Report: New Sports Arenas Drive Up Construction Prices, Take Years To Become Neighborhood Anchors

The economic impact of sports arenas has been a contentious topic for decades, but their effects on commercial real estate are tangible.

A new study conducted by Newmark Knight Frank found that it often takes years for newly built stadiums to become the anchors of mixed-use communities, as often promised by local business owners and political leaders.

More recently, developers have attempted to remedy the situation by constructing master-planned developments around the arenas as they are built, rather than waiting for the teams and their fans to fill them.

• Nationals Park in Washington, D.C., was completed in 2008, with some construction in progress around it in the neighborhood now known as the Capitol Riverfront. But the Great Recession scuttled and delayed many of those plans, and only recently has meaningful commercial and residential density arrived in the area.

• SunTrust Park opened to house the Atlanta Braves in Cobb County last year with a mixed-use community called The Battery already planned. It took a leap of faith and, in the case of the stadium, hundreds of millions of dollars in public money, but returns are beginning to look promising. German company Thyssenkrupp Elevator Americas announced last month that it will move its U.S. headquarters to a three-building, build-to-suit development in the area. A Georgia Tech study found that the complex already generates $19M per year for Cobb County, which has spent part of the revenue to raise wages for city employees and public school teachers.

Meanwhile, Mercedez-Benz Stadium in Downtown Atlanta has also been recently completed, and a multimillion-dollar renovation to State Farm Arena — home of the Atlanta Hawks — is almost finished (its name, formerly Phillips Arena, being among the first changes). Between them lies The Gulch, where the city has envisioned a massive community, though its spent years finding a developer. In the end, CIM Group was the only bidder on the project, envisioning a $5B project with 9M SF of office space, rumored to be the site for Amazon HQ2 should the company pick Atlanta. It is seeking a contentious $1.75B tax incentive package, on top of $700M given to Mercedes-Benz Stadium. Local executives believe that with or without the incentives (or Amazon), the Gulch is destined to be successful.

While cities, counties and states wait for the returns on these massive undertakings, the local construction community feels their effects immediately.

Newmark found that during the simultaneous construction of Mercedes-Benz and SunTrust, Atlanta was forced to bring in labor from other markets as prices increased by more than the national average.

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. 

CORRECTION, SEPt. 21, 1 P.M. ET:  A previous version of this story misstated the cost and appropriation of public funds toward the Battery. This story has been updated.