Should You Invest In Real Estate Near Sports Stadiums?

New sports stadiums or arenas are often touted as great ways to increase real estate in a given area. Though there is a debate on whether or not they actually bring an economic benefit to the area, but for real estate investors the question is whether or not they make an area good to invest in?

Commercial real estate firm Newmark Knight Frank just finished a new study and found that it can often takes years for newly built stadiums to become good anchors for areas. This is even as many developers are beginning to build mixed-use communities near the stadium locations.

As the study states…”clubs have a history of creating destination retail and entertainment venues from scratch. These new facilities are constructed where land is available, and that is usually not in the already-activated areas of town.

Lower prices for site assemblage are a priority for the club and its investor partners, while minimizing the displacement of businesses and residents is a main objective of the public sector (along with enhancing tax revenues).

Most of the time, a new stadium or arena is built in an underutilized part of a metro area that has few demand drivers to spark organic revitalization. Sometimes that is in a suburban or exurban location; recently, stadium and arena construction is following the pattern set by residents, and is migrating downtown.”

The study had some answers to real estate investing questions I had after a recent visit to the Navy Yards/Capitol Riverfront in Washington D.C. If you’re unfamiliar the Navy Yards / Capitol Waterfront is a mixed-use development on the waterfront in D.C. and includes stadiums for the Nationals and DC United.

Currently, there are cranes everywhere in the area, and the number of new buildings is astonishing. Usually, when developers are making investments of this size, real estate investors can find smaller commercial or residential properties that can benefit from the increase in real estate values in the area, due to the overall construction.

The study went on to find:

Developers race to identify available properties to create retail and entertainment destinations for before and after games and concerts.

New ancillary development, though, typically takes years to reach fruition unless it is part of a master-planned site.

Washington, DC’s Capitol Riverfront neighborhood serves as an example: Major League Baseball’s (MLB) Nationals opened a new park in 2008, but the area did not add a material number of restaurants for pre-game and post-game revelry—nor many apartments and condominium residences within walking distance of the stadium—until years later.

BisNow has an interesting take on how these developments do affect real estate investment in the area, from a labor perspective. As they write, “The report estimates that the construction market feels the effects for three to four years, the average time it takes for a stadium to be built.

That does not include the labor required to build the master-planned communities around the stadium, which are likely to cost more in rent for office tenants than similar developments elsewhere in a metro area, according to Newmark.

In California, the Giants and Golden State Warriors are working on billion-dollar mixed-use projects around their stadiums (AT&T Park and the under-construction Chase Center, respectively). The coordination of such projects is a relatively new process, without a firm answer on whether they are worth the money, effort and labor.”