DWU CONSULTING

March 2026

Airport Real Estate Development & Highest-Best-Use Analysis

The Federal Framework

Airport real estate development operates within a layered federal regulatory structure that constrains how airport land may be used, what may be charged for its use, and how proceeds flow.

Grant Assurance 24 (Fee and Rental Structure) requires airport sponsors to "maintain a fee and rental structure for the facilities and services at the airport which will make the airport as self-sustaining as possible under the circumstances." Sponsors may charge below fair market value (FMV) to aeronautical tenants, but are required to charge FMV to non-aeronautical tenants. FAA's Revenue Use Policy merged this obligation with the prohibition on revenue diversion — meaning that a below-FMV non-aeronautical lease is treated as a form of revenue diversion (Source: FAA Revenue Use Policy, 64 FR 7720–21).

Grant Assurance 25 (Airport Revenues) requires that all revenues generated by the airport be expended for capital or operating costs of the airport, the local airport system, or other facilities directly and substantially related to air transportation. Revenue from the sale or transfer of airport real property is classified as airport revenue (Source: 49 USC § 47107(b)).

Grant Assurance 31 (Disposal of Land) addresses the sale of airport property purchased with federal grant funds, requiring disposal at FMV and reimbursement to the FAA in proportion to the federal share of the original purchase (Source: 49 USC § 47107(c)(2)).

Land Use Categories Under FAA Order 5190.6C

FAA Order 5190.6C, Chapter 22 (updated February 20, 2026), implements the FAA's Policy Regarding Processing Land Use Changes on Federally Acquired or Federally Conveyed Airport Land. The Order defines four categories of airport land use:

Land Use Category	Definition	FAA Action Required	Examples
Aeronautical use	Involves, makes possible, is required for safety of, or is directly related to aircraft operations	None	Runways, taxiways, aprons, hangars, FBOs, fueling, ARFF, ATC
Airport purpose	Directly related to actual operation or foreseeable aeronautical development; non-aeronautical components do not conflict with aeronautical needs	None	Terminal complex (including concessions, car rental counters, parking), FBO facility including parking
Non-aeronautical use	All other uses not aeronautical or airport purpose; aviation-related uses that do not need to be located at an airport	FAA consent (federally conveyed land) or approval (federally acquired land)	Hotels, warehouses, car rental facilities (stand-alone), flight kitchens, airline reservation centers
Mixed use	Both aeronautical and non-aeronautical components, where the non-aeronautical component could be located off-airport	FAA consent or approval	Mail distribution centers with air cargo operations, aircraft manufacturing with engineering/R&D, cargo operations with warehousing

For airport real estate development purposes, the critical distinction is between aeronautical use/airport purpose (no FAA action required) and non-aeronautical/mixed use (FAA consent or approval required). Residential use on airport property is prohibited.

The Highest-and-Best-Use Standard

FAA Order 5190.6C, Chapter 3, § 3.6 establishes the standard for valuing airport land when it is leased for non-aeronautical use or disposed of through sale: "Any 'highest and best use' determination should consider the probability of achieving such use and should not be speculative."

The highest-and-best-use analysis must be based on:

• The economic potential of the property
• Qualitative values (social or environmental) of the property
• Use factors affecting land use — zoning, physical characteristics, private and public uses in the vicinity, neighboring improvements, utility services, and access

For non-aeronautical leases, this standard feeds directly into the FMV rental rate requirement under Grant Assurance 24. A lease at below FMV — measured against the highest-and-best-use value of the property — is treated as a form of revenue diversion.

Appraisal practice at airports reflects this standard. Riverside County, California, contracts a master appraisal of its five county airports every five years, with the appraised FMV used both to set new ground lease rates and to adjust existing leases. Existing leases contain a provision that adjusts base rent to one-twelfth of 8% of the then-current FMV of the leased premises (Source: Riverside County TLMA, "Airport Master Appraisal Services RFP," December 2, 2024). The Metropolitan Airports Commission (Minneapolis-St. Paul) uses a peer-airport comparative method, deriving market-based rental rates for aeronautical ground leases from an analysis of unimproved aeronautical land rents at comparable airports — rates that ranged from $0.25 to $0.55 per square foot at MAC reliever airports as of 2023 (Source: MAC, "Reliever Airport Market Rent Update," 2023).

