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Page 4 — Retail Properties Quarterly — May 2018 www.crej.com • Meet the specific needs of travelers, • Surprise and delight travelers with unexpected or unique options, and • Generate critical nonairline revenue to help keep the airport’s costs low for airlines. Meeting the specific needs of travel- ers differs across the globe. In general, the most successful airports have a strong understanding of who their consumers are. For example, some of the most successful Asian airports focus on high-end retail, while some of Europe’s busiest airports dedicate a great deal of space to duty free. The common denominator among these airports is that they each do a great job of meeting their customers’ needs and wants.With that goal in mind, almost 70 percent of DIA’s concessions square footage is dedicated to food and bever- age – because that’s what U.S. custom- ers have responded well to, Heck said. “We want our airport to reflect the region it serves,” he said. So, there’s an emphasis of Colorado- and Denver- based restaurants, everything from Root Down and Elway’s to Smash- burger and Snooze. “It gives us a way to showcase our region” and hopefully entice those connecting here to plan a future trip to Colorado, he said. In addition to local restauranteurs, the airport likes local businesses that may operate a national brand, such as a Chick-fil-A or McDonalds.With mil- lions of passengers coming through the airport, a varied mix is important. “What we’ve found is that there’s plen- ty of demand for all different types of offerings,” he said. The tenant mix within each con- course is nuanced. Concourse A hosts the airport’s international flights (aside from United Airlines and Southwest Airlines), catering to an international traveler profile with a large square footage devoted to duty-free retail. Concourse B, which is all United Air- lines flights, sees a higher percent of its customers connecting – making grab-and-go concepts crucial – while Southwest’s C Concourse focuses on yet another business model and differ- ent kind of customer, Heck said. The airport handles all of its leasing and management for the concourses internally, working directly with the operators. Like all retail real estate managers, curating a blend of unique, memorable and balanced options is vital to the repositioning of space. The tenant curation is done through a combination of operators soliciting the airport and DIA seeking out particular operators that it thinks would do well. All of DIA’s spaces go out to the pub- lic in a request for proposal. After the RFP process, the airport negotiates a contract, which then goes through a City Council process – read at a com- mittee, approved by the Council and signed by the mayor – before it is offi- cially executed. From announcement of the RFP to Council approval, the whole process can take close to a year – and then the build-out starts. Leases are done on a percentage rent basis, with a minimum guar- antee, and then a percentage rent, which varies from the low-teens to more than 20 percent, Heck said. The terms typically are five, seven or 10 years, depending on the scope of the project and amount of capital invest- ment expected. DIA does not offer any tenant improvement budget, requir- ing the concessionaire to put in the capital. Great Hall Project Last August, the Great Hall project was approved by Denver City Council. The public-private partnership will repurpose levels five and six of the Jeppesen Terminal, including the cur- rent ticket counters as well as the open space under the iconic tented canopy. Moving, enhancing and con- solidating the security checkpoints will allow the airport to “recapture the original spirit of the terminal as a relaxing and vibrant experience, via new shops and restaurants, enhanced flight information displays, children’s play areas, relaxing seating and more,” a DIA press release stated. The project will include a pre- and a post-security component. The prese- curity area will be for people greeting and sending off travelers. The post- security component is going to be a large retail development. The renovation will create 63,000 sf of space for 50 commercial operators, according to Great Hall Partners, the development partner. By repurposing the space, the airport will get more capacity out of the Great Hall, which was built and designed for 50 mil- lion passengers a year – far below the more than 60 million passengers who started or stopped trips here in the past year. “This project is going to help give us the right level of capacity so that we can get well north of where we are today in terms of growth,” Heck said. Great Hall Partners is led by Ferro- vial Aeropuertos with Saunders Con- cessions and Magic Johnson Enter- prises/Loop Capital. The terms of the deal call for four years of design and construction followed by 30 years of operations and maintenance. While the leasing models will be similar to the concourse conces- sion leases, Great Hall Partners will procure the operators. There will be a rental revenue split between DIA and Great Hall Partners on an 80:20 basis. “We get 80 percent, and they get 20 percent,” Heck said. “In doing that, it gives us both skin in the game to make sure it’s offering what our cus- tomers actually need.” In April, Great Hall Partners released the first 10 RFPs for Great Hall conces- sionaires. Unlike the tenant makeup in the courses, the retail development will be more evenly balanced – as of now, it’s expected to be about 40 to 45 percent food and beverage and the rest retail operators, Heck said. “Denver’s passenger mix and demo- graphics present a highly attractive customer segment for retailers, ser- vices and restauranteurs alike,” said Ignacio Castejon, chief executive officer of Great Hall Partners. “We are looking to attract forward-thinking concessionaires while encouraging minority and small-businesses par- ticipation.” The team hopes the space will inspire “a new type of airport retailing, one that’s driven by the call to entre- preneurship and the spirit of the New AmericanWest,” Castejon said. “These ambitions reflect the attitudes and interests of the people whom this ter- minal will serve: a fast-growing popu- lation that is smart, well-educated and adventurous, many of whom are frequent fliers with long dwell time and have high disposable income.” All the tenants currently in the Great Hall are on holdover month-to- month agreements. These leases will terminate, and the operators can re- bid on spaces in the area through the RFP process. All this building and repurpos- ing means there’s a lot of upcoming opportunities for commercial real estate professionals at DIA. “We really welcome input and feed- back from any of your readers who might be interested in doing work at the airport,” Heck said. “We would love to hear from them.” s Continued from Page 1 DIA activity tracker Operating in an airport is different than operating a street location, for many reasons – from employee secu- rity requirements to functioning in smaller spaces and at a quicker pace. For that reason, an ideal operator is a company that has airport experience. The other key quality is for the tenant to know its brand well, so it doesn’t change or get diluted in the airport setting. “We believe in the power of brands,” said Patrick Heck, Denver Internation- al Airport’s chief commercial officer. “Root Down is a good example of a local brand that has proven extremely popular out here – and staying true to the brand they created on the street has been really important to the air- port.” As a DIA passenger, expect more concession changes in the years ahead. More leases will be announced this year as long-standing tenants close down and new operators open. Here is a list of the most recent food and beverage concessionaires that have signed agreements, as of early April, according to DIA: 1. Panda Express – A Concourse 2. Freshens – A Concourse 3. Great Divide – C Concourse 4. Shake Shack – B Concourse 5. Qdoba – B Mezzanine 6. Snooze – B Mezzanine 7. Hacienda – B Mezzanine 8. Osteria Marco – B Mezzanine 9. CityWok Sushi – B Mezzanine 10. Grabba Green – B Mezzanine 11.Wow Bao – B Mezzanine 12. Peet’s Coffee – B Mezzanine 13.Veuve Cliquot Raw Bar – B Mezzanine Retail Spotlight Great Hall Partners A rendering of the completed Great Hall project, which will create 63,000 square feet of space for 50 commerical users. Denver International Airport New Belgium Hub, near Gate B80, is one of the many local operators at DIA. Project map of B Mezzanine concessions.