Airport and off-airport property ready for take-off

Properties close to airports and airports building compounds themselves have been neglected in Romania, while abroad such assets represent attractive alternative investments. Romania has several airports that have seen increasing numbers of passengers, due in part to the increasing presence of low-cost carriers that have included Romania in their expansion programs.
Romania has 17 commercial airports in total, the busiest being Henri Coanda in Bucharest, which handled 3.5 million passengers in 2006. It expects up to 5.5 million passengers this year. The main Bucharest hub is on the list of airports which need revamping and even expansion, with a project to that end already drafted. The Romanian state, the major shareholder in the Henri Coanda Airport, will start buying land for the expansion by mid-this year, according to previous announcements. A new airport is to join the existing 17, once the terminal in Brasov, for which construction works have recently started, is completed.
But besides air traffic, airports represent perfect locations for offices, hotels, warehousing facilities, and even for supporting retail. Bucharest's main airport, Henri Coanda (Otopeni), has attracted several office building developers to its vicinity,
The off-airport property market in Europe saw last year rents between EUR 120 per sqm per year in Vienna to EUR 539 per sqm per year in Paris, which remains the most expensive market for such properties.
Bucharest stands midway between the two, with an estimated rent of a little less than EUR 200 per sqm per year, according to the King Sturge report. Rental values have picked up across Europe and vacancy rates continue to fall. In both Western and Central Europe, an improving economy and occupier outlook, combined with a shortage of available class A space in town, is driving an upturn in out-of-town office rental values.
While for Romania, the average in-town office property investment yield stands at some 6 percent, out-of-town offices offer a 7 percent investment yield, found the King Sturge report. Bucharest offers the second biggest yield for out-of-town office investments, outdone only by Bratisvala, with a 7.5 percent yield for out-of-town offices.
Cities in the region, such as Budapest, Prague and Warsaw, where in-town office yields have already been dropping in the last period, are not offering better out-of-town yields than Bucharest does. They range from 6 to 6.5 percent.
Bucharest is not the only Romanian city where airport property is a still untapped niche, and which could prove profitable. The Timisoara airport was the second fastest growing passenger airport in 2006, with a 186 percent increase, up to 750,000 passengers, according to the King Sturge report. Surprisingly, Bucharest's Aurel Vlaicu (Baneasa) airport came fourth, with 676,000 passengers and a 75 percent increase, according to the report quoting ACI. In the first half of 2007, Bucharest's main airport Henri Coanda (Otopeni) was sixth on the list of airports with the biggest passenger traffic increases, with 2.1 million passengers, a 38 percent increase on the same period of the previous year.
“Small regional airports across Europe are experiencing the fastest growth rates in passenger numbers, in particular those located in the Central and Eastern European (CEE) countries of Poland and Romania. Increased mobility of the population across Europe and the continued growth of low-cost carriers (LCCs), which favor regional airports over the larger international hub airports, are the main drivers behind growth at these airports,” the report states.
The original airport serving Bucharest before Henri Coanda International Airport was built in 1968 was at Baneasa. Once traffic had migrated to the new airport, Aurel Vlaicu remained operational but was seldom used until the arrival of several low-cost airlines. The airport has now positioned itself as the low-cost alternative to Henri Coanda, serving airlines such as Blue Air (Romania's first home grown low-cost carrier), Germanwings and My Air.
Timisoara airport, which handled 755,000 passengers in 2006, serves the western region of Romania and has experienced rapid growth in passenger traffic over recent years, mainly hosting full service carrier international and domestic services.
The growth of passenger numbers through Central and Eastern European airports is set to continue as the CEE countries become more integrated in the European Union. For a growing percentage of the population, air travel is being used not just for business travel or to reach a holiday destination, but for commuting between a country of origin and other EU countries where they may be residing for employment or study purposes.
Freight operators could also consider building their own facilities close to Romanian airports, to better serve the region, thus tapping into the airport property market. “There seems to be a repositioning by air freight companies to airports that can serve the booming Eastern Europe market,” the report says.
Hotel properties are popular close to airports, and large international hotel chains have chosen to build such facilities close to airports with high traffic. Marriott has built a Courtyard unit close to Frederich Chopin Warsaw airport, and Prague airport. The hotel also features office and conference facilities for travelers to use in between flights. Novotel, part of Accor Group, has also chosen the Warsaw airport area to build a facility.
Bucharest only has several local and international branded hotels close to the Otopeni airport. The former Golden Tulip airport hotel has recently become Angelo, after being taken over by Austrian group Warimpex, while a second hotel facility called Phoenicia is run by hotel investor Mohamad Murad.
With the main airports becoming more crowded as passenger traffic increases, secondary airports will get some of the main load and also become attractive to property developers.
The underway Brasov airport is one of the most eagerly awaited, which suggests that not only does off-airport property represent an opportunity in Romania, but airport properties as well, as several existing airports may need revamping, while others are planned for construction. The Brasov-Ghimbav airport is being built on a 200-hectare plot through a public-private partnership and requires a EUR 100 million investment, of which EUR 80 million represents direct investment. The local authorities expect the investment in the airport to break even in eight years, with a six-month period of grace once the airport is up and running. The Brasov airport is expected to be completed in 30 months,
Canadian company Intelcan is working on the Brasov airport project, after placing the sole bid for it. The firm provides both air traffic control solutions and aviation infrastructure. It holds 64.3 percent of the shares in the company which runs the airport project, while the Brasov county council, 20 percent, the Brasov local council holds 10 percent, and the Ghimbav City Hall, a five percent share package. The Covasna and Harghita county councils also hold 0.5 and 0.2 percent respectively, after having offered land for the project.
The Brasov airport has already received letters of intent from airline companies, such as Malev, Austrian Airlines and Wizz Air, which would like to use it, according to the Brasov municipality. The airport should host at least 12 such companies immediately after completion. Intelcan was already working in Romania on the Fetesti airport. The airport project in Brasov will be a showcase of what the ministry of transportation is planning for the new airport in south Bucharest, which would become the third such facility in the capital. As airports are infrastructure, many of them may receive European financing dedicated to the sector.
At the same time, American group ANYC Group Inc. is planning to invest in the existing Suceava Airport, and is expected to present its investment plan in June this year. The investment project includes the construction of several warehouses in the area and the expansion of the airport runway. The Suceava authorities also expect the airport master plan to be ready at the beginning of June this year.

By Corina Saceanu