FAA Reauthorization Act of 2024: Section 743

The FAA Reauthorization Act of 2024 (Pub. L. 118-63), signed May 16, 2024, contains Section 743, which revises the scope of FAA authority over airport real estate projects. Key changes:

Narrowed jurisdiction. FAA retains authority to regulate projects that: (1) materially impact the safe and efficient operation of aircraft at, to, or from the airport; (2) adversely affect the safety of people or property on the ground from aircraft operations; or (3) adversely affect the value of prior federal investments. For projects where FAA has land use authority only over a portion of the project, the agency may not extend jurisdiction to non-aeronautical portions — reversing FAA's prior position (Source: Kaplan Kirsch & Rockwell, "FAA Reauthorization Act Makes Key Changes to Airport Law," May 14, 2024).

45-day notice process. Section 743 replaced the FAA's "Section 163 determination" process with a notice requirement. Sponsors notify FAA before proceeding with a project outside FAA jurisdiction. FAA has 45 days to assert jurisdiction; if it does not, jurisdiction is lost for that project.

Grant assurance limitation. Section 743 provides that FAA may not "directly or indirectly regulate or place conditions on... any project" for which it lacks ALP approval authority, "including through any grant assurance." The breadth of this language is untested but may limit FAA's enforcement tools for projects that fall outside its jurisdictional scope.

Revenue diversion penalty increase. Section 703 of the Act allows FAA to seek twice the value of illegally diverted revenue (up from 1x) in judicial proceedings, for funds diverted after the Act's enactment (Source: Kaplan Kirsch & Rockwell).

Non-Aeronautical Land Development: Named Airport Programs

Dallas Fort Worth International Airport (DFW)

The DFW Airport Board has developed one of the largest airport commercial real estate portfolios among U.S. airports. DFW's commercial development program generated $45 million in ground lease revenue in FY 2018 and $48.5 million in projected ground lease revenue in FY 2019 (Source: DFW Airport, ACRP Insight Events Presentation, April 2018).

Development districts include Passport Park Business Park (a logistics hub with tenants including Uline, Samsung Electronics America, Tempur & Sealy, and Romark Logistics) and Bear Creek Business Park (approximately 600 acres designated for corporate campus, medical research, retail/restaurants, and hospitality). The Hyatt Regency DFW and Bear Creek Golf Course contribute $3.6 million in annual revenue to DFW.

A 2025 economic impact study by The Perryman Group concluded that DFW contributed $78.3 billion in gross product and $146 billion in total expenditures to the North Texas economy in 2024 (Source: DFW Airport, "Study: DFW Airport Now Contributes $78.3 Billion Annually to North Texas," December 2, 2025).

Denver International Airport (DEN)

DEN occupies approximately 53 square miles (13,700 hectares) of land — the largest airport by area in North America. Of this total, approximately 16,000 acres are classified as non-aviation property (Source: Sasaki, "DEN Real Estate Strategic Development Plan").

DEN's Real Estate division has pursued development through a Strategic Development Plan that organizes non-aviation land into concentrated development districts along Peña Boulevard. Completed developments include the Westin Denver International Airport Hotel and the Final Approach development. Peña Station Next, a transit-oriented development surrounding the 61st & Peña commuter rail station, includes 30 acres available for long-term ground lease (Source: Greenwood CRE, "Peña Station Next").

In August 2025, DEN CEO Phil Washington announced an acceleration of the airport's land development program, citing the need for private-sector investment in horizontal infrastructure (water, sewer, electrical, roads, and fiber optic cable) to support further commercial development (Source: La Voz Colorado, "Denver International Airport Moving Aggressively to Accelerate Development of Airport Land," August 13, 2025).

San Diego International Airport (SAN)

San Diego County Regional Airport Authority reported ground rental revenue of $21,686,652 in FY 2024 (fiscal year ended June 30, 2024), representing 5.4% of total operating revenue (Source: San Diego County Regional Airport Authority, FY 2024 Annual Bond Disclosure Report).

Dallas Executive Airport (DEA)

In February 2026, the Dallas City Council approved a 40-year ground lease for an 87-room Country Inn & Suites by Radisson on the 1,070-acre Dallas Executive Airport property — the airport's first non-aeronautical development in over 30 years. The development agreement is structured as a ground lease, with the City of Dallas receiving increased revenues from sales, property, and hotel occupancy taxes (Source: City of Dallas, "Dallas Executive Airport Development Progresses with Hotel Construction," February 16, 2026).

