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Sports arenas attract fans—and dollars—to neighborhoods in need

Investing in athletic facilities takes real estate development far beyond the ticket window

By Caroline Brooks | caroline.brooks@am.jll.com | @CarolineKBrooks

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Sports teams give their host cities a sense of culture, pride and the thrill of competition. Top professional athletes earn millions from the fans they put in the seats.

And those seats? Sports arenas can be a hot ticket for real estate developers and investors who see them as a way to turn around a neighborhood, boost the local economy and create jobs.

"Sports venues are really their own hubs of activity," said JC Pelusi, managing director for JLL’s Great Lakes region. "Think of them as the hub of a ‘hub and spoke’ model for the surrounding communities. For areas that are in need of reinvention, these are great opportunities for public-private partnerships."

An athletic facility is no short-term real estate venture, added Kevin Wayer, co-president of JLL’s Public Institutions practice. What begins with a building can extend for miles outside the arena and for years to come.

"Investing in local real estate is a commitment to the community," Wayer said. "The more public-private partnerships we have that invest in the community, beginning with the sports venues, the better chance we have to create a vibrant–and financially sustainable–culture.”

Wayer and Pelusi lead the real estate team overseeing the redevelopment of the former Civic Arena and adjacent to CONSOL Energy Center , the new home to the Pittsburgh Penguins, Steel City’s professional hockey team. The Penguins are seeking to recreate an entire “downtown Pittsburgh experience” around their arena.

Construction, slated to begin later this year, will transform nearly 28 acres around the arena into a vibrant and environmentally sustainable mixed-use neighborhood of retail and entertainment spots, as well as office and residential space. The new development is expected to create more than 4,000 construction jobs and 3,000 permanent jobs and generate more than $25 million in annual tax revenues once completed.

"The development underscores the value of public-private development," Wayer said. "From the public sector, this is all about regeneration and growth. Politicians and civic leaders can support these projects with the spirit that they’ll generate jobs, tourism and taxes over time. From the private side, real estate companies have tremendous opportunities to get their hands on projects that shift the entire market’s image—and generate a good return on their investment," he said.

Since 2000, 14 professional football stadiums have been built in the United States, opening their gates to an average of 68,000 fans per venue. These stadiums are no small investment: MetLife Stadium in East Rutherford, New Jersey, home to the New York Jets and the New York Giants, is the most expensive stadium in the world , at a cost of $1.6 billion to build. On paper, the stadium is owned by the New Jersey Sports and Exposition Authority, but the staggering price tag was shared by the two teams–not taxpayers.

Since opening in 2009, the area surrounding MetLife Stadium has benefited from investor interest and tourism dollars; most notably from Super Bowl XLVII in 2014, which generated between $550 to $600 million to the local economy.

"Thanks to sports venues, people and businesses are moving downtown and hitting the streets for entertainment. What was once vacant is now vibrant"

Kevin Wayer, co-president of JLL’s Public Institutions

Similar arrangements have transformed other cities in need of a facelift. Detroit and Cleveland are swelling with development projects thanks to Dan Gilbert, owner of Detroit-based QuickenLoans and the owner of the Cleveland Cavaliers NBA franchise.

In the last three years, QuickenLoans has opened new offices in metro-Detroit, spurring job growth. Gilbert has invested $1 billion in the city and today owns about 2.9 million square feet of real estate in the central business district.

In Cleveland, Gilbert has invested upwards of $600 million; the Cavaliers’ modernized arena, now known as "The Q," is surrounded by entertainment, hotels, other businesses and the Horseshoe Casino.

"Thanks to sports venues, people and businesses are moving downtown and hitting the streets for entertainment. What was once vacant is now vibrant," Wayer said. "Like Gilbert, urban-minded young entrepreneurs are seeing sports arenas as a magnet that entice visitors to urban cores and boost businesses."

Even lively and prosperous cities that aren’t in need of a real estate renaissance feel the benefits that athletic facilities bring to surrounding neighborhoods. Take Chicago’s North Side, where the storied Cubs baseball franchise has played their home games at Wrigley Field for a century.

Lauren Filo, a seven-year Wrigleyville resident, values the vibrancy of her neighborhood and doesn’t plan to leave the area anytime soon—despite the controversial renovations proposed for the stadium and surrounding area.

"I’ve only ever lived in Wrigleyville since moving to Chicago. The life is unbeatable: all public transportation options are steps away, limitless restaurants, and tons of energy and excitement," Filo said.

"There’s nothing like taking my dog for an afternoon walk and hearing the crowd cheer on the Cubs, having so many nearby options to entertain out-of-town guests, or even hear the summer concerts taking place at Wrigley. How many people can say they’ve heard Paul McCartney, live from their porch?"

With concerts in the summer and an ice skating rink in the winter, drawing millions of fans and tourists to America’s third-largest city, Wrigley’s pending renovation has fueled aggressive debates on planning and funding.

"Due to their size, visibility, revenue potential, and position as a multi-sector structure, sports arenas have multiple stakeholders that provide input,” Wayer said. “With heightened competitive interest from so many sectors, it needs to be an open conversation that extends from the planners, financiers and community leaders and citizens."

Those conversations may slow development and construction, but winning public approval is critical to high-profile projects like Wrigley Field.

"It’s important to engage the community very early on in the planning process, and to be informative often," said Erin Duffy, community outreach director for Alderman Tom Tunney, whose 44th ward includes Wrigley Field.

"We have ongoing discussions with Wrigley Field and it has now become a 365-day relationship. We have alliances with the City of Chicago and the local Chamber of Commerce, which know the benefits to the local economies and community by having the stadium become a year-round, multi-purpose entertainment venue."

And done the right way, real estate investors can make a positive impact on cities: economically and socially. "By investing in cities and communities, real estate advisors and investors can protect the profitability of existing assets – while taking on a crucial role in leading development efforts to guide cities and communities to a more stable future," Wayer said.


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