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A Site Selection Web Exclusive, July 2014
WEB Exclusive story

The Aerotropolis EMEA Conference Report, Part 1:

The Aerotropolis Defined; Manchester Airports Group Case Study

The Aerotropolis EMEA Gala Dinner was held under a retired British Airways Concorde at the Runway Visitor Park at Manchester Airport.
Photo by Mark Arend

by DAVID BENTLEY, Chief Airports Analyst, CAPA - Centre for Aviation

he Aerotropolis is a process or strategy, not a project. That was the main conclusion of the conference, Aerotropolis EMEA, which took place in Manchester, UK, in early July 8-10, 2014. Attempts were made to define the Aerotropolis and to differentiate it from the "Airport City" to delegates that ranged in nature from the already well-informed to the absolute beginner. It was interesting to note that several major airports do not use the terms "Airport city" or "Aerotropolis" even though it is widely observed that they have one or the other, or both, themselves.

Moreover, the US FAA does not have a definition of Airport City or Aerotropolis, despite the fact that some of the best examples, and particularly the area around Dallas-Fort Worth airport, can be found in the US. Clearly, these concepts are a process that is still a work-in-progress.

Will the planned aerotropolis have an advantage over unplanned ones?

The conference proceedings were heavily influenced by the presence of the Manchester Airports Group (MAG), the major host and sponsor, which provided several speakers, along with associated organizations and individuals. In essence, the Airport City development at Manchester became a benchmark and point of reference for the delegates and speakers. The £800-million ($1.3-billion) airport city, on which work has recently begun, is the first such planned development in the UK.

Conference Chairman Professor John Kasarda, Director for Air Commerce at the University of North Carolina, hinted in his opening address that planned facilities can be expected to have an advantage in the future over random, unplanned ones. The opening, framing session and the contribution from MAG will be considered first.

In the opening address, Sir Howard Bernstein, chief executive of Manchester City Council, said the Asia Pacific becoming more economically successful will pose problems for cities globally. The top 600 cities in the world will change, and 100 new ones will emerge. International collaboration and trade will become fundamental to city strategy, as will connectivity, and the aerotropolis covers both elements. In a dig at the south of the UK Sir Howard said the north could be an industrial powerhouse through better surface and air connectivity if only central government would let it.

Framing the Aerotropolis Concept

The value proposition of the airport city and the aerotropolis is that connectivity = competitiveness, stressed Professor Kasarda in the opening session. He highlighted the difference between the two. The aerotropolis brings benefits to a defined economic region of significance around a major airport just as the airport city does in the immediate environs. But the aerotropolis represents a strategy to encourage a "constellation" of social policy and economic facilities as well. Speedy connectivity is paramount - the fast eat the slow as much as the big eat the small.

Airports are now driving economic location just as canals and railways did before. We have entered the fifth wave of air transport development with large jet aircraft; globalisation; speed; agility; connectivity; perishability (increasing across industries); and tourism all playing their part in the equation.

The 21st century has become an aviation-based economy. The percentage value of trade in international business services (e.g. auditing, consulting, and marketing) is likely much higher than goods traded, possibly as much as 65-70 percent higher. The current IATA reported percentage of 35 percent refers only to the air value of international trade. Kasarda referred to airline routes as "the physical internet" of today's global commerce, moving people and products over long distances, with airports as the "routers" of this network.

The consumer population of airports is greater than might be realised, and much larger than that of tourist sites. For example, 95 million people passed through Hartsfield-Jackson Atlanta International Airport last year, while only 40 million visited Disney World and the Grand Canyon combined.

The aerotropolis develops spines or nodes of commercial and residential development. The two biggest are the New Songdo IBC in Korea and Dallas-Fort Worth's Las Colinas; also Frankfurt, which benefits from having the best air connections in the world, Amsterdam and Washington Dulles. An interesting observation was that hotels at airports have become more meeting places than sleeping places. The airport city is at the centre of the aerotropolis.

Referring to China, as he did extensively during the proceedings, Prof. Kasarda said there are now 51 airports in the country with airport cities. Many of them are anchored by major companies selling their products globally, such as smartphone manufacturers. He pointed specifically to Zhengzhou, whose special economic zone (SEZ) is 450 sq. km. (174 sq. miles), or five times the size of Manhattan. Investment in these facilities throughout the country is measured in hundreds of billions of US dollars.

As a consequence of the SEZ, cargo volume grew by 80 percent at Zhengzhou Airport last year compared to 4 percent on average throughout China. (It is also the third-fastest-growing passenger airport in China, but that is subsidiary to the cargo function). Intriguingly, Prof. Kasarda revealed that this expansion is being powered by interests in Beijing rather than local ones.

Ironically, the airport city, as a transformational device for airports, is observed to be driving growth at city-centre sites. Several speakers made reference to this phenomenon, which is caused by factors such as units being too small at airports and very fast connectivity by train to the downtown central business district. In some cases, the airport's rail station is being used as a connecting point by commuters, which was not anticipated in the original designs.

In summary, the aerotropolis is a joint venture of airports, airlines, and the region. Rail is an integral ingredient. At Frankfurt for example, rail services directly into the airport service many thousands of airport city workers every day, while at Hong Kong the US$20-billion costs of improvements will including an $8-billion rail link.

