Chicago's O'Hare airport is in the best position to realize CRE growth, says JLL.

CHICAGO—In a mature market, the nation’s airports increasingly are looking outside the airlines to get their share of revenue, JLL says in a new report. The airports faring best at positioning themselves in the supply chain, at a time when global commerce is growing faster than demand for air freight, sit at the center of population centers with strong logistics infrastructures and ties to trade, in particular biologics and e-commerce.

“Airport executives are increasingly focused on the bigger picture, specifically the role that their airport and the supporting infrastructure play in making shippers’ supply chains more efficient,” says Rich Thompson, managing director of JLL’s Ports Airports and Global Infrastructure group. “The market is not growing as a whole, so they must use every tool they have to stand out, and attract shipping volume.” Growth in air cargo volume was a modest 0.3% to reach 18.8 million metric tons for 2013, and JLL is predicting flat growth for this year. 

A key hurdle faced by airport operators is dollars and cents. “Air freight, while the swiftest transportation mode, is also the costliest when compared to ocean, rail and road transport,” according to the report from JLL’s PAGI group. That’s an especially tough sticking point given that global freight traffic expansion is not keeping pace with the rise in expenses, including jet fuel.

While airports typically focus on lowering their cost per emplaned passenger through reducing traditional operating expenses such as facilities management, JLL says operators rarely take advantage of “the significant income-generating assets right in their own backyard.” However some airports have taken to leveraging their land for logistics, hotels and other commercial real estate uses, and the report notes that as a result, some operators now see 60% of their revenue deriving from non-airline sources.

The US airport that’s best positioned for near-term real estate growth happens to be right in JLL’s own backyard. Chicago’s O’Hare International Airport tops JLL’s scoring index, moving into the top spot from second place in last year’s index.

“Infrastructure is a priority, with new cargo facilities planned that offer both airside and landside access,” according to JLL. For supply chain executives, Greater Chicago offers six major railroad connections, and is a one-day drive to nearly a third of North American consumers.

“This positions ORD as a gateway of choice—and investors are noticing that buildings are commanding higher rents than ever before within a three-mile radius from ORD,” according to JLL. Typically, rent premiums are more common in in-fill markets than emerging logistics corridors, according to the firm’s report.

Number one in last year’s index, Miami scored the second highest ranking this year. Miami-Dade International Airport and surrounding businesses move 71.2% of all US perishables, while the region’s lack of a single dominant carrier leaves room for “enhanced competition and demand for real estate,” according to JLL.

Coming up into third place is Los Angeles, where freight-forwarders near Los Angeles International Airport were especially active last year. Further, according to JLL, “real estate demand from logistics providers, consumer non-durables and food & beverage was notable throughout the surrounding market.”

LAX’s largest trading partner continues to be China, followed by Japan, Hong Kong, Thailand and South Korea, according to JLL. “Goods that enter through this access point help serve Los Angeles County’s ten-million-strong population.”