities branded under the AirportCity name. Nearly
58,000 people are employed at Schiphol, which integrates multimodal transportation,
regional corporate headquarter oIIices, retail shopping, logistics, and exhibition space to
Iorm a major economic growth pole Ior the Dutch economy.

Other international airports, not quite the scale oI Amsterdam Schiphol or Seoul`s
Incheon have given commercial development a high priority in their master planning (e.g.,
Brisbane Airport, Vienna, Canada`s Calgary, Zurich, and Stockholms Arlanda Airport). The
majority oI these have embraced the Airport City concept in their strategic development models,
either explicitly or implicitly.

As a result, airports are undergoing a metamorphosis, taking on many oI the commercial
Iunctions oI a metropolitan Central Business District (CBD). With the growing number oI
boutiques, restaurants, meeting Iacilities, and entertainment and cultural attractions, passenger
terminals resemble parts oI downtown. Many airports also have the density oI highway and rail
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connections that are usually associated with CBDs. This is reinIorcing their new roles as drivers
oI business location and urban development over an extended area.

The Rise of The Aerotropolis
Even greater aviation-oriented commercial development is occurring well beyond airport
boundaries. With the airport itselI serving as a region-wide multimodal transportation and
commercial nexus, strings and clusters oI airport-linked business parks, inIormation and
communications technology complexes, retail, hotel and entertainment centers, industrial parks,
logistics parks, wholesale merchandise marts and residential developments are Iorming along
airport arteries up to 20 kilometers outward.

This more dispersed airport-linked development is giving rise to a new urban-Iormthe
Aerotropolis. Similar in shape to the traditional metropolis, made up oI a central city and its
commuter-linked suburbs, the Aerotropolis consists oI an airport city core and extensive outlying
areas oI aviation-oriented businesses and their associated residential developments. A
synthesized model oI the Aerotropolis based on development Ieatures around major international
hub airports is illustrated in Figure 1.






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ReIlecting the new economy`s demands Ior connectivity, speed and agility, the
Aerotropolis is optimized by corridor and cluster development, wide lanes, and Iast movements.
In other words, Iorm Iollows Iunction. Airport expressway links (aerolanes) complemented by
airport express trains (aerotrains) bring cars, taxis, buses, trucks and rail together with air
inIrastructure at the multimodal commercial core (the airport city). Aviation-linked business
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clusters and associated residential developments radiate outward Irom the airport city, Iorming
the greater Aerotropolis.

Aerotropolises are emerging because oI the advantages airports provide to business in the
Iast-paced, globally networked economy. Today`s most competitive manuIacturers, Ior example,
use advanced inIormation technology and high-speed transportation to provide Iast and Ilexible
responses to customers` unique needs. Such Iirms build agile production systems that connect
them to their suppliers and customers, allowing them to source parts and ship assembled
products as needed.

A manuIacturer`s ability to meet customer demand also depends on the existence oI a
comprehensive ground-to-air shipping network oI air cargo carriers, trucking companies, Ireight
Iorwarders, and logistics providers. This network has been strengthened as demand Ior time-
sensitive manuIacturing and distribution grows. Made possible primarily by proximity to an
airport, a ground-to-air shipping network allows manuIacturers to minimize their inventories,
shorten production-cycle times, and quickly access novel inputs Ior custom products that create
additional value.

Like time-sensitive goods processing industries, the service sector has increasingly Iound
airport areas to be an attractive location. Airports have become magnets Ior regional corporate
headquarters, conIerence centers, trade representative oIIices, and inIormation-intensive Iirms
that require executives and staII to undertake Irequent long-distance travel. Business travelers
beneIit considerably Irom quick access to hub airports, which oIIer greater choice oI Ilights and
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destinations and more Ilexibility in rescheduling as well as oIten avoiding the costs oI overnight
stays.

Firms specializing in inIormation and communications technology and other high-tech
industries consider air accessibility especially crucial. High-tech proIessionals travel by air at
least 60 percent more Irequently than other proIessionals, giving rise to the term 'nerd birds in
the U.S. Ior commercial aircraIt connecting 'techie capitals such as Austin, Boston, Raleigh-
Durham, and San Jose. Many high tech Iirms are locating along major airport corridors, such as
those along the Washington Dulles Airport access corridor in Northern Virginia and the
expressways leading to Chicago`s O`Hare International Airport. In this sense, knowledge
networks and air travel networks increasingly reinIorce each other.

