When we think of airports, planes, luggage, and control towers come to mind. But they go beyond that; there's a whole logistics universe within real estate that is often overlooked. Giancarlo Nicastro, CEO of SiiLA, hosted Cesar Worms, Real Estate Business Manager of Viracopos, in the latest edition of the SiiLA Podcast.

The conversation took place at Viracopos Airport and focused on understanding how logistics operations work in the airport world. Here's an excerpt from the conversation, and you can watch the full episode on YouTube or listen on Spotify.

Giancarlo Nicastro: Cesar, could you talk a bit about how the real estate business area within an airport started and what the routine is like?

Cesar Worms: Yes, certainly, let's dive into it. The airport had a commercial management very focused on airport retail, that is, on shops. The airport management always saw the possibility of developing areas within the airport site, beyond the areas destined for airport infrastructure. Therefore, there was a lot of land available for development and real estate exploration. I was invited by the director of Viracopos to lead this development.

GN: We, who typically visit airports as tourists and passengers, I believe the bureaucracy within the airport, for this side here, must be much more complicated. Could you share with us what this universe is like and how real estate development works?

CW: Let's separate the airport into 2 major segments. The regulated segment covers all operational aspects, including passenger operations, cargo operations, and access control. So, let's talk about the airport from an operational point of view. This is regulated by the National Civil Aviation Agency (ANAC) and is a fairly strict regulation. However, when you look at the concession contract, specifically the Viracopos concession contract, it deals with the possibility of commercializing spaces within the airport at market prices agreed upon by the parties. This dissociates the real estate exploration part of the airport from the tariff issue. Therefore, we need to demystify the idea that it's much more difficult. It is a regulated environment, yes. But it is a real estate exploration environment where the contract itself establishes this.

GN: With your statement, you recently mentioned in an interview with REsource that the market may begin to see the airport as a major distribution center.

CW: Not only can it, but it should. There is the concept of airport development, known as an aerotropolis. This concept was developed by a professor at Columbia University, John Kasarda, who helped us develop the master plan for Viracopos. Basically, the idea is that the airport is a centrality, and from this centrality, economic activities arise in its surroundings, including real estate development. So, let's talk a bit about the case of Viracopos. It has a characteristic focused on cargo transportation, being a cargo airport. A large part of our revenue here comes from cargo, so what is Viracopos' first attraction? Logistics and warehouses. And with warehouses, we can bring in industries. By bringing in industries, can we think about hotels? Yes. Can we bring retail outside the passenger terminal? Yes. Therefore, we start to create a cluster around the airport. It is a center around which all these real estate activities develop. Starting with the logistics segment, due to its cargo vocation, considering that more than 40% of the air cargo entering Brazil passes through Viracopos.

GN: One of the things I always say, including in our SiiLA Academy course, is about logistics serving for storage. The logistics centers we monitor and work with data on at SiiLA are mainly for cargo and goods storage, not for industry. So, if 40% of the cargo arriving in Brazil passes through Viracopos, that makes total sense. The airport, which is still very recent, how do you price a lease, an occupancy? What are the inputs you take into consideration?

CW: First, let's differentiate between storage and cargo transit. The airport has always been seen as a transit location for cargo. Therefore, within airports, the areas designated for cargo operation and movement are generally small, especially before airport concessions. This is because the cargo passes through the airport and is taken elsewhere. So, these transit areas, called "line A," are those located in front of the aircraft apron, where prices are higher, and the areas are smaller. Regarding pricing, what variables do we consider? What are the advantages for the operator to be here inside? First, the speed of operation. Transiting cargo between the aircraft and your warehouse while being at the apron door is a major advantage. Second, is the insurance paid for cargo or movement higher or lower? Being inside the airport, it's lower, as the risk is lower than traveling on highways. It's difficult to quantify, but we know that the customer is willing to pay more for this operational ease.