Sports Venues New Stars In Real Estate Development

By CHUCK GREEN

Professional sports stadiums are an anchor for a growing number of real estate developments as teams capitalize on Americans’ desire for all-encompassing experiences.

Based on a count from RCLCO Real Estate Consulting, between the National Football League, National Basketball Association, National Hockey League, Major League Baseball, and Major League Soccer, there are 43 venue-anchored real estate development projects on the ground, with seven more under construction. Another 34 are being considered.

Last month, RCLCO announced the launch of a new proprietary Venue-Anchored Development Tracker for every major league stadium in the U.S. and Canada. Users can find information about existing, under construction, and planned venue-anchored developments.

During a recent presentation, Vice President Alex Shaia talked about what’s driving the change.

“What we’re seeing is that not only are owners interested in managing a team and owning a team, they’re interested in improving the game day experiences, diversifying their revenues; really playing a role in the real estate development around them. And what that results in are really great projects,” Shaia said.

And with more than 40 venue leases across the five leagues expiring next decade, Managing Director Joshua Boren said this is more than just a trend to watch.

“As rising franchise values and new ownership continue to increase, and teams look for additional ways to expand their brand and increase revenues, real estate will continue becoming an even more critical component of these transactions and the industry’s future,” Boren said in a statement.

What’s behind the popularity of these developments?

Sports teams and their venues are deep in the psyche of humans, said Eric Buckels, associate account director at Dimensional Innovations. He helps develop fan and player experience projects for professional and collegiate sporting facilities.

“It’s natural that people of these communities yearn to be more involved with and near their teams and venues and, with that, there’s an opportunity for developers to create these experiences and value,” Buckels told The Mortgage Note.

Buckels said it is smart for teams to develop the area around their stadium because it creates a year-round destination for fans and tourists.

“More teams and owners are seeing their brand and the real estate around where their team plays as monetizable assets,” Buckels said.

And as team owners see other venues succeed, they want the same so there is some copycatting taking place, according to Jack Mula, an attorney who works in professional sports and real estate.

“Just as winning pro team roster development gets copied by teams struggling to consistently reach the playoffs, so now is the stadium as an anchor gaining widespread adoption amongst more organizations throughout all professional leagues,” Mula said.

What are the pros and cons of these developments?

Owners who want to bring in more money by building mixed-use developments that include luxury apartments and shopping malls say these additional features help unite the community, positively impact the local economy, attract businesses and talent to the area, and pull in other major events such as concerts.

But state and local governments often subsidize the construction of major league sports venues, and some opponents argue they do not drive the additional economic activity promised.

It is estimated that taxpayers spent $33 billion to build stadiums in North America between 1970 and 2020, with the median public contribution covering 73% of costs.

Victor Matheson, a professor at College of the Holy Cross in Worcester, Massachusetts, specializes in sports economics. He told The Mortgage Note that having professional teams could theoretically increase property values in a metro area, but the taxes could affect any benefits for residents.

“There’s some evidence that stadiums and arenas do increase property values in the vicinity of the facility but those impacts fade rapidly generally becoming insignificant within under a mile,” Matheson said.

“The problem is that the taxes required to pay for stadiums and arenas can serve to drag down property values balancing out any gains.”

Baseball is leading the way when it comes to mixed-use properties with 16 ballparks having a related development, according to RCLCO.

“We think they’ve been really successful partially because of the number of games they play,” Shaia said.

Buckels agrees, saying the number of home games held in baseball stadiums contributes to additional vibrancy in a community.

“It makes perfect sense that MLB’s leading the way. Baseball stadiums are often in prime urban spots that naturally evolve into year-round hubs for dining, shopping, and entertainment,” Buckels said.

MLB teams are planning for continued success in this area. According to RCLCO, the team or owner is involved in 83% of planned venue-anchored developments.