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ARENA/RETAIL SYNERGY SOMETIMES ELUSIVE

By Dave Bodamer

The San Diego Padres are teaming with the city for a stadium project. The San Diego Padres are building an arena complex that encompasses 26 blocks.

In the movie “Field of Dreams,” a ghostly voice instructs Kevin Costner’s character, “If you build it, he will come,” which inspires the farmer to uproot some of his farmland and build a baseball diamond that becomes a nexus for deceased ballplayers. For some cities, though, simply planting a sports arena in the middle of an urban landscape has not had the same magical effect on retail development.

But a handful of ongoing projects, where development of retail and other commercial space is planned in conjunction with sports venues, is showing that it is possible to use these facilities as centers of economic development.

“An arena can’t stand on its own and be an instant draw for other development,” said John Filipos, managing director of Insignia ESG, Washington, D.C., a retail real estate brokerage firm. “Picking a location that is synergistic with commercial, retail and office uses is the key in using a sports facility as a cornerstone for other growth.”

Washington’s MCI Center; Nationwide Arena in Columbus, Ohio; and San Diego’s as-yet-unnamed baseball stadium are all centerpieces of ongoing development projects in those cities. In each case, the city has rezoned the areas around the new facilities and drawn up cohesive master plans — an approach that stands in stark contrast with the past decade, when sporting venues were plunked down without any long-term scheme for associated development; in some cities, such as Buffalo and Phoenix, development alongside new venues has been minimal.

But that is not the case with Washington’s MCI Center, which opened in 1999 on a site bordering F Street and 7th Avenue. The stadium is near the city’s geographic center but is east of its densest business and commercial districts. The arena, which was paid for entirely by Abe Pollin, the owner of Washington’s NBA and NHL franchises, is in an area that was the center of commercial activity until the 1968 riots drove businesses away.

“It took a giant leap of faith by Mr. Pollin to build the arena downtown,” said Seamus Houston, senior director of marketing and communications for Washington’s downtown Business Improvement District (BID). The BID has authority over a 110-square-block area in the sector of the city in which the arena was constructed. Houston estimates there are 55 developments under way with a cumulative value of $5.5 billion.

The arena itself features a few retail tenants, and the owners are discussing opening up its F Street wall for streetscape retail development. Moreover, Western Development Corp., Washington D.C., is building the $200 million mixed-used Gallery Place project that will share a plaza with the arena (SCT, April 2000). Confirmed tenants at Gallery Place include a Virgin Megastore, Jillian’s, a 12-screen AMC theater and two restaurants.

Growth in downtown Washington has been helped by rezoning to increase the amount of housing, and rents in the area around the arena have gone from about $20 per square foot to more than $70 per square foot since the arena opened, Filipos said.

Columbus gets an NHL arena
An arena is also the centerpiece for downtown development in Columbus, Ohio.

In 1997 the NHL granted an expansion franchise to the city to begin play in 2000. Nationwide Realty Investors, Columbus, the real estate arm of the Nationwide insurance company, stepped forward soon after with a plan to finance and build the Arena District, a $500 million project encompassing a new stadium, 1.5 million square feet of commercial and office space, 500 apartments and several entertainment venues. The arena opened last year, and the rest of the district is under construction.

The arena alone would not have been enough to make the district vibrant, explained Brian Ellis, Nationwide Realty Investors president. Although it is expected to host 175 events a year and draw about 2 million people, “We really needed to do more” to spur other business, he said.

Part of the plan entails other entertainment venues, including an eight-screen movie theater opening this fall and the PromoWest Pavilion, a live music performance space that will host 200 events a year. Ellis estimates that the movie theater and the Pavilion will bring another million customers into downtown Columbus annually.

The first round of retail tenants is a collection of bars and restaurants, including Buca Di Beppo, an Italian restaurant that opened in May 1999, which claims this to be its highest grossing site in the company’s chain.

Columbus’ tenants illustrate a common aspect of sports facility redevelopment zones: The first wave of retail often comes in the form of restaurants and bars.

“People want to have a bite to eat after work, before the event,” Filipos said “After the event, they don’t just want to jump in their cars and go home.”

San Diego’s ballpark district
On the West Coast, the San Diego Padres are building a new ballpark downtown. The Padres, along with the city and the San Diego Redevelopment Agency, have assembled a “ballpark district” encompassing 26 blocks to hold the stadium and associated development. It will include 200,000 square feet of retail, 350,000 square feet of office space and 800 hotel rooms.

“The city and the Padres basically formed a partnership to develop the ballpark together,” said Albert A. Corti, a principal at locally based Corti Gilchrist, which has been brought in as the project’s retail advisor and leasing agent. “In order for the city to participate, they required the Padres to develop other commercial uses within the district.”

The team expects the project to be completed by the 2004 season. The delays, however, have kept Corti Gilchrist from confirming tenants for the retail portion, although they’ve talked with dozens of suitors, Corti said. Los Angeles is poised to join this list, with the City Council in early September approving a plan to rezone 27 acres near the Staples Center sports arena as a $1 billion shopping and entertainment district.

Learning from successful projects
In planning new projects, developers have looked to previous models — both good and bad. The most common example cited as a successful integration of sporting facility and urban setting is Baltimore’s Oriole Park at Camden Yards, which moved the Orioles from the city’s northern outskirts to the tourist-friendly Inner Harbor.

Oriole Park, which was finished in early 1993, coincided with other revitalization activity, including the Harborplace shopping center and the renovation of the National Aquarium. Since then, other pieces have been added to the area, including a new football stadium, the PowerPlant retail facility and infrastructure linking Inner Harbor to Baltimore’s Little Italy.

“You take the 3 million people coming for baseball games annually and the 70,000 to 80,000 coming to eight football games and that has to have a positive effect on our business,” said Michael Durham, president of the Harborplace Merchants Association.

The main difference between Baltimore and what developers are trying to create now is that Baltimore’s growth was not part of a long-term scheme or the product of one development entity; Inner Harbor’s redevelopment occurred before plans for Camden Yards were approved.

A lack of a cohesive plan or coordinated group has, in some cases, led to misfires. In Buffalo, N.Y., for instance, the recently built Marine Midland Arena has failed to spur development, Ellis of Nationwide said.

A similar problem has arisen with Bank One Ballpark, in downtown Phoenix, which cost $238 million and opened in 1998. While the stadium generates $167 million annually, $129 million of that is spent at the ballpark, and only $38 million goes to the surrounding district, according to a study produced for the Downtown Phoenix Partnership by Elliott D. Pollack and Co., a local economic and real estate consulting firm. Cases like Phoenix have led some economists, including Roger Noll, with the Brookings Institute, Washington, D.C., and author of a book on the economic impact of stadiums, to argue that sporting facilities do not create new revenues for cities. He contends that such facilities instead shift spending from one part of a city to another.

But handled the right way, stadiums can generate new wealth, according to Brian Raabe, an economist from Samford University, Birmingham, Ala., who specializes in stadium and convention center impact. “It’s not the size of the city, it’s not the quality of the teams, it’s not the novelty of the park that determine a stadium’s impact. What turns the project is management skill. It’s a long-term effort and more often than not its up to the commitment of the people involved.”

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