Synopsis: Many airport projects impact real estate markets well before they open for business, as investors, business owners and developers flock to “beat the rush” and capitalize on potential demand. This article discusses the impact of airports on land value, the investment potential airports generate for the hotel, logistics, commercial, and residential industries.
Major infrastructure projects have been affecting real estate markets for years, but nothing comes with more anticipation than a new airport. A lot of investors, developers and businesses look for a strategic location before the first aircraft even leaves the ground, and much of the surrounding land is sold out. This is due to the fact that people expect that airports will provide them with increased connectivity, economic activity and long-term growth. This can rapidly turn neighborhoods once considered the “periphery” into the next big real estate market.
Why do the land prices go up before the airport opens?
- Forecasting of future growth: Investors do not delay opening the airport. When a project is approved and construction begins, many buyers begin buying land in anticipation of the future.
- Infrastructure precedes flights: Airports are often followed by new metro lines, flyovers, utility upgrades, and new highways. These enhancements increase the accessibility and desirability for development of nearby areas.
- Companies buy land early: Hotels, logistics firms, warehouses, retail stores and office developers typically advance-purchase land to take advantage of decreased land costs and strategic positioning.
- Limited land, rising demand: As news of the airport spreads, more investors get into the market while a limited amount of land is available for development, which pushes the pricing up.
- Predicted market growth: As big projects at the airport get underway, investors – institutional and individual are attracted to the market and encouraged to invest early in the region’s infrastructure.
The Airport Effect on Real Estate
- Enhanced Connectivity: Airport-related infrastructure is often expanded in the form of new roads, expressways, metros, and public transport lines, which increase the desirability of areas around the airport.
- Job opportunities: Thousands of direct and indirect jobs are created in air transport, hotel and restaurant, retail, logistics and support industries.
- Commercial activity speeds up: Businesses like business parks, offices and commercial hubs develop in areas which are easily accessible from domestic and international transport.
- Population flows increase: Better public facilities and employment opportunities attract qualified people and migrant workers, increasing housing and rental demand.
- A new economic zone takes shape: The airport development can quickly become a larger economic ecosystem, with far-reaching business and real estate impacts.
Airport-Led Growth
- Airports influence real estate in more ways than just speculation. Infrastructure investments, businesses, and emerging commercial hubs have contributed to significant property price increases in several areas around airports in India.
- From around ₹1,866 per sq.ft. in 2012, the price of properties has gradually climbed to ₹6,600 per sq.ft. by 2022, which is projected to reach a forecasted ₹10,350 per sq.ft. by 2027, at an average CAGR of around 13.5% for the period.
- The value of property has increased by almost 780% at Shamshabad, Hyderabad since the airport’s opening in 2008 till 2022. The average rate of increase in prices of housing units in the area was from around ₹1,307 per sq. ft. in 2018 to ₹6,150 per sq. ft. in 2022 due to its enhanced connectivity and commercial development.
- North Goa–Mopa Airport Corridor: Areas near the new airport have seen projected land values climb by 25–30% in a year’s time, with the growth of tourism, hospitality investments and infrastructure projects valued at nearly ₹15,000 crore.
- Sindhudurg–Chipi Airport Region: The real estate price escalated from ₹3,972 per sq. ft. in 2019 to around ₹6,397 per sq. ft. in 2023, which is an average rate of 12.6% CAGR. The airport has also created an increase in demand for resorts, homestays, wellness centres, and tourism related developments.
Also read: Metro Corridors vs Ring Roads: Which Infrastructure Investment Offers Maximum Property Appreciation?
Property Opportunities Around Airports
Hotels and Hospitality
Business hotels, budget hotels, serviced apartments and transit stays are in constant demand at airports. For those with early flights or long layovers, or for those who miss their flight, there are many passengers who like to stay close to the airport. Major airports are also surrounded by convention centres, banquet and business meeting facilities.
Food Businesses and restaurants
Restaurants and cafés attract customers year-round, including travellers, airline personnel, taxi drivers, airport staff and tourists. Near airport corridors, fast food, drive throughs, food courts, bakeries and coffee shops can be found. Many people will spend time at restaurants near the airport before heading towards the airport or waiting area, leaving it can be costly.
Warehousing and Logistics
Airports are key transportation hubs, leading to a need for warehouses, distribution centres, and fulfilment centres. The ecommerce firms, couriers and air-freight companies like to have a place near the airports to lessen the delivery time. Logistics infrastructure is frequently found near the airports, such as FedEx, DHL, Blue Dart and Amazon.
Commercial and Business Parks
Corporates prefer locations where there is quick access to domestic and international flights. Often, offices, co-working spaces, and mixed-use business sites are developed near airports. The projects are of business interest, in the sector of technology, consultancy, trade and logistics.
Support Services and Retail
Airport traffic is benefiting fuel stations, vehicle rentals, parking facilities, pharmacies and convenience stores. Other businesses that benefit include travel agencies, forex centers, cargo handling and vehicle maintenance businesses. As a group these create a viable commercial food chain that sustains commercial demand for long-term real estate.
Logistics hubs
The modern airports are no longer merely transit points for passengers, but are being transformed into logistic and distribution hubs. Air cargo demands speedy delivery, which is very important for e-commerce, pharmaceuticals, electronics and perishables and high value goods in the nearby warehouses. Costs are often higher for land close to airports as every kilometer saved will lead to a reduction in transportation time and associated costs. Airport-connected infrastructure provides quicker movement of goods for major players like FedEx, DHL, Blue Dart and Amazon.
Conclusion
Airports are frequently the sparkplug that can ignite real estate development before engines start up. Hotels, warehouses, restaurants, commercial buildings and housing projects spring up around them, spurring the demand for land and property. From an investor’s perspective, it can be highly advantageous to make an early purchase, if the investment is supported by good research, and/or has long-term growth potential.
Written by Boyapati Sai Jasmitha
