New Airplane, No Hangar: Nationwide Hangar Shortages Create Problems for Owners

Aircraft sales are at record numbers as more people, including a number of first-time aircraft buyers, discover the benefits of aircraft ownership. Both the pre-owned and new aircraft markets are seeing incredible demand with minimal supply currently available.

Some new aircraft owners are surprised to learn their new aircraft doesn’t have a home hangar after the closing. Iver Retrum, a partner at Business Aviation Group, said the extent of the hangar shortage problem depends on geography but occupancy rates at most airports are 100% – or even higher.

If demand exists for additional hangars, why don’t developers recognize that demand and just build new hangars?

Retrum explained construction costs make it difficult to build new hangars and compete at prices tenants are used to, especially for the small airplane market of T hangars or small box hangars.

“A lot of these hangars are leased by airport authorities well below market rates, often with years’- or decades’-old agreements for $200 or $400 a month,” Retrum said. “New T hangars, considering today’s construction prices, would need to rent at something closer to $1,200 to $1,500/month, so it’s unattractive for a developer to even consider building while airports are charging so little.”

Larger corporate hangars create an even bigger challenge – literally, since business aircraft continue to get larger over time but lease rates haven’t kept up over the same period.

Meanwhile, airports are in a difficult position because they’re typically public entities and receive public funds. These funds typically can’t be used for the benefit of private entities so infrastructure investment can be challenging.

For example, a developer might consider building new hangars but if there is no taxi lane in place, the airport might not be able to contribute funding to build one.

“There really needs to be public-private partnerships to make new builds happen,” Retrum said. “Airports need to assume responsibility for the infrastructure and then ensure the infrastructure is usable – and useful – to all airport users.”

Retrum also reports seeing a change in the FBO model of subsidizing hangar rates in order to sell fuel, adding, “FBOs are realizing they’re in the real estate game more than the fuel game, so lease rates are increasing at most airports. This can help level the playing field for new developers to come into an airport.”

“Airports have to create an environment in which private enterprise can thrive. This requires good business planning and long-term strategy,” Retrum concluded, adding that Centennial Airport in Denver is a prime example of a public-private partnership in an area with high demand. Centennial Airport kept lease rates relatively unchanged but increased concession rates and established new building fees.