In recent years, the intersection of sports and real estate has become increasingly prominent, with major teams on both sides of the Atlantic embarking on ambitious development projects. These ventures go beyond merely upgrading stadiums; they aim to transform surrounding areas into bustling hubs of commercial and residential activity. This trend underscores a strategic shift where sports franchises leverage their brand power and fan bases to maximise revenue streams and diversify income avenues.
The US Sports Scene: Pioneering Mixed-Use Developments
In the United States, several major sports teams have led the charge in integrating real estate projects with their sporting facilities. A prime example is the Los Angeles Rams and their SoFi Stadium, part of the vast Hollywood Park development.
Spanning 298 acres, this project includes retail spaces, office buildings, residences, a hotel, and green areas, creating a new urban centre in Inglewood, California. The development is a testament to how sports infrastructure can be a catalyst for wider urban renewal.
Similarly, the Atlanta Braves have transformed the area around Truist Park with The Battery Atlanta. This mixed-use development combines residential units, office spaces, retail outlets, and entertainment venues, offering a vibrant lifestyle destination for both fans and residents. By investing in such projects, teams like the Braves are creating continuous revenue streams that extend beyond game days.
More recently, Mark Cuban, owner of the Dallas Mavericks; agreed to sell a majority ownership stake to the Adelson and Dumont families, who run Las Vegas Sands Corp. The deal was done to secure a long-term partner to diversify the revenues and transform the arena and surrounding areas with the Durmont families development credentials.
European Clubs: Embracing Urban Regeneration
Here across the Atlantic, European sports teams are adopting similar strategies. The Tottenham Hotspur‘s redevelopment of their stadium area is a leading example. European Clubs: Embracing Urban Regeneration
The new Tottenham Hotspur Stadium is surrounded by a comprehensive development plan that includes residential units, a hotel, sports facilities, and commercial spaces. The additional nearby Heart of Hale regeneration project is further testament to the wider regeneration opportunities around stadia.
In Spain, Real Madrid has undertaken a massive renovation of the Santiago Bernabéu Stadium. The redevelopment includes a retractable roof, expanded commercial areas, and enhanced digital experiences for fans, turning the stadium into a year-round destination.
Manchester City has undergone significant redevelopment across the wider area around the Etihad stadium, transforming it into the Etihad Campus. Key developments include the City Football Academy, stadium expansion, Eastlands regeneration framework forming a broader initiative of residential and commercial developments and most recently the completion of the Co-op Live arena, a state of the art 23,500 capacity arena and entertainment venue.
It's not just major teams: Bristol’s Sporting Quarter
Closer to home for me being Bristol born and bred, the owner of Bristol Sport (Steve Lansdowne), comprises the agglomeration of various sports teams in Bristol are embarking on plans to redevelop the surrounding Ashton Gate stadium to provide a new 4,000 seater Sport & Convention Centre (SCC), 232 room hotel, 536 space multi-storey car park, 125 residential units and 28,000 sq ft of commercial / office space.
The vision of this project, which saw the planning green light last year, is to generate sufficient sustainable income for the organisation to help power the club’s successes into the future, with less requirement for additional subsidies from the Landsdowne family.
These real estate projects are not just about expanding physical spaces; they are strategic investments designed to maximise long-term revenue for sports franchises. By developing mixed-use areas, teams can generate income from various sources, including leasing retail spaces, selling residential units, and hosting events in new commercial facilities. This diversification reduces reliance on game-day revenues and enhances financial stability. As we are seeing, today’s venues are operational 24/7, 365 days a year.
Moreover, these developments often lead to increased property values and local economic growth, creating a positive feedback loop that helps both the teams and the communities they are part of. The integration of ultramodern facilities, modern amenities, and vibrant community spaces helps attract fans, tourists, and new residents, further boosting economic activity.
These developments often lead to increased property values and local economic growth, creating a positive feedback loop that helps both the teams and the communities
The Potential Downside: Rising Interest Rates and Development Costs
While the growth of real estate in sports presents many opportunities, it is not without risks. Rising interest rates and increasing development costs pose significant challenges to these ambitious projects.
Higher interest rates can lead to more expensive borrowing costs, which can strain the financial viability of large-scale developments. Additionally, escalating construction costs, driven by inflation and supply chain disruptions, can further impact project budgets and timelines.
Everton FC’s new stadium project at Bramley-Moore Dock in Liverpool illustrates some of these potential downsides. Originally estimated to cost around £500 million, the project has faced escalating costs due to rising prices for materials and labour with the stadium now estimated to cost c.£1bn and heavily behind schedule. These financial pressures have required the club to secure additional funding and face points deductions this season for breaching the leagues profit and sustainability regulations (PSR’s).
The Future of Sports and Real Estate
The trend of integrating sports and real estate is likely to continue, with teams increasingly recognizing the value of such investments.
However, the financial environment will require careful planning and risk management. By creating multi-functional spaces that cater to diverse needs, sports franchises are redefining their role in urban environments. These projects not only enhance the fan experience but also contribute to sustainable urban development and economic prosperity (if done correctly).
As this trend continues, it creates multiple opportunities for real estate investors and developers alike. For developers, partnering with clubs to develop specific projects, or ‘piggy backing’ off these developments to generate further nearby regeneration. For investors, once complete these projects offer acquisition opportunities through assets like the hotels or commercial spaces created through these ventures, or even potential minority equity stakes from significantly improved and stabilised revenues.
This article first appeared in Green Street News on 05/07/2024
