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September 2018 The Impact of Sports Venue Construction on Neighboring Commercial Real Estate September 2018 By Marianne Skorupski The Impact of Sports Venue Construction on Neighboring SeptemberComm 2018ercial Real Estate TheBy Marianne Impact Skorupski of Sports Venue Construction on Neighboring Commercial Real Estate The National Trend: From Suburban Visionaries to Downtown Catalysts By Marianne Skorupski Visionary. It’s not the first adjective one thinks of for a professional sports franchise when it builds a new stadium or arena, but clubs have a history of creating destination retail and entertainment venues from scratch. These new facilities are constructed where land is available,The National and that T rend:is usually From not in Suburban the already­activated Visionaries areas ofto town. Downtown Lower prices Catalysts for site assemblage are a priority for the club TheandVisionary its National investor. It’s not partners, Ttherend: first adjective whileFrom minimizing Suburban one thinks the of displacement Vforisionaries a professional of tobusinesses sportsDowntown franchise and residentsCatalysts when it buildsis a main a new objective stadium of or the arena, public but sector clubs V(alonghaveisionary a withhistory. It’ enhancings not of creatingthe first tax adjectivedestination revenues). one retailMost thinks and of theof entertainment for time, a professional a new venues stadium sports from or franchise arenascratch. is Thesebuiltwhen in it newan builds un facilitiesderutilized a new are stadium constructedpart of or a arena,metro where areabut land clubs that is havehasavailable, few a history demand and ofthat creatingdrivers is usually todestination spark not inorganic the retail already­activated revitalization.and entertainment Sometimes areas venues of town. that from isLower scratch. in a suburbanprices These for neworsite exurban facilitiesassemblage location; are constructedare recently a priority, wherestadium for the land cluband is available,arenaand its construction investor and that partners, isis followingusually while not the minimizingin pattern the already­activated set the by displacementresidents, areas and of is of businessesmigrating town. Lower downtown. and prices residents for site is assemblagea main objective are a ofpriority the public for the sector club andOnce(along its compl withinvestor enhancingeted, partners, new stadiumstax whilerevenues). minimizingbring Mostout tens ofthe the ofdisplacement time,thousands a new of ofstadium peoplebusinesses orper arena event and is residents overbuilt ain decades­longan is una derutilizedmain objective span—these part of athe metro are public customers area sector that with(alonghas fewdisposa with demand enhancingble income. drivers tax As to revenues). aspark result, organic developers Most revitalization. of the race time, to identify aSometimes new stadiumavailable that or propertiesis arena in a suburbanis builtto create in oran retailexurban underutilized and location; entertainment part recently of a metrodestinations, stadium area thatand for beforehasarena few constructionand demand after games drivers is following and to spark concerts. the organicpattern New setrevitalization. ancillary by residents, development, Sometimes and is migrating though, that is typicallyindowntown. a suburban takes yearsor exurban to reach location; fruition recently unless, itstadium is part ofand a arena construction is following the pattern set by residents, and is migrating downtown. master­plannedOnce completed, site. new W stadiumsashington, bring DC’ sout Capitol tens of Riverfront thousands neighborhood of people per serves event asover an a example:decades­long Major span—these League Baseball’ are customerss (MLB) NationalsOncewith disposa compl opeted,enedble income. newa new stadiums Aspark a inresult, 2008,bring developers butout thetens ar ofearace thousandsdid to not identify add of aavailable peoplematerial per propertiesnumber event ofover to restaurants create a decades­long retail for and pre­game entertainment span—these and post­game destinationsare customers revelry for —norwithbefore disposa many and afterapartmentsble income. games andandAs a condominiumconcerts. result, developers New residences ancillary race development,to within identify walking available though, distance properties typically of the tostadium—untiltakes create years retail to andyearsreach entertainment later fruition. unless destinations it is part of for a Mixed­usebeforemaster­planned and plannedafter gamessite. developments W ashington,and concerts. aroundDC’ News Capitol sports ancillary Riverfrontvenues development, are neighborhood increasingly though, servespopulartypically .as takesIn anSan example:years Francisco, to reach Major MLB’ fruition Leagues Giants unless Baseball’ are it isplanning parts (MLB) of a $1.6master­plannedNationals billion op developmenened site. a new Washington,t, park while in nearby2008, DC’ but sthe Capitol the National ar eaRiverfront did Basketball not add neighborhood aAssociation’ material numberservess (NBA) ofas restaurantsW anarriors example: are for under Majorpre­game construction League and post­gameBaseball’ on a $1s revelry(MLB)billion project.Nationals—nor many In op Detroit, apartmentsened a Littlenew andparkCaesar condominium in 2008,’s Arena but openetheresidences aread in did 2017, within not add home walking a material to distancethe NBAnumber of’s thePistons of stadium—untilrestaurants and Na fortional years pre­game Hockey later. and League’ post­games (NHL) revelry Red —nor many apartments and condominium residences within walking distance of the stadium—until years later. Wings,Mixed­use bring planneding all four developments of the city’s aroundmajor professional sports venues sports are teams increasingly back downtown popular. Inand San across Francisco, the street MLB’ froms Giants one another are planning, with the a Mixed­usegoal$1.6 ofbillion stimulating planneddevelopmen newdevelopments t,surrounding while nearby around development. the sports National venues In Basketball Cincinnati, are increasingly Association’ a $1 billion populars mixed­use(NBA). In W Sanarriors district Francisco, are sits under between MLB’ constructions theGiants city’ sareon baseball aplanning $1 billion and a $1.6footballproject. billion stadiums.In Detroit,developmen Littlet, Caesarwhile nearby’s Arena the opene Nationald in Basketball2017, home Association’ to the NBAs (NBA)’s Pistons Warriors and Naaretional under Hockey construction League’ ons a(NHL) $1 billion Red project.InWings, addition bringIn Detroit,toing the all displacement fourLittle of Caesar the city’ of’ss Arena somemajor residenopeneprofessionaldts, in sports­related 2017, sports home teams toneighborhood backthe NBAdowntown’s Pistons building and andacross has Na ripple thetional streetef Hockeyfects from for League’onethe ofanotherfices (NHL) and, with multi­ Red the Wings,housinggoal of bring stimulatingmarkets.ing all Because fournew of surrounding the stadium city’s majorconstruction development. professional requires In Cincinnati,sports many teams skilled a $1back laborersbillion downtown mixed­use for a andduration acrossdistrict of thesits3­4 streetyears,between from supply the one city’is another limiteds baseball , forwith other andthe typesgoalfootball of of stimulatingstadiums. projects. In Thenew Minnesota, increasingsurrounding the demand V development.iking Lakes for new mixed­use In homes, Cincinnati, developmentoffice a buildings$1 billion will andmixed­usebring distribution multifamily district centers, re sitstail, between ofisfice, resulting hotel, the city’medicalin as strainbaseball office, on andandthe industryfootballmore to stadiums.theand area increased surrounding costs, particularlythe Minnesota given Vikings’ 1.5 million corporate residential headquarters construction and trainingworkers facilities. left the industry when the Great Recession hitInIn addanditionition fewer toto than thethe displacementhalf of those jobs of some came residenresidenback. ts,ts, sports­related neighborhood building has rippleripple efeffectsfects forfor thethe ofofficefice andand multi­ Featuredhousing markets. Market: Because Atlanta’ stadiums Sports­Centricconstruction requiresrequires Development many skilled laborerslaborers Charts forfor a T durationwo Paths of 3­43­4 years,years, supplysupply isis limitedlimited forfor otherother typestypes of projects. The increasingincreasing demand forfor new homes, officefice buildings and distribution centerscenters isis resultingresulting inin aa strainstrain onon thethe Between 2014 and 2017, the Atlanta market built two new professional sports stadiums: SunTrust Park, home to MLB’s Atlanta industryindustry and increasedincreased costs, particularly given 1.5 million residentialresidential constructionconstruction workers leftleft thethe industryindustry when thethe Great Recession Braves, and Mercedes­Benz Stadium, home to the National Football League’s Atlanta Falcons and Atlanta United of Major League hit and fewerfewer thanthan half of thosethose jobsjobs came back. Soccer. These developments monopolized a large portion of the local construction labor during this time; in fact, the industry needed toFeatured recruit from Market: outside th Atlanta’e region tos Sports­Centricfill vacancies. The increase Development in the region’ Chartss construction Two Paths employment is indicated on the adjacent chart. Between 2014 and 2017, thethe Atlanta market built twotwo new professional sportssports stadiums:stadiums: SunTrustrust Park, homehome toto MLB’ss Atlanta Braves, and Mercedes­Benz Stadium, home toto thethe National Football League’ss Atlanta Falcons andand Atlanta United ofof Major LeagueLeague Soccer.. These developments monopolized a larglarge portion of thethe locallocal constructionconstruction laborlabor during thisthis time;time; inin fact,fact, thethe industryindustry neededneeded toCONSTRUCTIONto rrecruit fromfrom outside ththEMPLOYMENTe regionregion toto fillfill vacancies. The increaseincrease inin thethe region’region’ss constructionconstruction employment isis indicatedindicated onon thethe adjacentadjacent chart.

