“If you build it, they will come.” – Shoeless Joe Jackson, Field of Dreams
What can Las Vegas’ commercial real estate market expect from a brand new stadium? Does this project promise guaranteed growth, more opportunities for mixed-use developments, sustainable jobs in the form of leases and tenancies? The answer is: probably, however it’s difficult to say. Frankly, there are a lot of articles out there, but there just aren’t a lot of solid numbers. While Las Vegas will certainly see an increase in tourism, which contributes greatly to our economy, what do sports venues truly mean for the commercial real estate market?
In October of last year, Ten-X Research published an article looking at local apartment and retail markets. They studied the correlation between new stadium announcements and openings and net absorption rates, completion rate and NOI growth. Taking a sample from 9 of the newest NFL and MLB stadiums, they found, as it pertains to completion and absorption for the retail market, when they compared the submarket to the overall market, there was no evidence to suggest developers are more inclined to build new retail, and likewise tenants are no more inclined to lease space near a new stadium. Conversely, NOI growth at the submarket level exceeded the broader market by over 65% in both post-announcement and post-opening cases. This strongly suggests vacancy rate improvement and rent growth in areas surrounding new stadiums.
Markets such as Sacramento, Kansas City, and Detroit have seen notable increases in population growth, mixed-use development, and redevelopment, in their downtown areas, since the opening new arenas and stadiums in their downtown cores. In a January New York Times article written about the impact on sports stadiums downtown, it suggests that the recipe for successful growth and development is a stadium surrounded by some sort of mixed-use project, instead of a stand-alone stadium surrounded by a parking lot, in the suburbs.
What does any of this mean for Las Vegas? At this point, no one knows for sure. Las Vegas-based sports venues are unique for multiple reasons, first and foremost, location, location, location. T-Mobile Arena is on the Las Vegas Strip – commercial development on these parcels is an anomaly unto itself, and there is no comparison or quantifiable metric to measure commercial growth on the Strip in traditional parlance. Additionally, the proposed football stadium sits across the I-15 freeway from the Strip, on a small parcel, surrounded by a parking lot and existing industrial properties, with no additional room for mixed-use development absent substantial planning. Yet, development of the football stadium seems most comparable to the development of Petco field in San Diego and redevelopment of the surrounding warehouses into the “Gas Lamp District.” Maybe that’s the recipe for success? Finally, the Las Vegas Ballpark in Summerlin, located in Downtown Summerlin and bordered by existing commercial and retail and a large swath of open land, certainly sets up the pins for a tremendous run on mixed-use development. But what came first – the chicken or the egg? Would any of this land develop without a sports facility project? Did the sports facility spur future development? There is no doubt we have seen and will continue to see increased foot traffic in all of these developments, perhaps a population increase and demographic shifts, and it will no doubt boost tourism, but aside from building the actual facilities themselves, what long-term benefit will commercial real estate in the valley see? While some politicians claim early credit for success due to the sports facilities, and others express concern about the allocation of precious capital and resources, the rest of us will have to wait several years to know whether and how sports facility developments affect the Las Vegas commercial real estate market.