Ground Lease Rates: Data Points

Airport ground lease rates vary by geography, use category, and property characteristics:

Airport / Authority	Rate (per sf/year)	Use Type	Source / Date
Tampa International Airport (TPA)	$0.30 (ground) + $0.05 (pond)	Non-aeronautical (Vandenberg Trust)	Ground Lease Agreement, April 2024
Miami-Opa Locka Executive Airport	$0.29 (county ground rent); $1.01 (sublease)	Aviation infrastructure	CBRE Appraisal, March 2025
Metropolitan Airports Commission (MSP relievers)	$0.25–$0.55	Aeronautical	MAC Market Rent Update, 2023
Sonoma County Airport (STS)	$0.40–$0.75	Aeronautical / non-aeronautical	FY 2024–25 Fee Schedule

A Rapid City Regional Airport (RAP) rate study by Frasca & Associates found that two independent appraisals suggested market rental rates for general aviation ground leases between $0.27 and $0.39 per square foot (Source: Frasca & Associates, RAP Rate Study, 2020).

Non-Aeronautical Revenue in Context

Property and real estate rents are one component of airport non-aeronautical revenue. ACI World's 2023 Airport Economics Database reported that at North American airports, property and real estate revenue or rent accounted for 8% of non-aeronautical revenue, within a non-aeronautical total that represented 33% of total airport revenue in the region. The global figure was 16% of non-aeronautical revenue in the same year. North American airports' non-aeronautical revenue is weighted toward car parking (24%) and retail concessions (21%) (Source: ACI-NA, "State of Airport Non-Aeronautical Revenues and Activities," July 2025).

The FAA Approval Process for Non-Aeronautical Use

When an airport sponsor proposes to use federally acquired or federally conveyed property for a non-aeronautical, mixed, or interim revenue-producing use, FAA Order 5190.6C, Chapter 22, §§ 22.9–22.10 prescribes the following process:

Step 1 — Sponsor submission. The sponsor submits to the FAA Region/ADO:

• Identification of the property and documentation of how it was acquired (grant agreements, conveyance documents, Exhibit "A")
• Current use of the property
• Current and future aeronautical demand (current master plan, forecasts, hangar waitlists)
• Proposed use, including anticipated duration

Step 2 — FAA evaluation. FAA evaluates the request based on: (1) reasonableness and practicality; (2) effect on aeronautical facilities; (3) net benefit to civil aviation; (4) compatibility with civil aviation needs (residential use is prohibited); and (5) NEPA coordination. FAA approval will not be granted if aeronautical demand for the land is likely to exist within the period of the requested use.

Step 3 — Documentation. The Region/ADO issues a letter of approval (for federally acquired land) or letter of consent (for federally conveyed land). The letter specifies: (a) the duration of the approval; (b) a requirement that the land will be returned to aeronautical use at the end of the approved period; and (c) a requirement that the sponsor obtain FMV lease rates.

For sale or disposal (as opposed to lease), the process requires ACO-100 written concurrence, a Federal Register notice (30-day public comment), NEPA review, height/obstruction analysis, and a FMV appraisal based on the highest-and-best-use standard.

Revenue Diversion: Enforcement for Below-FMV Leases

A non-aeronautical lease at below FMV is treated as revenue diversion under the Revenue Use Policy. The enforcement consequences include:

• Withholding AIP grants
• Withholding PFC approval
• Civil penalties up to 3x the diverted amount (49 USC § 46301(a)(3))
• Judicial recovery of 2x the diverted amount (per Section 703, FAA Reauthorization Act of 2024)
• Withholding other DOT transportation funding (transit, highway)
• Exercise of reversionary interests on federally conveyed property

Financial Considerations

FMV floor. Non-aeronautical ground lease rates are subject to a FMV floor. The FMV standard is the highest-and-best-use value of the land — which for airport land with access, visibility, and transportation connectivity may exceed the rate that the proposed tenant is willing to pay.

Lease term and reversion. FAA consent or approval for non-aeronautical use specifies that the land must revert to aeronautical use at the end of the approved period. This creates a tension with commercial tenants and lenders who seek long-term certainty — particularly for capital-intensive developments such as hotels or distribution facilities. DFW's commercial leases, DEN's Peña Station development, and Dallas Executive's 40-year hotel ground lease illustrate how airports have structured terms within this constraint.

Revenue classification. Ground lease revenue from non-aeronautical tenants is non-aeronautical revenue, which may be credited against the airline cost base under residual and hybrid airline rate-setting methodologies — reducing the airline rate requirement. At airports where non-aeronautical revenue is credited against airline costs, an increase in ground lease revenue from commercial development has a direct and calculable effect on landing fees and terminal rents.

Infrastructure investment. Non-aeronautical development requires horizontal infrastructure (roads, utilities, stormwater management) that may or may not be funded by the airport. DEN's August 2025 announcement that it would seek private-sector financing for water, sewer, electrical, roads, and fiber illustrates the infrastructure capital requirement associated with airport land development.