CONSTRUCTION EMPLOYMENT

Source: JobsEQ, NKF Research; September 2018

Commercial development surrounding these new stadiums tells two different stories. At SunTrust Park in suburban Cobb County, the stadium anchors a brand­new mixed­use development called The Battery. The Battery is the first master­planned, “18­hour” destinationSource: JobsEQ, in NKFthe countResearch;y and September is owned 2018 by the Braves. The site was previously commercial­zoned, leaving limited development obstacles once approved. Since 2014, 389,000 square feet of retail, 264 hotel rooms, 1,100 apartment units and 352,000 square feet of office space has been built in the development. In July 2018, thyssenkrupp Elevators announced it would be establishing its new Commercial development surrounding thesethese new stadiums tellstells twotwo differentferent stories.stories. At SunTrustrust Park inin suburbansuburban Cobb County,, thethe Americas Complex headquarters at The Battery. Construction is anticipated to start soon on a new movie theater and a 140­room stadium anchors a brand­new mixed­use development called The Battery.. The Battery isis thethe firstfirst master­planned, “18­hour”“18­hour” Aloft hotel. destination inin thethe county and isis owned by thethe Braves. The site was previously commercial­commercial­zoned,zoned, leavingleaving limitedlimited developmentdevelopment Sittingobstacles in downtownonce approved. Atlanta Since near 2014, the 389,000Georgia sWquareorld Congressfeetfeet of retail,retail, Center 264 hoteland therooms,rooms, Georgia 1,100 Aquarium, apartment Mercedes­Benzunitsunits andand 352,000352,000 Stadium squaresquare wasfeetfeet constructedof offficefice space just has to thebeen south built of inin thethethe formerdevelopment. Georgia InIn Dome. July 2018, It generated thyssenkruppthyssenkrupp new infrastructure Elevators announced upgrades, itit wouldincluding bebe establishingaestablishing pedestrian its itsbridge newnew overAmericas Northside Complex Drive headquarters from the Vine at City The MAR BatteryTA .(transit). Construction station. isis The anticipated only development toto startstart soonsoon directly on a related newnew movie to the theatertheater stadium andand is theaa 140­room140­room creation Aloftof The hotel. Home Depot Backyard on the site of the Georgia Dome, a greenspace connecting Northside Drive with Centennial Park. Building on this momentum in downtown, State Farm Arena, home to the NBA’s Hawks, is underway on a $192 million renovation. Sitting inin downtown Atlanta near thethe Georgia World Congress Center and thethe Georgia Aquarium, Mercedes­Benz Stadium was The largest nearby commercial development in the planning stages is The Gulch, a 27­acre site recently purchased by CIM Group. It constructed justjust toto thethe south of thethe formerformer Georgia Dome. ItIt generated new infrastructureinfrastructure upgrades,rades, includingincluding aa pedestrianpedestrian bridgebridge would be Downtown’s largest development since Peachtree Center in the 1960s, with more than nine million square feet of office over Northside Drive fromfrom thethe Vineine City MARTA (transit)(transit) station. The only development directly relatedrelated toto thethe stadiumstadium isis thethe creationcreation space, 1,500 hotel rooms and one million square feet of retail space. of The Home Depot Backyard on thethe site of thethe Georgia Dome, a