Lois Larson
Renting space at an airport can be a great opportunity for small businesses to expand their customer base and develop their brand. Airports are often owned by a government entity that may choose to lease out retail or restaurant space. The process of securing a lease can be complex and bureaucratic, with multiple layers to navigate. Airports are unique landlords with their own requirements, processes, and approval systems, and they often issue requests for proposals or put concession opportunities out for competitive bids. This guide will take you through the key steps of how to rent space at an airport, from understanding the airport's minimum standards to negotiating the lease agreement.
How to rent space at an airport
| Characteristics | Values |
|---|---|
| Benefits | Airports can be great for business as they have a large number of potential customers and can showcase a brand. |
| Airports can generate big sales numbers. For example, food and beverage tenants at Hartsfield-Jackson Airport generated sales that averaged $1,970 per square foot in 2011. | |
| Airports are becoming magnets for small businesses. | |
| Airports provide a captive audience, especially if a flight is delayed. | |
| Challenges | Airports are quasi-governmental and heavily focused on security, which can make the process of setting up a business difficult and bureaucratic. |
| Airports are unique landlords with their own requirements, processes, and approval systems. | |
| Rent is typically higher than in traditional stores. Airports usually charge a straight percentage rent with a net effective rent percentage ranging between 10 and 22 percent. | |
| Space is limited and every square inch is valuable. Tenants should understand their space needs and negotiate additional storage space if needed. | |
| Location is important. Some terminals may be busier than others, and a space near a security checkpoint can be heavily trafficked. | |
| Tenants should be aware that the landlord may have the right to relocate them and should negotiate this upfront if they are not willing to comply. | |
| Tenants should be familiar with the airport's minimum standards to operate a business and its procedures for approving a business. | |
| Tenants should research the competition and determine if their type of business already exists at the airport. | |
| Tenants should consider the accessibility of their business for customers and employees, as parking and public access may be limited. |
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What You'll Learn
Understand the airport's minimum standards and approval processes
Understanding the airport's minimum standards and approval processes is crucial when considering renting space at an airport. These standards are essential for maintaining excellent aeronautical services and promoting airport businesses' growth. They provide guidance on property-related issues, tenant concerns, and preventing discrimination in operations. Here are some key points to consider:
Minimum Standards for Aeronautical Activities:
Each airport has its own set of minimum standards, which are essential for ensuring the smooth operation of businesses within the airport. These standards cover various aspects, including maintenance areas, hangar areas, and aircraft storage. For example, the Dickinson Theodore Roosevelt Regional Airport has detailed requirements, such as a minimum maintenance area of 1,000 square feet and a hangar door width of at least 40 feet.
Compliance with Regulations:
Airports, especially federally obligated ones, must comply with specific regulations and grant assurances. For instance, the FAA encourages airport owners to develop minimum standards through publications like the FAA Airport Compliance Manual. Additionally, lease terms at federally obligated airports must adhere to grant assurances and any applicable state or local requirements.
Lease Agreements and Relocation:
Lease agreements at airports can be complex. Developers or landlords often retain the right to relocate tenants, impacting the visibility and foot traffic of the tenant's business. Tenants should carefully review and negotiate lease terms, including the possibility of rent adjustments based on enplanements (departing passengers) and the inclusion of a non-disturbance or recognition agreement to protect their business operations.
Security and Logistics:
Airports have unique security considerations and logistical challenges. Tenants should be aware of the limitations on products that can be sold and the potential constraints on storage space. Understanding your space requirements and negotiating for additional storage, if needed, is crucial before signing a lease.
Avoiding Exclusive Rights and Discrimination:
Minimum standards help prevent the granting of exclusive rights or discrimination in airport operations. This ensures a level playing field for all businesses operating within the airport.
When considering renting space at an airport, it is essential to thoroughly review and understand the specific minimum standards, regulations, and lease agreements applicable to that airport. This will help ensure a smooth and successful rental process and business operation within the airport environment.
