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New High-Tech 'Sports Districts' Seen as Winning Strategy for Developers

Surrounding CRE Development, Tech Investment Seen as 'Secret Sauce' for Drawing Fans to Mixed-Use Sports Districts
October 19, 2017
A new $525 million arena for the NBA's Milwaukee Bucks will include an entertainment block, beer garden and plenty of technological bells and whistles.
A new $525 million arena for the NBA's Milwaukee Bucks will include an entertainment block, beer garden and plenty of technological bells and whistles.
Live-action sports are finally coming to Las Vegas, which until recently was one of the largest major U.S. markets without a major-league sports franchise. Yesterday MGM Resorts International announced that it purchased the WNBA's San Antonio Stars and will move the team to Las Vegas, joining the Golden Knights NHL franchise, which makes its debut this season.

Also, retail developer Howard Hughes Corp. (NYSE: HHC) recently revealed plans to build a new 10,000-seat ballpark for the Las Vegas 51s, its Triple-A affiliate of the New York Mets, to be located in the company's massive master-planned community in Summerlin.

And that's not even counting the pending relocation to Las Vegas of the NFL's Oakland Raiders, slated to begin playing in a new 65,000-seat, $2 billion domed stadium in 2020 or 2021. Nevada transportation officials recently began planning about $900 million in infrastructure improvements near the 62-acre site along Russell Road. But that may be the tip of the iceberg compared with the total retail, dining, hotel and residential development planned around the new sports venues.

Across the U.S., real estate companies ranging from large REITs and entertainment companies to private local and regional developers - often team owners themselves, such as Los Angeles Rams owner and developer Stan Kroenke, and Cleveland Cavaliers owner and Quicken Loans founder Dan Gilbert - are driving construction or renovations of sports stadiums and arenas -- and the surrounding mixed-use entertainment districts that spring up around them.

Total spending on stadium construction reached a record high of $10 billion on a moving 12-month basis last June, according to a recent report by Wells Fargo Securities.
And much of the financing for the development surge is coming from private sources rather than public funding used to finance projects in the past.
Teams Ramp Up Tech, Luxury Box Spending

Private financing has also provided teams with the opportunity to enhance the “in-venue” fan experience in an attempt to help combat sagging attendance by luring fans out of their living rooms and sports bars, including higher investments in technology and premium seating, Wells Fargo said.

The 2009 construction of the $1.3 billion AT&T stadium, home of the Dallas Cowboys, sparked a trend toward massive 360-degree HD video boards, 3D projection, retractable stadium roofs, and age-check verification software for beer vendors, development of cell phone apps and free Wi-Fi for fans to check their fantasy league scores and post on social media.

Following suit, the San Francisco 49ers' new Levi’s Stadium, located in the Silicon Valley hub of Santa Clara, includes 70 miles of wiring throughout the stadium supporting 1,200 distributed antenna systems, bringing 40 times more Internet bandwidth to fans in their seats than any other stadium in the U.S.

In blue-collar Milwaukee, where teams have long played second-fiddle to their rivals in Chicago to the south along Lake Michigan, former Vornado Property Trust exec and part-owner of the Milwaukee Bucks NBA franchise Michael Fascitelli is building a $525 million arena that will include an entertainment block and beer garden. The Bucks are slated to begin playing in the venue next year.

"It's all about taking advantage of brand scarcity of the teams," Fascitelli said during a panel discussion at the recent DLA Piper Real Estate Summit in Chicago. "It's hard to know the value of a team, but with the brand, you can create a lot of development and value around it.

"There's a rush to build or renovate NBA arenas all over the country to take advantage of technology and consumer demand," Fascitelli added, saying that Bucks ownership will spend $30 million on technology compared to the $1 million budgeted for the team's current arena.

"If kids go into the arena and lose their ability to text, they go into meltdown mode, like withdrawal from a drug," Fascitelli said.

"Whether it's a ballpark, pavilion, or another kind of sports use, it's all about destination and entertainment," added David R. Weinreb, CEO of Howard Hughes Corp. "It's about being social. At the core, that's why we don’t believe retail is going away."

Stadium Benefits Ripple Outward

The convergence of technology and surrounding development proved a stunning success on the opening night of baseball season in Atlanta. Opening-night ticket sales, retail and concessions revenue at the $722 million SunTrust Park, the new home of the Atlanta Braves, was the largest in team history, according to executives for Braves team owner Liberty Media.

Liberty Media became interested four years ago in the stadium's impact beyond the turnstiles on surrounding commercial property, executives said.

"We’ve seen numerous precedents for appreciation in land surrounding new ballparks and older sports venues as well, and we wanted to take part in that value creation," said Greg Maffei, Liberty president and CEO, citing LoDo around Coors Field in Denver; L.A. Live around the Staples Center, and Wrigleyville around Chicago, among others.

Liberty's own mixed-use development surrounding the ballpark, Battery Atlanta, is coming on line with major office tenant Comcast set to move in November and the Omni opening a hotel in the first quarter of 2018.

"The secret sauce of what’s going on here is the synergy between The Battery and SunTrust Park, and it’s a model breaking phenomenon," said Liberty Chairman and CEO Terry McGuirk during a Braves investor meeting in August. "Everybody who comes through looks at it and wants to duplicate it, replicate it -- for any new project that is going on anywhere in sports, this is the model."

While construction of new stadiums has have long boosted the value of surrounding private property, "it’s usually owned by someone else," McGuirk said.
"We said we're going to take a much more holistic approach and build this from the ground up," he added. The result has been a "raving success."

"Our fans come early, stay late and they are just eating it up," McGuirk said. "Battery is just overwhelmed almost every day that the team is in town. The first week [of the baseball season], all the retailers ran out of food or beer or clothes. They had no idea of the kind of uptake that was going to occur here."

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