Lastly, commercial services oI all types have begun relocating to airport areas in order to
attract a dual customer base oI travelers and locals. Airports now oIIer on-site or nearby hotels,
restaurants, shopping, Iitness centers, and entertainment Iacilities. As these oIIerings grow, areas
within Iive kilometers oI major airports are adding jobs considerably Iaster than suburbs located
at similar distances Irom a metropolis` center, but not near an airport. Such job growth
stimulates residential projectsIurther Iueling Aerotropolis development. Airport areas are
even developing their own 'brand image'the DFW Area . 'the O`Hare Area. Ior
instance.

In sum, by oIIering speedy distant market connectivity to aerotropolis businesses, the
airport provides important value to these businesses. Aerotropolis businesses, in turn, generate
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additional passengers and cargo Ior the airports, resulting in reciprocal beneIits. Figure 2
illustrates these reciprocal beneIits Ior Amsterdam Schiphol`s Airport City and its greater
Aerotropolis.







Although airport cities initially evolved in Western countries the broader Aerotropolis is
emerging most vividly around Asia`s newer international gateway airports. This can be seen in
developments at and near Hong Kong International Airport, South Korea`s Incheon, Beijing
Capital International Airport, and as planned around Bangkok`s new international airport,
Suvarnabhumi.


















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The Future Aerotropolis
To serve the economic demands oI connectivity, speed, and agility, the Aerotropolis will
require localized inIrastructure planning oI unprecedented scale. To date, most Aerotropolises
have evolved largely spontaneously, with existing nearby development oIten creating arterial
bottlenecks. In the Iuture, strategic inIrastructure planning could reduce this congestion.
Dedicated expressway links (aerolanes) and high-speed rail (aerotrains) should eIIiciently
connect airports to business and residential clusters near and Iar. Special truck-only lanes should
be added to airport expressways, as should improved highway interchanges to reduce congestion.
Multimedia technologies should produce themed electronic public art along airport transportation
corridors that highlight the culture, history and economic assets oI the region the airport serves.

Global inIormation and communications technology (ICT) networks will also help shape
the Aerotropolis. Advanced inIormation processing technologies and multimedia
telecommunications systems served by high-density Iiber-optic rings and satellite uplinks and
downlinks will evolve around airports, instantly connecting companies to their global suppliers,
distributors, customers, and branch oIIices and partners. Companies that require the Iastest
possible networking will thus have an additional reason to locate in the Aerotropolis. This ICT
inIrastructure is appearing not only around major passenger airports like Incheon and
Washington Dulles but also around U.S. air express hubs such as Memphis (which serves global
shipper FedEx) and Louisville (which serves United Parcel Service).

As multimodal transportation and advanced communications inIrastructure develops at
and near airports, businesses will have even more reason to move to an Aerotropolis. The
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principal determinant oI land value, lease rates, and the type oI commercial use on a given
property will be the cost oI moving people and products to and Irom the airport and, via the
airport, to distant markets. This value/cost proposition will be measured primarily in time to the
airporta Iunction oI the site`s place on local transportation arteries, and not necessarily oI
spatial distance. For example, a site 10 kilometers away, but one stop on a high-speed train line,
Irom the airport will be worth more than a site 5 kilometers away with poor road and rail
connections. To put it another way, the three 'A`s (accessibility, accessibility, accessibility)
will become the critical component oI the three 'L`s (location, location, location) in
Aerotropolis real estate value.

At Iirst glance, one might misconstrue Aerotropolis land uses as simply additional sprawl
along main airport transportation corridors. In reality, the Aerotropolis grows according to a
rational system based on time-cost access gradients radiating outward Irom the airport.
Constructing appropriate multimodal ground transit and locating commercial Iacilities consistent
with the Iorm and Iunction oI the Aerotropolis will contribute substantially to the emerging
needs oI business, more eIIicient cargo and passenger Ilows, and the Iuture competitiveness oI
urban areas.

These outcomes will not occur spontaneously, however. Aerotropolis optimization will
require bringing together airport planning, urban planning, and business site planning in a
synergistic manner so that development is economically eIIicient, aesthetically pleasing and
environmentally sustainable.

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Author Note: John D. Kasarda, PhD, is Kenan Distinguished ProIessor oI Management and
Director oI the Kenan Institute oI Private Enterprise at the University oI North Carolina`s Kenan-
Flagler Business School. He advises airports and government oIIicials around the world on
airport city and Aerotropolis development.