Building A Hangar? Remember This Dirty Word…”Compromise”

Hangar Site Land ImprovementPoliticians, it appears, have no room for compromise. Yet it is an inescapable element of politics, marriage, business, and even leisure. And as far as I can tell, compromise exists in even simpler things, too, like building a hangar. 

Building a hangar at an airport is actually a major exercise in compromise. Many interested parties will influence every step of the process. The FAA, EPA, DNR, TSA, BOA, the airport sponsor, the surrounding community and a multitude of state and local agencies may impact and impede your efforts to build that perfect hangar.

There exist three elements that one needs to consider first. They are Budget, Location, and Size. Placing these three items in the order of importance is your first exercise in compromise.

Budget

Your budget needs to take into account several items that may include the desired size of the hangar, the materials it is made from, the accessories within, the extent of any build-outs, the type of hangar door desired. Other costs that will impact your budget over the long term include fees associated with land lease, property taxes, association fees, and any other fees, permits, or nuisance taxes you may discover along the way.

Of these, the land lease is probably the most important variable to understand because you may never recover any of your investment. The leasing of public land (or private for that matter) consists of a cost per square foot over a specific length of time (term). The price per square foot varies wildly from airport to airport and from state to state. The rate is based upon demand, extent of site improvements, and services provided at the airport (ground and air). HangarSphere has witnessed rates as low as $.08 per square foot per year but routinely observes rates in the $.30-$.50 range at larger metropolitan airports. These rates may fluctuate with CPI or may be pegged to a predetermined schedule of rate increases over the life of the term.

Entire Lot, Footprint + Buffer, & Footprint 

Of course, all airports are run differently and what the lease rate applies to can vary. The square foot lease rate can be applied one of three ways. It can be applied to the entire lot of land, the footprint of the hangar plus a buffer of ten to twenty feet, or just to the footprint of the building itself. If you do the math, all three scenarios will yield three entirely different annual costs.

The rate per square foot is just one-half of the lease equation. The other half is the duration of the term. Like the rate, term lengths differ greatly. HangarSphere has witnessed terms that are year-to-year and others that eclipse the 100-year mark. 20-40 year terms are most commonplace. The FAA sees anything over 50 years as a “disposal of airport property.” (Source: Wisconsin Bureau of Aeronautics)

What happens when the lease term expires?

This is a very important question to ask. Because the land is leased and not yours, you may be faced with forfeiting the building when the term expires. Therefore, it is in your best interest to secure the longest term possible to amortize the building cost over the life of that term. Contracts are dynamic. Get creative and add as much favorable language to the lease agreement as possible. Add options like the “right” to renew the lease after the original term expires with additional 10-year increments or whatever length suits your needs. If you don’t ask for it, you won’t get it. For example, if you hear of a lease that is a “40/10/10,” you should interpret that as a 40-year term with two (2) 10-year extensions. The extensions could be predicated on conditional statements within your agreement so ensure those conditions can be met by you.

The airport sponsor, whoever that may be, has a fiscal responsibility to the taxpayer to ensure the best financial outcome for the airport. At the expiration of the term, the airport may pursue any of the following options. They may…

  • Adopt a year-to-year lease with you
  • Renegotiate an entirely new lease
  • Terminate the lease, assume ownership of your hangar, and rent the hangar to other tenants willing to pay more than you.
  • Demolish/disassemble the building to make room for airport infrastructure (runways, taxiways, etc).

There exist two key takeaways regarding lease agreements. The first is to remember that the land your hangar sits on is not yours and you must be willing to hand the hangar over to the airport at the completion of the term (unless you opt to disassemble it and take it with you.) The second takeaway is to make it clear to the sponsor that your hangar is an investment in the airport and the surrounding community both in the way the airport qualifies for funding and jobs, respectively. This reality must be leveraged with the airport sponsor to achieve the best lease agreement possible.

Location

The location is actually a three-part issue. But this time, it is all about “Location, Location, Orientation!” where you need to consider the location of the desired airport, the location of the hangar inside the fence, and the orientation of the hangar once it is constructed. Again, compromises may need to be made.

Desired Airport Location

Your desired airport may be a quick five minute ride down the road, possess precision approaches, have a control tower, and have multiple FBOs that offer very competitive prices for 100LL and Jet-A. However, you’ve discovered a series of unfortunate truths. All hangars are full, the waiting list is measured in years, and the land that is available for new hangar construction has yet to be improved with proper soils, utilities, and taxiways.

The nearest alternative airport is thirty minutes away but it possesses shovel ready hangar sites with existing taxiways and utilities. Advertised lease agreements are $.35 a square foot applie to the entire lot with 20/10/10 term lengths. This airport does not have instrument approaches, no control tower, and higher fuel prices. The compromises (perhaps concessions) are beginning to add up.

Desired Location and Orientation 

Inside The Fence

With the airport location selected, it is now time to select the location inside the fence. Be sure to ascertain all the various plots of land on the field that are shovel ready. Some plots may possess different lease rates due to numerous reasons. They may include availability of certain utilities (water, sewer, natural gas, fiber optics), parking, accessibility from a nearby interstate, height restrictions on the hangar due to the proximity to the runway, etc. The load bearing capacity of some taxiways/ramps may also prevent you from selecting a key position at the airport if you are an operator of a larger aircraft.

Orientation of your hangar can be a crucial decision. In the northern latitudes where snowy winters are commonplace, the plots that will be leased first are those that can offer a hangar door with southern exposure. If your airport is opening up new sites for hangar development, be sure to be the early worm and select a site that will permit you to build a hangar where the door and ramp will enjoy a south or westerly exposure. Another item to consider is that of the prevailing winds as most hangar doors have wind speed limitations when the door is in operation. If you live in the Great Plains, this is a worthy consideration.

Size 

The size of your hangar is probably the easiest of the three key elements to consider. First and foremost, it must be large enough to comfortably fit your aircraft and all of its accessories. But as referenced earlier, the height of your hangar may be limited due to its proximity to the runway or because it might obscure the visibility of those in the control tower.

When all is said and done, it is far easier to buy an airplane than it is to build a hangar. Multiple opportunities for compromise exist by themselves but when added together will compound to the point where your end result is a far cry from the hangar you had envisioned in your mind’s eye. Before you launch into this endeavor, keep an open mind, ask questions, and be patient.