greenspace connectingconnecting Northsiderthside Drive with Centennial Park. BuildingWhat Are on thisthis the moment Implicationsum inin downtown, for Our State Clients? Farm Arena, home toto thethe NBA’’ss Hawks, isis underwayerway onon aa $192$192 million renovation.renovation. The largestlargest nearby commercial development inin thethe planning stages isis The Gulch, a 27­acre sitesite recentlyrecently purchasedpurchased byby CIM Group. ItIt New stadiums provide an opportunity to rejuvenate underutilized real estate. For current property owners, this can result in increased would be Downtown’s lalargestrgest development since Peachtree Center inin thethe 1960s, with more thanthan ninenine million squaresquare feetfeet ofof ofofficefice values, particularly if a mixed­use project is completed. Planning and zoning allowances from the local jurisdiction are important for all space, 1,500 hotel roomsrooms and one million square feetfeet of retailretail space. property owners, as adjustments may be required to the initial plan before approval is granted. Office and retail tenants seeking to be Whatpart of a Are new ,the well­amenitized ImplicationsImplications development forfor Our usua Clients?lly will find opportunities, but at a higher price than in nearby existing buildings. A big part of any sports­driven project’s success will rest in its ability to complement existing and future developments – to become part of a New stadiumstadiums provide an opportunity toto rejuvenarejuvenatete underutilized realreal estate. For currentcurrent property owners,owners, thisthis cancan resultresult inin increasedincreased well­planned and active office, residential and retail environment. values, particularly ifif a mixed­use project isis completed. Planning and zoningzoning allowances fromfrom thethe locallocal jurisdictionjurisdiction areare importantimportant forfor allall property owners, as adjustments may be requirerequired toto thethe initialinitial plan before approval isis granted. Offficefice andand retailretail tenantstenants seekingseeking toto bebe part of a new,, well­amenitized development usuallylly will findfind opportunities,Research but at a higher price thanthan inin nearbynearby existingexisting buildings.buildings. A bigbig part of any sports­driven project’s success will restrest inin itsits ability toto complement existing and futurefuture developmentsdevelopments –– toto becomebecome partpart ofof aa well­planned and activeAbout of thefice,fice, author: residentialresidential Marianne and Skorupskiretailretail environment. is Research Director in Newmark Knight Frank’s Atlanta office.

For more information: Alexander (Sandy) Paul, Senior Managing Director of National Research, 202.312.5783 [email protected]

Sources: The Atlanta Journal­Constitution, CoStar, Curbed, Forbes, JobsEQ, The New York Times, The Undefeated, U.S. Census Bureau. Research Share on social

About thethe author: Marianne Skorupski isis Research Director inin Newmark Knight Frank’ss Atlanta ofoffice.fice.

For more information:information: Alexander (Sandy)(Sandy) Paul,, Senior Managing Director ofof National Research, 202.312.5783202.312.5783 [email protected]

Sources: The Atlanta Journal­Constitution, CoStar,, Curbed, Forbes, JobsEQ,JobsEQ, The New Yorkork Times,imes, The Undefeated, U.S. Census Bureau.Bureau.

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