Why Airports Are Thriving With Retail
There is a lot of negative discussion about the brick-and-mortar side of the retail business. Overblown or not, there have been hundreds of store closings over the last few years, and several malls across the country are struggling. That isn't the case in airports, though — where retail is thriving. When was the last time you were in an airport and didn't see a line at a restaurant for seating, or wait at a newsstand to purchase a snack or magazine?
An Increased Retail Push in Airports
Major retail centers in these transportation hubs are nothing new. London's Heathrow, Pittsburgh International and New York City's LaGuardia started making major renovations to accommodate more stores and restaurants — including an influx of well-known chains — in the 1990s, but that number has increased exponentially over the years.
For example, as of late last year, Indianapolis International Airport reportedly had sales per square foot — a marker that best shows a retailer's health — of $978. Meanwhile, overall retail sales per square foot for all other venues is at $325.
According to research firm GlobalData, in 2016, airport retail sales hit $38 billion worldwide and they are poised to increase by 27 percent and hit $49 billion by 2021. Much of the reason for this has to do with an overall increase in air travel. The International Air Transport Association (IATA) says that in 2016 there were 3.8 billion people who flew on airplanes, and that number is set to increase to 7.2 billion globally by 2035. All of these factors have caught the attention of retailers.
A Bigger Variety of Airport Retailers
Now that retailers and outlet operators know that they have a captive audience in an airport that's growing, there is a push to enter these facilities. Luxury stores now want to lease space in terminals. Credence Research says that sales for retail outlets in airports will hit $90 billion by 2023.
Among the companies looking to go into these venues are XpresSpa — a company out of New York City that offers massages and other services — as well as Brooks Brothers, Hugo Boss, Lacoste and others.
Right now, most of this activity is taking place in the world's gateway city airports, such as New York, Shanghai, Tokyo and London, but it will certainly become more of the norm as operators, like Dufry, attempt to capitalize on the trend.
Don't Expect a Mall at Every Airport
You'll probably see higher retail at your local airport, but unless you're a resident of a global gateway city, don't expect a shopping extravaganza, with luxury, at the terminal.
The space needed to fulfill the amount of money that tenants need to make in order to turn a profit is extensive, and so is the cost of airport development. As the IATA has reported, airport expansion comes at significant costs, and planning for that is a very extreme process.
There are serious infrastructure and government regulations to take into account that can cost billions of dollars when an airport expansion is proposed. It's not likely that retail will drive the need for more facility space any time soon.
For more information please contact Greg Gilroy, Regional Executive, Income Property Group at email@example.com or 315-477-6060.