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Research competition and viability of your business
Renting space at an airport can be a complicated process, but it can also be a great opportunity for small businesses to expand their customer base. Before you embark on this journey, it's crucial to conduct thorough research on the competition and assess the viability of your business in an airport setting. Here are some key considerations:
Researching the Competition:
- Airport Websites: Most airports have official websites that list the businesses operating within their premises. Browse through these websites to determine if a similar business to yours already exists at the airport. This will help you understand the potential competition and the uniqueness of your offering.
- Customer Base: Evaluate whether there is a large enough customer base to support your business. Airports cater to a diverse range of travellers, so consider if your products or services align with their needs and preferences.
- Marketing Partnerships: Explore potential partnerships with existing airport businesses. For instance, if you offer aircraft insurance, collaborating with an aircraft sales company could be mutually beneficial for referrals.
Assessing Business Viability:
- Location and Foot Traffic: Airports have varying levels of foot traffic across different terminals and security checkpoints. When considering a location, keep in mind that some areas may be more desirable and visible than others, impacting your sales.
- Lease Agreements: Lease agreements at airports can be complex. Understand the terms, including any clauses related to rent adjustments based on enplanements (departing passengers) or the landlord's right to relocate your business. Negotiate terms that protect your interests, such as the ability to reject a proposed relocation or terminate the lease under certain conditions.
- Space Constraints: Airport retail spaces often have limited square footage and storage space. Ensure you know your space requirements and negotiate for additional storage if needed before signing the lease.
- Bureaucracy and Delays: Operating in an airport comes with a certain level of bureaucracy and unforeseen delays. Be prepared for potential challenges and delays that may impact your sales and operations.
- Security Considerations: Airports have stringent security measures, which can affect the types of products you can sell and create logistical hurdles for supply management.
Conducting comprehensive research on competition and assessing the viability of your business in an airport setting is crucial. By understanding the market, lease agreements, and unique aspects of operating in an airport, you can make informed decisions about renting space and successfully navigate the complexities of this endeavour.
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Consider the location and foot traffic
When considering renting space at an airport, location and foot traffic are key factors. Airports are unique environments for businesses, with a hyper-focus on security and logistics, and space is at a premium.
Firstly, it is important to research the airport's layout and terminals to identify busy areas with high foot traffic. Some spaces near security checkpoints, for example, may be heavily trafficked. Different terminals may also vary in terms of passenger numbers, so understanding the airport's layout will help you choose a desirable location.
Additionally, consider the accessibility of your potential space. Parking and public access can be limited at airports, so ensure your business is easily reachable by customers and employees. Assess whether a long commute from the parking lot to your storefront will impact your operations and sales.
It is also worth noting that airports are typically owned by governmental entities or authorities, which may choose to lease out retail or restaurant spaces to separate entities. These landlords often have the right to relocate tenants, so be prepared for potential relocation and negotiate upfront any terms that may impact your business negatively.
Finally, understand the airport's minimum standards and approval processes. Most airports have minimum standards to ensure equal treatment for all businesses, and your proposal must demonstrate how your business will benefit the airport and its customers.
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Be aware of the unique requirements and conditions of airport spaces
Renting space at an airport comes with a unique set of requirements and conditions that set it apart from traditional retail spaces. Here are some key points to be aware of:
Security and Logistics
Airports have stringent security measures and logistical considerations that can impact the products you can sell and how you manage your supply chain. Due to the focus on security, you may face certain restrictions on the types of products allowed, and there may be additional protocols to follow when bringing inventory into the airport.
Space Constraints and Storage
Airport retail spaces are often limited in size, and every square inch is valuable. Tenants need to maximise their space utilisation, considering not just product displays but also storage, production, and customer service areas. Understanding your space needs and negotiating additional storage space, if required, is crucial before signing the lease.
