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The potential economic impact of stadium development

  • Posted on:  Tuesday, 28 February 2017 14:00

The possibilities new stadiums offer to clubs can be stated with various examples: increased stadium attendances, bigger budgets (through higher ticketing revenues, branding and improved revenues of F&B and hospitality) and higher supporter/visitor satisfaction rates.

Stadium construction projects have also a big impact: think about the pressure on budgets and the influence on the public sector through the development of the wider area around the stadium (mobility, public transport, etc.). This article presents an overview of how specific stadium projects affect and impact (local) economy.

Wembley & the Olympic Stadium - London

Several studies confirm the impact new venues have on the housing market, both in terms of property and renting. Overall, an increase in housing values is detected in the perimeter around the new stadium. The Spatial Economic Research Centre conducted research on the impact of new football stadia on property prices in London. Main outcomes of this research where twofold:

  • New stadia do have an impact on property prices. As an example, the development of Wembley stadium resulted in a 15% increase of property prices in the surrounding of the stadium (within a radius of 3km).
  • The extent of this increase is dependent on the distance from the stadium. The closer to the stadium, the bigger the impact. For every 10% closer to the stadium, an additional 1,7% increase in property prices is found.

The outcomes of this research are supported by research focusing on the impact of the London Olympics announcement. The value of a residential property within the host boroughs was lower than the corresponding value of a comparable property placed outside the impact area prior to the Olympics announcement. Prior to the announcement, properties in Greenwich, Hackney, Tower Hamlets and Waltham Forest sold for approximately 8.1 percent lower than comparable properties in other boroughs. Nonetheless, London’s successful Olympics bid did seem to have a substantial impact on property values following the announcement as well.

Post-announcement, properties within the area directly impacted from the Games are estimated to sell for 4.3 percent lower, compared to properties with similar attributes in non-host areas. The size and significance of this coefficient indicates that hosting the Olympics has a positive impact on property prices; the price differential between host and non-host boroughs decreases by nearly 50 percent. Additionally, the research investigated the impact of distance from the stadium on housing value. Following the announcement of the successful bid each additional mile away from the main stadium decreases property prices by 0.4 percent.

This research concludes that properties up to three miles away from the main Olympic stadium sell for 5 percent higher, resulting in an overall property price increase of £1,4 billion. This number accounts for approximately 15 percent of the £9.3 billion cost for the 2012 London Olympic Games.

Velodrom & Max-Schmeling Arena - Berlin

This specific case focuses on the Velodrom and Max Schmeling Arena, both located in an undervalued area. The arenas were originally designed to the standards of the International Olympic Committee (IOC) as they played a role in the unsuccessful bid of Berlin for the Olympics of 2000. Special attention was paid to appealing architecture of visible buildings and their incorporation into park landscapes, thereby providing recreational spaces in one of the most densely populated areas of Berlin. The University of Hamburg investigated the impact of these sports arenas on property prices. For the radius between 2000 – 4000 meters, no significant effect has been found. However, coefficients for the 1000-200m distance ring have positive impact for both areas. The results suggest a positive impact of around 3,5% for both arenas. Regarding the immediate proximities, results differ. No significant impact was found for the Max-Schmeling Arena, however the impact of the Velodrom on the 0-1000m distance is approximately 7,5%.

The results presented above are in line with the results of an American study identifying a three-mile impact area for the FedEx Field stadium.

The outcomes of these studies show a significant positive effect on surrounding house values, supporting the idea that professional sports facilities generate important intangible benefits in the local economy.

New Zealand stadium development and the impact on job creation

The impact of stadium development on job creation and economic growth is less clear. Different studies suggest variable outcomes. The New Zealand Massey University conducted research on the impact of stadium development on job creation in 15 different urban areas, spread over 46 quarterly time periods. The research focused both on construction period and post-construction period. During construction works, a significant increase in employment growth has been noticed for each quarter during construction. As an example, Wellington, which had an average quarterly construction employment growth of 0,719% during the period of analysis.

