For decades, major league teams depended on ticket sales, concessions and TV deals to generate revenue. But team owners in recent years have turned to real estate development to bring in extra cash and drive up the asset values of their franchises.
Billionaire owners have built dozens of new stadiums and arenas, often with hundreds of millions of dollars in taxpayer funding. State and local governments spent $33 billion in public funds to build stadiums in North America between 1970 and 2020, with the median public contribution covering 73% of costs, a study published last year found. As part of teams’ agreements with cities and states, they have been handed the rights to transform the land around these ballparks into offices, apartment buildings, hotels and shopping malls.
“Stadiums are giant paper weights and are incredibly expensive,” said Geoffrey Propheter, who studies the economics of sports stadiums at the University of Colorado Denver.
“Every time you get a new stadium, an owner wants to get real estate with it and the rights to develop everything around,” he said. “They can make more money with development rights than they can operating the stadium by itself.”
Teams’ push into real estate has significant implications that is shaping both sports leagues and urban areas: Teams are now real estate plays for billionaire owners, stadiums increasingly serve as anchors for mixed-use shopping and entertainment districts, and development rights around stadiums for owners have become a key component of public financing for these projects.
For example, the Washington Wizards and Capitals plan to move from downtown Washington, DC, to Alexandria, Virginia, which will issue $2 billion in bonds to fund a surrounding district with stores, restaurants and an e-sports gaming facility.
Sports monopolies
Sweet land rights deals are a subsidy public officials can give to owners to pay for the skyrocketing costs of building new stadiums.
“It makes perfect sense for a team owner to play real estate,” said Propheter. “As long as people drink the Kool-Aid that stadiums trigger large economic returns, owners will take the land.”
Owners have been able to obtain generous public funding for stadiums and favorable development agreements because of their market power, which comes from increased fan interest in pro sports and leagues’ control over supply.
This creates “excess demand” among cities to host professional teams, and forces cities and states into competition with each other over who can offer an owner the best packages, said Andrew Zimbalist, an economist at Smith College who studies sports business.
“That means that team owners do have a lot of leverage,” he said. They can use the threat of leaving town to strong-arm political officials into better stadium packages.
But most studies find that building pro stadiums is not worth the public investment.
From parking lots to restaurants
Mixed-use development in urban areas is the latest trend in sports stadium construction.
In the 1960s and 1970s, many teams shifted from centrally-located downtowns to the growing suburbs.
They built circular, cookie-cutter stadiums surrounded by giant parking lots that could host both baseball and football games. Riverfront Stadium in Cincinnati, Busch Memorial Stadium in St. Louis, Three Rivers Stadium in Pittsburgh, were a few of the multi-purpose stadiums that reflected the design trend of the era.
The Baltimore Orioles’ Camden Yards ballpark, which opened in 1992, reversed this model and set off a wave of stadiums returning to downtown locations.
Camden Yards, which cost around $110 million at the time, was the template for the modern stadium design with premium suites, restaurants and amenities. It set off a wave of smaller, retro-style stadiums, such as Cleveland’s Progressive Field and San Diego’s Petco Park.
Adjacent real estate development also began to become a larger component of sports stadium deals beginning with the success of Camden Yards.
In 2012, Barclays Center in Brooklyn opened as part of a mixed-use commercial and residential project that used eminent domain to transform the neighborhood, displacing hundreds of residents and businesses. It was originally led by developer Bruce Ratner, who owned the Nets and moved the team from New Jersey.
‘Live Next to the World Series Champions’
Nearly every new stadium built or proposed recently is part of a mixed-use project.
SoFi Stadium, which opened in 2020 in Inglewood, California, and is home to the NFL’s Los Angeles Rams, has an adjacent “Hollywood Park” district with luxury apartments, a movie theater and 500,000 square feet of retail. Stan Kroenke, a real estate mogul who has led this sports-focused development trend, poured $5 billion into the complex.
In the “Battery Atlanta” neighborhood surrounding Truist Park, the Atlanta Braves’ stadium in the Atlanta suburbs that opened in 2017, the club developed an office tower, luxury residential units and a live music venue. Truist Park cost $672 million, half of which was funded by local taxpayers.
The Golden State Warriors’ Chase Center in San Francisco, which was privately financed for $1.4 billion and opened in 2019, is surrounded by two eleven-story office buildings. Uber and other tech companies have moved into “Thrive City.”
The Texas Rangers have developed a luxury apartment building, a hotel and other development around Globe Light Field, which opened in 2020 in Arlington, Texas. “Live Next to the World Series Champions,” the apartment complex advertises on its leasing website. Arlington paid for half of the $1.2 billion baseball stadium.
Other owners have big development ideas for surrounding neighborhoods, and nearly every new proposed stadium includes a mixed-use district. Steve Cohen, the owner of the New York Mets, has partnered with Hard Rock International on a proposal to build a casino complex around Citi Field.
Dallas Mavericks’ owner Mark Cuban’s sale of the team to Adelson family, who control the Las Vegas Sands Corp. casino empire, was a sign of owners’ shift into real estate and entertainment, including the booming sports gambling industry.
“I’m not real estate people. That’s why I did it,” Cuban said of why he sold the team to the Adelson family. “Having a partner like [the Adelsons] and their ability to build and to redevelop the arena and whatever comes next beyond that” puts the Mavs in stronger position for the future.
Bad investments for cities
While proponents of new stadiums often point to their economic development benefits, research finds that spending at and around stadiums largely displaces existing local commerce that would have happened elsewhere, rather than creating new economic activity.
“Professional sports venues generate limited economic and social benefits, which fall far short of the large public subsidies they typically receive,” a study published last year in the Journal of Policy Analysis and Management found. “Stadium subsidies transfer wealth from the general tax base to billionaire team owners, millionaire players, and the wealthy cohort of fans” who regularly attend games.
Who wins in these stadium deals with lucrative redevelopment opportunities is typically the owners.
“Generally speaking, the people who come off well are the team owners and the developers,” Zimbalist said.