Foot Traffic and Sales Variability
Enplanements, or departing passengers, are a critical factor in airport retail. Foot traffic can vary significantly depending on the airport, terminal, and location within the airport. Lower enplanements can impact sales, especially if an airline cuts routes or an airport loses its hub status. Therefore, it is essential to consider the potential impact on sales and negotiate rent adjustments accordingly.
Relocation and Lease Agreements
Airport developers or landlords often retain the right to relocate tenants. While they may cover moving expenses, the new location might not be desirable for your business. Negotiating the right to reject proposed relocation or terminate the lease in such cases is essential. Additionally, obtaining a non-disturbance or recognition agreement can protect your business if the airport owner or developer breaches their lease with you.
Operating Costs and Rental Rates
Airport locations typically come with higher operating costs and premium rental rates. Rents are often charged as a straight percentage of sales, which can range from 10% to 22%, or even higher in some cases. While sales figures tend to be lucrative, with passengers spending billions in airport stores and restaurants, it is crucial to carefully consider the potential sales and ensure that the higher costs are offset by higher sales.
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Negotiate the terms of the lease
Negotiating the terms of a lease for airport space can be a complex process, but there are several strategies that can help you secure favourable terms. Here are some key considerations:
Understand the Airport's Minimum Standards and Procedures
Before negotiating, familiarise yourself with the airport's minimum standards and procedures for approving businesses. Most airports have specific requirements that must be met, and understanding these upfront will help you navigate the negotiation process more effectively.
Location and Foot Traffic
Location is critical when negotiating your lease. Some terminals or areas near security checkpoints may have higher foot traffic, which can impact your sales. Consider negotiating for a specific location within the airport that aligns with your target customer base and business needs.
Rent and Sales Performance
Airports typically charge premium rental rents due to the high sales numbers generated by airport stores. Rent structures may be based on a straight percentage of sales or a net effective rent percentage. Understand the sales performance of similar businesses in the airport and use that data to negotiate favourable rent terms.
Storage and Space Constraints
Airport spaces are often limited in terms of square footage, which can be challenging when it comes to storage and operations. Before signing the lease, negotiate additional storage space if needed and maximise the available space for your business operations.
Relocation Clauses
In many cases, the developer or landlord retains the right to relocate tenants. While relocation expenses are typically covered by the landlord, the new location may not be desirable for your business. Negotiate the right to reject a proposed relocation and terminate the lease if necessary. Alternatively, you can negotiate a reduction in rent until sales reach a certain level after relocation.
Non-Disturbance or Recognition Agreements
Before investing significant resources into building out your retail or restaurant space, obtain a non-disturbance or recognition agreement with the airport owner. This agreement ensures that your business can continue operating under the original lease terms, even if the developer or landlord breaches their lease with the airport owner.
Enplanements and Rent Adjustments
Negotiate a clause in your lease that adjusts your rent if enplanements (departing passengers) decrease. Lower enplanements can result in reduced foot traffic and lower sales, so this clause can provide some financial protection for your business.
Remember, negotiating a lease at an airport can be a complex and bureaucratic process. Don't hesitate to seek legal or professional advice to ensure you are making informed decisions and securing the best terms for your business.
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Frequently asked questions
Renting space at an airport is a complicated process with many bureaucratic hurdles. The process may involve an agreement with the airport manager, approval from an airport commission or a government body. You will need to research the competition and determine whether your business meets the airport's minimum standards. If there is space available, you will need to review the lease and ensure all the terms are acceptable.
Airports are coveted locations for businesses due to the high volume of foot traffic, with hundreds of thousands of people passing through every day. This can lead to big sales numbers and excellent brand exposure.
Airports are unique landlords with their own requirements, processes, and approval systems. They are hyper-focused on security, which creates logistical challenges concerning supply and the types of products you can sell. Space is also at a premium, with every square inch being valuable.
Your proposal should demonstrate the viability of your business and how it can benefit the airport and its customers. It should also show that you are familiar with the airport's minimum standards and any relevant procedures. If you have proven airport experience, be sure to include this in your proposal.
