Why this matters
American sports stadiums have since the 20th century become increasingly important parts of city centers, helping to revitalize downtown areas economically. Here are five ways these facilities can go even further to ensure they provide strong benefit to a community.
For decades, mayors, county officials, and governors have cut deals to fund sports facilities and have continued to spend taxpayer dollars as part of their economic development strategies despite the wealth of evidence that these infrastructure projects fail to fulfill the promises of regional economic growth made by state and local government leaders and team owners. Still, real financial benefits for both teams and the public sector are possible.
These benefits can be achieved when a public-private partnership for a professional sport infrastructure project includes a real estate development strategy that can support new neighborhood and community development that is anchored by an arena, ballpark, or stadium. This can be referred to as a sport, hospitality, and entertainment district (SHED).
Recent projects like Milwaukee’s Deer District or Denver’s LODO joined a well-known list of completed projects across many sports nationwide that are also anchored by adjoining real estate. But the most ambitious sport-anchored redevelopment projects may be the redevelopment of Willets Point in Queens, New York, and perhaps the mixed-use development project proposed by the Meruelo Group LLC, owner of the Arizona Coyotes, which includes the relocation of the National Hockey League team from Glendale in the West Valley to Tempe in central metro Phoenix.
Largely known for its auto-body shops and junkyards, Willets Point is a 61-acre piece of land that lies adjacent to CITI Field. Although plans for the area’s environmental remediation were set for 2013, after years of uncertainty, environmental cleanup plans have finally begun. In 2021, the first phase of the redevelopment project was approved, and it will include the construction of 1,100 affordable apartments, open space, and an elementary school.
Mixed-use development projects and SHEDs have undisputedly reshaped business, law, governance, spatial planning, and urban economics. Furthermore, these types of mixed-use development projects cannot be actualized without substantial cooperation and support from the public sector. For instance, large tracts of land need to be acquired, receive zoning approvals, and undergo environmental remediation, and they require immense investments in new infrastructure development. They also require at a minimum, a 5- to 10-year buildout commitment. This can become a broader public policy issue as the city, county, region or metropolitan statistical area (MSA), or state government are tasked with providing funding or allocating tax revenues to the arena, ballpark, or stadium, and the construction process and governmental oversight can potentially extend over several state and local government election cycles.
While major league sports in the United States do not substantially change regional economic development levels, they can change where within a region the economic activity occurs. Much of the research that has focused on the impact of professional sports facilities on the economy has been conducted at the regional or metropolitan level. However, there has been a growing focus on the impact of sports facilities and their urban revitalization efforts at the more granular neighborhood or community level. This level of analysis focuses on understanding the impact these sport infrastructure projects have on the changes on economic activity levels within a city itself and is therefore micro-focused at the neighborhood level as opposed to the region.
For years, city managers actively pursued various strategies to revitalize failing downtown city centers. In the early 19th century, cities were booming, with a clustering of commercial and retail activities within the central business districts, powered in part by the rural-to-urban migration of workers and the growth of the manufacturing industry. Yet, with an increased concentration of a low-income workforce and rise in crime, middle- and upper-class households fled to the suburbs and downtowns faced substantial disinvestment with the loss of a large portion of the city’s tax base, creating a considerable decline in the fiscal health of the downtown region. These city centers became obsolete as economic and retail centers as suburbanites developed their own faux downtowns equipped with shopping malls. The transition from a primarily manufacturing economy to a service economy made it possible for businesses to relocate to the suburbs and create an agglomeration of industries by way of industrial parks and satellite campuses.
The decentralization of jobs led to economic segregation and fiscally stressed downtown city centers that had once been thriving. Yet, cities were still expected to be fiscally self-reliant. Without the support for increased taxes, it became increasingly difficult for local governments to provide the public services needed by inner-core residents, which in turn also made cities less attractive places to live. City managers and other elected public officials were tasked with establishing new strategies to generate higher levels of revenue in the downtown core by attracting citizens to live, work, and play there. This included creating a greater demand for residential, commercial, and retail space within the inner-city. Anchored by mixed-use real estate projects, sport venues were able to create that demand downtown.
In the early 1990s, large-scale capital projects such as major league sports venues were used to reignite the excitement and activity of central cities. Since shopping malls and boutique retail outlets could be replicated in the suburbs, these large-scale projects were unique and successful in forging demand from their presence. Due to the fact that teams in the four major sports leagues are limited, these sport venues can in some ways be characterized as unicorns. They cannot be easily replicated, and are therefore considered a rare and highly desirable amenity.
Some proposed redevelopment strategies used these large capital projects as anchors for further ancillary development such as new mixed-use residential and commercial development and to entice large corporations and start-ups or business incubators to relocate downtown. These capital projects were not only catalysts for the redevelopment of failing inner-cities, but also a mechanism to recentralize economic activity in and around the urban core. Sport venues have been a unique selling point to inspire more entertainment options, residential (single-family and mixed-housing) and commercial units, and other land uses.
What Does a Successful Sport-Anchored Mixed-Use Real Estate Development Look Like?
A SHED is designed to create a space that generates activity around the clock from sports and entertainment events, but also from those who live, work, and play within that space. This, however, can only be achieved through smart development strategies, providing customizable options, creative financing and innovative programming. Furthermore, city managers, team owners, and private investors must cooperate with one another to ensure the master development plans can fulfill the city’s revitalization agenda, team owners have a state-of-the-art facility for their players, and private investors can turn a profit on their investments both inside and around the facility.
