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Terminal move might spur land rush: Midfield project to free choice real estate

January 24, 2005

Overshadowed by the $974 million midfield terminal project is a potential economic development bonanza: the reuse of the existing terminal and surrounding land at Indianapolis International Airport.

More than 120 acres along Interstate 465 that today hold parked cars might someday house hotels, shipping operations or even a light-rail station after the midfield terminal opens in about three years.

Another 54 acres representing the terminal and its immediate surroundings will be available for aviation uses from air freight to corporate jets.

"Airport property is just valuable, valuable, valuable," said Bruce Strand, president of Denver aviation consulting firm Strand Associates Inc.

To put the 176 acres in perspective, FedEx uses almost 300 acres for its giant air cargo hub on the southeast corner of the airport. The Memphis-based company employs nearly 4,000 people here at its second-largest U.S. hub. It pumps into the local economy untold millions of dollars in everything from salaries to supplies.

Airport officials have yet to study reuse of the terminal and parking areas along I-465, but a consultant probably will be hired within a few years, said Dennis Rosebrough, spokesman for airport management firm BAA Indianapolis.

The Indianapolis Airport Authority owns the land and likely would lease it rather than sell it, given its proximity to taxiways and the need to maintain control over its use.

Often, developers won't invest to the same level as they would if they owned the land, said Ross Reller, vice president of real estate services at Meridian Real Estate.

Another factor that could affect development is building-height restrictions at the airport. But, in general, any land that fronts I-465 and is near the airport is in demand, Reller said.

Commercial real estate experts differ on what type of development is most suitable for the section closest to I-465, which now is a virtual sea of parking lots.

Overnight shipping firms could be viable candidates, said Bill Flanary, vice president of Colliers Turley Martin Tucker. "I'd see more industrial-type uses."

He doesn't envision much retail potential, in part because there isn't a large concentration of housing nearby. As for hotels-the Holiday Inn Select and Radisson Hotel operate at the terminal site-Flanary sees lodging springing up closer to midfield, along Six Points Road and Washington Street, where passengers will access the new terminal.

Others aren't so quick to dismiss more hotels and retail near the existing terminal.

"[I-465 frontage] is choice real estate. It's in between two interchanges. It's great access," said Mike Wells, president of Carmel-based commercial real estate firm REI Investments and a board member of the Indianapolis Airport Authority. And travelers will be able to access the new terminal from Perimeter Road, he said.

Possibly supporting that scenario is the fact that airport officials who once envisioned up to three hotels built at midfield now say only one is likely there.

As for retail, Wells said the area along I-465 can attract commuters traveling home from work.

On the other hand, Urban Space Commercial Properties President Brian A. Epstein sees a likely continuation of the mix of office and light industrial similar to what's now in place at Park Fletcher, across I-465 and southeast of the existing terminal.

"To me, the most logical thing would be the extension of Park Fletcher," Epstein said.

Airport consultant Strand pointed to airports that have focused on luring aviation-related uses. These might include catalog fulfillment centers, for example, that want to be close to FedEx. Any company that relies on just-in-time inventory, such as auto manufacturers, could benefit from air and interstate access.

"Clearly, the terminal complex is going to continue in aviation use, whether it's cargo or business aviation," Rosebrough said. "That is the most valuable asset ... . That is beachfront property."

Wells said airport officials might well target the area as part of an ongoing push to grow air-freight operations. A U.S. Postal Service package-sorting hub on the north end of the airport has been shuttered for years, except for a portion used as a truck hub.

The potential for making an airport the centerpiece of a commercial dynamo can be seen at Alliance Airport in Fort Worth, Texas. A brainchild of entrepreneur Ross Perot, the airport was designed in the late 1980s to be an industrial airport. It now is home to more than 130 companies with 20,000 employees.

Alliance has 4,500 acres of developed land, well beyond the 176 acres becoming available at Indianapolis. But Alliance demonstrates the scope of aviation development possibilities, with tenants ranging from a Bell Helicopter training base to a U.S. Drug Enforcement Agency aircraft storage and maintenance facility.

A more comparable model, perhaps, is the redevelopment of Pittsburgh International's former terminal after a midfield terminal opened in 1992.

That site includes a $12 million business aviation center that serves as a base for corporate and general aviation aircraft. Nearby, the Airside Business Park, a $35 million project spread over 24 acres, has a mix of tenants from engineering to technology firms.

How to configure the existing terminal area for commercial development is also up in the air. Some airport officials say the terminal's gates, which radiate out of the main building, are likely to be demolished. Conversely, the terminal's 1,800-space parking garage might have the most value.

Marketing the old terminal site could bring competition from an unlikely source-the airport itself.

At one point, St. Louis architectural firm Hellmuth Obata & Kassabaum identified almost 190 acres at midfield that could be used for hotels, restaurants and aviation businesses. One area is 78 acres between the airport's two parallel runways, and another is 110 acres west of the runways.

Combined, that's enough space for 20 Circle Centre malls. Most of the plots between the runways are just over six acres. Wells discounted competition between the two terminal sites. Much of the development at midfield will consist of businesses that directly support the new terminal, such as flight kitchens and rental car operations, he said.

His hunch: "Some developer will come along with a pretty dense mixed-use plan" for the old terminal area.

Other commercial real estate experts can imagine even more unconventional uses for the existing terminal. Flanary wondered about using it partly as a light rail station. As things stands now, airport planners see light rail connecting to midfield, with tracks swooping in from the west.

Flanary said the current terminal might even be needed at some point to take pressure off midfield, pointing to explosive growth in passenger traffic at Indianapolis-up 15.2 percent in November alone. Either use might necessitate connecting the existing terminal to the new one, perhaps via an underground people mover. Pittsburgh International uses such a system to transfer passengers between its terminal and parking areas.

The idea of accessing the midfield terminal from the east, where the current terminal stands, has been explored before. Rosebrough said former Mayor Steve Goldsmith asked the airport to analyze the feasibility of tunneling, but the cost was in the hundreds of millions of dollars. "I think everybody discarded that as an option," Rosebrough said.
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