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BWI Air Cargo Facilities Poised for Expansion

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As passenger-focused investments and improvements continue at BWI Thurgood Marshall Airport, the owner and operator of a large portion of the accompanying air cargo facilities is also preparing for growth.

The Aviation Facilities Company (AFCO) of Virginia recently announced the selection of Jones Lang LaSalle (JLL)’s Mid-Atlantic Industrial team to procure tenants for its 32-acre Midfield Air Cargo Complex at BWI.

According to an accompanying release, the site can accommodate up to 300,000 square feet of build-to-suit facilities and has 800,000 square feet of service apron space available.

The timing seems right, considering the $105 million expansion of international facilities slated to occur at BWI by 2017. That expansion could lead to new or increased requirements for facilities supporting airport and aviation-related entities that are separate from the passenger realm.

“BWI has been one of the fastest-growing airports in the country in recent years,” said Mark Levy, managing director of JLL’s Mid-Atlantic Industrial Group and the team’s Baltimore Market Lead. “We are confident that there is abundant demand for this space.”

It’s a Wild World

AFCO’s current capacities at the North Cargo Complex on Air Cargo Drive include five buildings with slightly more than 164,000 square feet of cargo handling space and 58,000 square feet of office space.

The complex also includes nearly 83,000 square feet of apron space, in addition to 175,000 square feet of adjacent airport-managed common-use apron space.

“Most of our current space is dedicated to aeronautical type uses,” said AFCO President and CEO Chuck Stipancic. It supports other uses as well, such as limousine and ground handling services, and the state of Maryland also maintains a vaccine storage facility at the complex for emergency purposes.

Among AFCO’s more unusual tenants is the United States Fish & Wildlife Service, which operates its sole wildlife inspection station in the mid-Atlantic region within AFCO’s Building F.

Specialized services at this facility include the processing of hunters shipping game in either finished form or destined for a taxidermist, in addition to shipments of live animals, fish and game and wildlife products for commercial purposes.

Breathing Room

The Midfield Air Cargo Complex, which AFCO holds under a long-term lease, represents the only significant land parcel available at BWI Marshall for new service facility development and construction.

AFCO already owns and operates one facility in the Midfield Complex, the 60,000-square-foot Cargo Building G.

“We have development rights on approximately 25 acres in the Midfield space in terms of raw land,” Stipancic said. “JLL is going to work with us to market, promote and develop our opportunities there.”

To date, AFCO’s own leasing efforts have apparently been more than adequate, which is evidenced by a current vacancy of only about 15,000 square feet within all of the existing buildings. “That’s why we’re ready to pull the trigger on new development,” Stipancic said.

The only problem, if it qualifies as one, is that AFCO’s leasing efforts have been decidedly local.

“JLL has the national and international exposure we’re looking for to supplement our local and regional emphasis,” he said. “They’re going to help us focus on some primary players who aren’t in the area [yet].”

The Forecast

Record-breaking annual domestic passenger growth from 2010 to 2013 at BWI Marshall gave way to a 1.8% decline in 2014. International passenger numbers have held strong, however, having registered 27% growth in February 2015, compared to the same month in 2014. Overall, the airport experienced a 13.5% increase in international passenger traffic in 2014.

At the same time, air cargo numbers at BWI declined 3.5% last year, even while the International Air Transport Association reported an overall demand growth of 2.4% in that sector for North American airlines.

Nevertheless, the Metropolitan Washington Council of Governments’ September 2014 Status Report on the region’s airports suggests that while current growth in air cargo is slow, it is showing signs of improvement. Industry forecasts predict between 2% and 8% annual growth during the next two decades.

Similarly, a Working Paper published in 2013 by Senior Research Associate David Versel of The George Mason University Center for Regional Analysis indicates that while the demand for domestic air cargo has been in decline during the past decade, international air cargo has been more resilient.

Despite slow sector growth and the fact that air cargo hasn’t exactly kept pace with passenger volume at BWI Marshall, it’s anticipated that additional cargo capacity will be necessary once international passenger expansions are completed.

Steady Skies

The core business from AFCO’s largest tenants — FedEx, UPS and Southwest Airlines — appears to be steady for the foreseeable future. But there’s a new potential client that could eventually add to the mix.

“We don’t have any direct contact with the [new] Amazon distribution center, which is about 13 miles away [in Dundalk],” Stipancic said. “But their business continues to grow, and with FedEx and UPS being the primary air servers for Amazon, that proximity should translate to a real benefit for BWI.”

Stipancic said, “The sooner we develop the Midfield Complex, the better,” although it isn’t yet known whether a single large building or multiple buildings will be most appropriate. “In any case, our objective would be to build quickly once we know and have a tenant on-site, within 12 to 18 months.”

Additionally, AFCO will have to accommodate a few other considerations tied to its Midfield ground lease. That includes the Maryland Aviation Administration’s (MAA) requirement that 75,000 square feet of existing cargo space on Elm Road eventually transition to the Midfield.

“One of the things we’ll need is a tug road to get to the facility,” Stipancic said. “There’s currently no way to get from the Midfield Complex to the passenger terminal. We’ll have to work with the MAA to get that built, but understandably, it’s not on their priority list just yet.”

As for the actual marketing and developing of the property, “Midfield is an ideal location for industrial tenants requiring custom-built facilities with close airport facilities,” Levy said. “BWI’s ongoing expansion will only increase demand for this land.”