While there are many factors that should be considered when proposing a sports anchored development project, here are five key principles that will ensure the development and its impact on the surrounding community neighborhood is successful:
Customization: A SHED must be customized to the city or region it is located in. In some cases, the foreseen development project might be a complete SHED build-out which would include the sport venue along with the ancillary development, and in other cases, the proposed sport venue must be integrated into an already established neighborhood. Either way, the proposed new development should create a sense of place and belonging within the existing neighborhood and meet the needs of the community at-large. A combination of amenities, whether that includes diverse options of retail and restaurants, that is well-received in Los Angeles may not work in Milwaukee.
Embrace Local Strategic Partners: It is critical to establish partnerships with the private sector to ensure ancillary investments and development will take place in congruence with the construction of the sport venue. Increasingly, professional sports facilities are being financed without tax subsidies. Therefore, it is imperative for teams to look for new ways to monetize their assets. The president of the Milwaukee Bucks, a National Basketball Association franchise, created his own development company to purchase 27 acres of vacant land for $524 million for the new Fiserv Forum. San Francisco’s Chase Center, new home of the Golden State Warriors, was not financed through tax subsidies, so to offset the development costs and future financing, the 11-acre arena district will need to include over 100,000 square feet of retail space, 580,000 square feet of office space, a hotel, and high-end residential properties. It is through collaboration and support of the private sector that these districts are financially viable and their overall vision is realized.
Establish Special Authorities and Capitalize on Existing Government Policies: Varying levels of intergovernmental cooperation, at the state and/or local level, is needed to finance and manage development projects of this magnitude. Even if a city itself can shoulder the financial risk and responsibility for the capital project, state and local governments will often create public authorities, also known as quasi-governmental agencies or special purpose districts, to meet a specific need of a local community. These exist independently from the local government, and the need they are meeting could be to provide a new service, improve the levels of the existing service, or provide a new financing mechanism to provide a service. This could be geared toward anything from airports to wastewater treatment centers to sports venues.
In the context of SHEDs, these public authorities are meant to lead negotiations with team owners and private sector actors, to supervise the ways in which the sport venue and adjacent real estate investments will fit into area-specific redevelopment strategies. They often continue across multiple election cycles. By establishing a special authority to oversee the development, long-term real estate projects like building out the sport venue and ancillary development will be insulated from frequent political turnover and can continue to negotiate financial agreements, independent of city politics.
Provide Innovative Programming: Tourism has socially and economically transformed cities and their purpose, transitioning from manufacturing and industrial hubs to centers for service and entertainment. Gourmet and farm-to-table restaurants and even pop-up shops for emerging designers are all amenities that are meant to cater to the local high-income-earning professionals as well as tourists in search of entertainment options that have a mix of local flavor. Facilities can also be utilized as incubator hubs and facilitate the development of community-based businesses by offering local training and entrepreneurship programs and can encourage local purchasing by consumers and businesses beyond event days. That said, in attracting local, regional, or out-of-state or international visitors, it is important to ensure the amenities provide a variety of options at different price points, and that the discretionary income available in the market can sustain a newly constructed sport venue.
Compactness and Walkability: Compact development and walkable communities are an essential element in developing SHEDs. The design of these entertainment districts and the immediate land use around the facility, should advance a planning approach that encourages compact and transit-oriented development (TODs). TODs are walkable communities with mixed uses such as retail, office, open space, and public spaces that encourage travel by public transit, car, bicycle, or by foot. Transit-oriented development reduces household driving, lowers regional congestion, and accommodates healthier and more active lifestyles. Downtown areas are strategically located at the juncture of transportation links which improves access to venues. For this reason, teams have an opportunity to attract a different demographic to the stadium, arena, or ballpark. In addition to ensuring the mixed-use development is walkable and a TOD, a portion of land within the sport, hospitality, and entertainment district should also be designated for plazas, parks, and green open spaces. These green open spaces are critical in promoting physical activity, health, and well-being, but also creates a space and programming around the facility that is activated all year round. Prioritizing TODs, walkability, and green spaces as key components of the mixed-use development project also prepares cities to better meet climate and sustainability goals.
New construction should be LEED-certified, climate resilient, and carbon neutral, design and landscaping should be aligned with the local natural environment, and the wastewater management systems should be integrated into a whole systems approach across the municipality to ensure waste is managed and disposed of properly. If municipalities and team owners align interests to allocate land for green public space and promote climate resilient infrastructure in all new construction and renovation within the mixed-use development, this will set cities up for success in their transition to be more climate conscientious and meet the sustainable development goals.
In the U.S., cities with plans for a new professional sports stadium, arena, or ballpark will most likely include a mixed-use development. Financing deals for professional sports facilities have come under immense scrutiny as U.S. taxpayers have over time become less supportive of allocating their tax dollars toward the construction of a new professional sports facility at the expense of investing in public services. Under the old model, standalone sport venues were unable to realize the promise of new jobs, new construction, and new tax revenues. However, with the shift toward investing in mixed-use entertainment districts, teams are able to broaden their footprints throughout their cities, their sports venues are strategically interwoven into the community fabric, and cities are able to incorporate the venues as anchor developments as part of their grander economic development agendas to revitalize their downtown cores.
You can see it from the skyline: Sport is a dominant part of any community where it is played. The economic relationship between professional organizations and these communities has always been fundamental to understanding sport, but as the industry grows, so too does the sway sport holds over cities and states.
How do fans and residents see this relationship? Do these private businesses owe the public more than they are giving? And what is the ideal role sports organizations should play in a community?