USA. San Francisco International Airport (SFO) yesterday issued its long-awaited Request for Proposals (RFP) for a much-expanded Duty Free and Luxury Stores concession.
The base term is approximately 14 years, plus a period of up to 365 days for construction of tenant improvements. An automatic extension period will be available to the tenant, if necessary, to ensure that the majority of premises in a new central retail plaza (if constructed) are operational for a full five years.
For each year of the lease, the base rent is the greater of the Minimum Annual Guarantee (MAG) or percentage rent offered by the winning bidder. The MAG for the first year of the lease will be US$42 million, adjusted annually.
Bids close on 15 September. The concession opportunity embraces eleven upscale duty free and luxury retail shops. “The successful proposer must deliver a strong commercial vision, demonstrated expertise, outstanding shops and customer service programme, and provide a passenger experience at SFO that is competitive with the world’s leading international terminals,” the airport company said.
As reported, the Duty Free and Luxury Stores contract (in the shape of the Post-Security Master Retail/Duty Free Concession Lease) has been held since February 1999 by DFS Group, which generated sales of around US$117 million last year.
Given SFO’s status as a major gateway for Asian visitors , and the airport’s ambitious commercial expansion plans (see below) the bid is certain to attract strong interest from multiple retailers. SFO first unveiled its plans for the tender at The Trinity Forum in Taipei in 2015, where it hosted a packed meeting for interested parties. The Moodie Davitt Report has provided updates on the tender plans since then, as well as tender plans for news-stand/speciality retail leases.
More details to follow.
To access the RFP click here.
TERMINAL EXPANSION TOUTED
As reported, SFO said it may also construct a single, central security checkpoint with a retail plaza located immediately post-security in the International Terminal during the next six to eight years. This new retail plaza is currently anticipated to include up to 30,000sq ft of concessions space, most of which would become duty free stores and luxury boutiques and be added to the premises under the Duty Free and Luxury Stores lease.
SFO serves more cities in China than any other airport in the Americas
The impact of this airport renovation is that the duty free and luxury stores tenant would build out its initial 47,126sq ft of premises over a 12-month period commencing in mid-2018 and later be required to add an additional “sizable” duty free and luxury store footprint in the central retail plaza.
Due to the unknown schedule for this substantial renovation and to allow for the duty free tenant to plan the new retail plaza along with the airport’s designers, a fourteen-year term is being recommended for the new Duty Free and Luxury Stores Lease.
The term also adequately allows for the amortization period needed for what may be two full build-outs of the duty free programme, SFO said.
Chinese traffic grows
In 2016, SFO posted record passenger numbers of 53.1 million, a growth rate of +6.1% year-on-year, with international traffic performing even better at +10%.
Importantly from a duty free and travel retail perspective, the airport gained two new destinations in China: X’ian and Hangzhou, while China Eastern also added the first non-stop service to Quingdao. These additions mean that SFO serves more cities in China than any other airport in the Americas.
The following tables show historical sales and PAX numbers at SFO
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