As Dueling Studies Fly, Sports Economists Say A Second Philly Arena Only Reshuffles The CRE Deck

The Philadelphia Industrial Development Corp. is eight months overdue in releasing an economic and community impact report likely to decide whether city officials hop aboard the 76ers' pitch to build a $1.5B arena in Center City.

Now the main stakeholders in the decision are getting antsy. Over the past several weeks, two consultant-led studies have dropped, yielding radically different potential economic and commercial real estate outcomes to building a second major arena.

Who should CRE believe? Neither, several economists told Bisnow, adding that the impact of two stadiums on the industry would be more nuanced. But the most likely result is that instead of doubling opportunity, hosting two major stadiums would merely redistribute where activity is happening, spreading a finite number of dollars over a wider canvas.

“All they need to do is convince some people that this number is objective when it's not,” Dennis Coates, a professor of economics at the University of Maryland, Baltimore, said of rival reports from the 76ers organization and Comcast Spectacor, whose Wells Fargo Center in South Philly would compete with a new arena.

One promises boom times ahead for city coffers, schools and real estate developers operating in and around a new 76ers arena. The other claims dueling arenas would split the market, draining potential attendance and revenue from both.

Economists say such studies are built upon different benchmarks that serve a specific purpose, and they aren’t a good guide for local developers, politicians or other stakeholders to use for decision-making, especially this year or at any prebuilding stage.

Coates said the real estate players poised to benefit from arena development are naturally those in close proximity that could see “greater demand, charge my tenant higher or even sell the land,” especially when a stadium first opens, he said.

But those near venues that lose a regular team, even to a stadium a few miles away, are set up for a corresponding amount of business going out the door, he said. 

Comcast Spectacor owns the Wells Fargo Center where the 76ers will continue to pay rent through 2031. Its study by real estate advisory Hunden Partners concludes that building a new basketball arena could lead to gentrification in Chinatown and a drop in overall event ticket sales that would weigh down both facilities and associated development, noting that Philadelphia has historically underperformed when it comes to entertainment expenditures relative to other cities its size, according to Pollstar data.

That could spell trouble for both arenas 10 to 20 years down the line when a lack of sufficient income and aging means the costs of redeveloping the facilities could be hung around taxpayers' neck, according to the study's authors.

“We firmly believe that the best outcome for our fans and the community is the 76ers and Comcast Spectacor united and based in South Philadelphia,” Comcast Spectacor Chairman and CEO Daniel Hilferty said earlier this month. 

Comcast Spectacor plans to redesign its own part of South Philadelphia's stadium district to include thousands of housing units and other facilities, potentially seeking some $2B in backing from the government for the project.

The 76ers organization declined to offer a spokesperson for comment. 

But that doesn't mean 76 DevCo, the company formed to push the Sixers' vision, has remained silent. The backers of the privately funded $1.5B plan said in a statement that the Hunden study doesn't account for the growth of the entertainment industry. 

76ers ownership also proffered its own commissioned research concluding that the net economic benefit of a new Center City arena would be $776M, including $202M to city schools over 30 years.

And 76 DevCo leader David Adelman has been adamant that neither the redux of the South Philadelphia Sports Complex nor the enticement of New Jersey tax credits to move arena plans across the river to Camden, New Jersey, will impact plans to relocate the team to its own Center City stadium.

The reality of new arenas, however, is that they tend to provide little economic impact beyond their four walls, economists told Bisnow. Instead, new arenas end up shuffling jobs, events and ancillary development from one place to another. 

“Certainly, moving NBA games just moves those 41 dates from one location to another,” said Victor Matheson, professor of economics and accounting at College of the Holy Cross. “Every major concert tour already comes through Philly, so you are not likely to attract much there [by adding an arena].

“And even large arenas in big cities still only have about 30 concert days per year, which means even with an NBA and NHL team and being the only large indoor concert venue, the current arena is dark over half of all days each year,” Matheson added.

76 DevCo argues that Philadelphia is one of the largest metropolitan areas in the nation but only its 13th-busiest entertainment market, demonstrating room to grow — the same statistic used by Comcast Spectacor to undermine the need for two large venues. That study estimates a new arena might bring in just an additional dozen shows per year.

Former Ticketmaster CEO Irving Azoff is among those supporting a second arena to build up what he believes is a maturing entertainment market.

“The fact is, the biggest acts need weekend nights for a successful tour and those nights are being occupied at the Wells Fargo Center by two professional sports teams,” Azoff told Bisnow in a statement. “There could easily be another 50 events in the city if a new arena was built with a schedule, design, and programming made to cater to both concerts and events.”

Matheson also said there was an argument to be made for the 76ers' plan to move to part of the Fashion District atop Jefferson Station, right in the heart of the city. Its location and the spillover impact to surrounding businesses could outweigh staying put. Placing stadiums far from bars, restaurants and hotels encourages more in-and-out commuting to events rather than staying and spending, he said. 

Yet because suburbanites make up the vast majority of commuters to events, it is difficult to argue for relocation, Temple University economics professor Michael Leeds said.

“I don’t see how, with a second arena, they don’t cannibalize each other’s acts that are of a second tier,” Leeds said, “The reason teams moved from highly urbanized areas to the edge of cities or outside of cities is because of a lack of parking. So this is going against 60, 70 years of history in the United States. I don’t know if you're going to change that right away.”

Data also doesn't support that there are additional jobs and businesses created by new arenas. One study found no evidence of increased new business openings after the opening of new sports facilities in 12 U.S. cities in the 2000s.

A comprehensive review of 130 studies on the economic impact of sports teams and stadiums by Maryland's Coates and two other researchers found one strong through line: Teams and stadiums aren't associated with having strong economic impacts on local communities, and the oft-cited ripple effects of increased business activity and profitable development haven't panned out.

A growing body of research indicates that new stadiums and arenas just rearrange existing activity geographically since the addition of new venues doesn't put more money in the public's pockets to spend there. 

Studies coming from self-interested business entities have a purpose, but not one that necessarily serves public and business interests, economists said.

“These studies, sponsored studies, of the impact of sports facilities are very precise and very accurate, except they put the decimal point in the wrong place. The actual impact is a tenth or a hundredth of the reality, [as] my colleague once said,” Leeds said. 

“There’s a problem, but I’m not sure what they’re proposing is a solution.”