The Importance of Critical Mass

But not airports all can justify airport cities. There has to be a critical mass of both passengers and air services to attract potential tenants.

Moving on to the extensive contribution of MAG, CEO Charles Cornish explained that the Manchester Airport City, which was planned seven years ago, will raise site employment from 22,000 to 40,000 in 10 years, and that connectivity was the driver, and in particular the need to encourage more point-to-point services, especially those to European capitals.

The joint venture - of MAG (50 percent), Carillion, the Beijing Construction and Engineering Group (BCEG), the Greater Manchester Pension Fund (GMPF) and Argent, an investment partner for master planning - will construct a mixed commercial, industrial and leisure complex, partly on the site of existing surface car parks.

Later in the event, a trio comprising the director of the Metrolink Tram service, the strategy director of transport for Greater Manchester and John Twigg, planning director for MAG, went into more detail about the overall transport context for the region. The contribution of Mr. Twigg was the most illuminating. He stressed that connectivity was considered to be the USP (unique selling proposition) for the Airport City at Manchester, which means trains, trams, bus, walking, even potentially a return to canal transport if an opportunity arises. The Airport City will be within 10-minutes' walk of the airport's surface transport hub and walking will be encouraged.

Another speaker from MAG emphasised how a joint venture had been created right from the start and that the partners BCEG and Carillion were sought out because they were highly regarded, well capitalised and each had a good track record operationally. GMPF (which had previously joined MAG in its bid for London Gatwick Airport but did not repeat the exercise in respect of London Stansted) joined the JV partly out of its need to seek out investment projects with strong credit ratings and longevity, as is usually the case with pension funds.

The JV admittedly had - and still has - its risks. The project was launched during a tough time for the economy. It has secured its first tenants (including DHL) but still has some way to go. BCEG's involvement was specifically linked to the ongoing search to find an airline to fly Chinese mainland routes. Cathay Pacific will recommence its Hong Kong route in December 2014, but it is routes to the likes of Beijing, Shanghai, Guangzhou and Chengdu that top the wanted list now.

It is known that investors in these real estate projects look well beyond the fluffy PR before making their decisions. So MAG extensively promoted the region as well as the airport itself - from the breadth of employment skills to culture, sport and surface transport. In the latter sense, Manchester enjoys an advantage owing to its central location in the UK and the airport's £50-million investment in the Metrolink tram service, which is being extended to the airport.

John Atkins, the Manchester Airport City's director, described the 10-mile (16-km.) distance between the airport city and Manchester's central business district as "optimum." In the case of some of the investors, the number and quality of graduates staying in the city after graduation is of paramount importance.

In Manchester's case this is up to 40 percent of each year's graduate output, from what is the UK's largest city campus. Other factors include the connectivity afforded to 15 million European passengers each year; national (domestic) connectivity (which can be better at regional airports like Manchester than it is at Heathrow); available land assets; local engagement; policy support through the Government's Enterprise Zone, which offers tax incentives; infrastructural investment, which has been achieved; and market demand.

Simon Bedford, partner at Deloitte Real Estate, has been involved with the MAG Airport City and described it as still being very much "embryonic." The economic geography in this case is suitable, but he re-emphasised the point made by Professor Kasarda that not every airport should aspire to have one; the driving force should be a metropolitan strategy, and not every airport is situated in a sufficiently large metropolitan area.

There needs to be an economic case made. For example:

  • That the airport has global connectivity;
  • That benefits and outcomes are demonstrated;
  • That a planning case has been put forward and is supported;
  • That surface transport has caught up with other developments.

In Manchester's case, there was a failure to get the strategy right from the outset. There was no joined-up strategy in Greater Manchester regarding employment prospects across the wider region, and this became a serious political issue. As such it has implications for many other airport cities. Mr. Bedford pointed to the argument that had erupted between authorities in the north and south of the region about the spatial distribution of economic interest. The airport is situated in the richer southern part, where the government has already authorised a special economic zone based around the airport, while the northern boroughs feel that they will not gain any economic benefit from it at all, aerotropolis effects or not.

Felicity Goodey, once a BBC journalist, is now a businesswoman who has been involved at 'Chair' level with, inter alia, the Northwest (England) Development Agency, the Manchester Chamber of Commerce and Industry; the Manchester 2002 Commonwealth Games; Northwest England Tourism, The Lowry (a Millennium Arts project); and latterly the Media City development that led to large parts of the BBC being relocated from London to Manchester. She made an enlightening contribution:

Comparing Media City to an aerotropolis, Ms. Goodey insisted that attracting and retaining new employees and persuading them to interact with existing staffers, thus building human capital, is the most critical aspect of ensuring the success of such projects.

The exploitation of the digital era also figures highly on the list and not just in the sense of media and broadcasting. Such enterprises must build a digital platform that ensures that the fastest possible communications are standard. As chair of a local hospital trust heavily influenced by research projects (and one that will interact with the nearby airport city) she revealed just how dependent the health sector will be on such digital platforms in the future.

Moreover, she argued, there needs to be a flexible environment, with small and large spaces available across the range of the infrastructure. Ms. Goodey revealed that the BBC rents all its (large and small) buildings at Media City; nothing is owned. Buildings can be rented for as little as one day, and it is easy both to upscale and downscale accordingly. (There are clear similarities here with Amsterdam's Schiphol Airport City - see Part 2 of this report.)

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