Stadiums, motorsport arenas and velodrome projects are associated with positive impacts on construction sector employment growth of between 1.4 and 4.3 percentage points per quarter during construction. Additionally, the research shows that the impact of stadium construction creates higher employment growth than construction of velodromes or arenas. This is mainly due the fact that stadium developments are typically bigger construction projects. Post-construction job creation results in similar positive growth for stadium projects. Post-construction job creation linked with stadium projects results in similar positive growth.

Ghelamco Arena - Ghent

The university of Ghent (Belgium) conducted research on the impact of the Ghelamco Arena, a new multifunctional stadium realized in Ghent. The impact has been divided between direct impact, focusing on the added value the Ghelamco Arena creates relative to the GDP of the city of Ghent. Secondly, the indirect impact of Ghelamco Arena on other companies in the regio have been looked at.

The direct added value is estimated on 4,75 million, created through additional jobs. The impact of the Ghelamco Arena on other companies from Ghent is estimated on approximately 5 million euros. The study concludes that the new stadium resulted in 66 additional FTE’s in the city of Ghent, besides the extra jobs that have been created inside the Ghelamco Arena.

In total, the effects of the Ghelamco Arena on the local economy are estimated at 9,8 million euro. This contribution implies approximately 0,05% of the total GDP of Ghent. The study, which has been conducted in 2014, states that the impact of the Ghelamco Arena will gain in importance in the upcoming years. This is mainly due to the fact that more and more companies will get their offices inside the stadium, resulting in additional job creation and leading to additional added value. Secondly, the site on which the Ghelamco Arena is located will be further developed. Thirdly, it is expected that additional investments will be made in the direct environment of the stadium, resulting in more visitors and employees.

Principality Stadium - Cardiff

The Principality Stadium, located in Wales published an independent report on the impact of the stadium on its economic significance. The stadium has continued to attract on average around 770,000 paying visitors every year (and around 50,000 in addition undertaking a Stadium Tour).

The economic impact of the stadium arises in part from onsite stadium activity, with current and capital spending by Millennium Stadium plc estimated at around £15m per annum (and with over 200 full time equivalent jobs supported onsite). On average, over the 2006-2016 period, the offsite spending of supporters is estimated on £97.0m of economic impact in Wales. Offsite spend supports around 2,100 full time equivalent jobs across Wales.

 

Economic impact of the Principality Stadium 2006-2016

Source: Millennium Stadium, Economic Impact

 

The amount of visits (750,000 visitors per year) is greater than any other paid visitor attraction in Wales, which is for example three times more than Cardiff Castle. Principality Stadium visits account for +- 5% of the entire Welsh visitor economy.

As a conclusion, the biggest impact of stadium development can be seen in the evolution of housing value. The significant output from American research shows a ‘3 mile impact’, similar to European findings.

Additionally, an overview of specific cases points out that stadium development can impact the local economy through job creation, increased revenues out of taxes and through city marketing it creates new landmarks for the city and its environment.

Next week a more in-depth case of the impact of the EURO 2016 will be published, combining results of different pre and post EURO 2016 studies and the highlights of the ESSMA Summit keynote sessions. 

 

Sources


Ahlfendt, G. M., & Kavetsos, G. (2011). Form or Function? The Impact of New Football Stadia on Property Prices in London. London; Spatial Economics Research Centre.

Ahlfendt, G. M., & Maening, W. (2008). Impact of sports arenas on land values: evidence from Berlin. Hamburg; Springer.

Richardson, S. A. (2016). Does stadium construction create jobs and boost incomes? The realised economic impacts of sports facilities in New Zealand.  Palmerston North; New Zealand Economic Papers.

ECONACTIVE (2016), Millennium Stadium, Economic Impact. Cardiff.

Zwaenepoel, F. (2014), De economische impact van de Ghelamco Arena. Gent; University of Ghent. 

Kavetsos, G. (2011). The Impact of the London Olympics Announcement on Property Prices. London; City University London.

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