By Billy Rose and Mauricio Umansky
With the Los Angeles City Council approval of the Environmental Impact Report of Farmer’s Field, L.A. is on the one yard line to bring NFL football back to the city.
As real estate agents, we are often asked our opinion as to how the market is doing and where do we think it is going. On any given day, we can point to trends. On rare occasions, we can point to an existent specific external event (such as, 9/11 or the recent economic collapse), which materially impacted property values. Almost never do we get to project, with any degree of certainty, a material change in value as a result of a specific external event, which is to occur in the future.
For example, there are those who are projecting what the consequences will be on the real estate market after the upcoming elections. But there’s a lot of uncertainty surrounding that specific external event: Will Obama be re-elected? If so, will current tax rates be increased or new taxes imposed? If so, will those taxes have any real, material impact on property values?
Amidst the growing cadre of those suggesting that arrival of NFL football in L.A. is imminent, we decided to examine the potential impact of a new NFL stadium on property values.
According to a wealth of research providing some mathematical parameters as to the effect of a new professional sports stadium on property values, it appears that a material, positive economic impact can be expected as a result of Farmer’s Field. Since 104 new stadiums and arenas were built between 1990 and 2010 (compared to just 130 in the preceding 90 years), it’s not terribly surprising that a number of studies examining the economic impact on property values have been conducted over the last ten years. And, it appears a material, positive economic impact can be expected as a result of Farmer’s Field.
In this regard, Carlino and Coulson [2004] investigated the impact of new NFL stadiums in Baltimore (M & T Bank Stadium), Charlotte (Bank of America Stadium), Jacksonville (EverBank Field), Nashville (LP Field) and St. Louis (Edward Jones Dome) and concluded that the presence of an NFL franchise increases annual rents by 8% in the recipient city. Focusing on FedEx Field in Maryland, Tu (2005) observed that the price of properties in proximity to the stadium increased by about 5%. Coates and Humphreys’ (2006) exploration of voting preferences regarding the decision to subsidize the construction or renovation of facilities in Green Bay and Houston indicated an appreciation of property wealth, business trade or fandom. Dehring et al. (2007) observed that NFL stadium construction announcements can lead to substantial price increases. Feng and Humphreys, in their 2008 case study examining Nationwide Arena and Crew Stadium
in Columbus, Ohio, noted that values were higher for properties closer to the facility.
In Europe, Ahlfeldt and Maennig (2010) determined that both the Velodrom and the Max-Schmelling Arena spurred an increase in property values in Berlin for up to 3 Km. (See also Ahlfeldt and Maennig, 2009). Kavetsos investigated London’s 2005 successful bid to host the 2012 Olympic Games and discerned a positive, significant impact on property prices in host boroughs and in properties up to nine miles around the main Olympic stadium. Focusing on Arsenal’s Emirates stadium and the rebuilt Wembley stadium, Ahlfeldt and Kavetsos found, in 2010, that the construction of the two new facilities increased property values by as much as 15%. And, finally, Halifax, this year, reported that values of properties in the same postal districts as the 20 Premier League football clubs increased by, on average, 50% more than properties, as a whole, across England and Wales. Without question, there is substantial empirical support to the notion that major sports facilities materially increase the value of properties that are in closer proximity to (less than 2 miles from) the facility.
Concurrent with the construction of Farmer’s Field, Anschutz Entertainment Group (AEG) is to undertake a modernization and expansion of the Los Angeles Convention Center. In this regard, the L.A. Convention Center is to be expanded to 1.7 million gross square feet, catapulting L.A. from 15th in the US for convention center size to within the Top 5. As a result, major convention bookings in L.A. are projected to jump from 24 in 2012 to 38 in 2016 when the stadium and the expansion are completed. Though the modernization and expansion of the Convention Center, alone, should create an upward trajectory of property values [see, for example, Wirick (Arena District, Columbus, 2008), HVS (Music City Center, Nashville, 2010) and others who have concluded that the construction, enhancement and/or rehabilitation of a major convention center will likely add to the values of properties proximate to the facility], the simultaneous addition of Famer’s Field seems to create a “perfect storm” for the increase of property values.
It seems we now stand in the calm of a storm, which will push Downtown L.A. property values to new heights. In the last decade or so, we have seen some $15 Billion in development downtown. There is currently another $1 Billion currently under construction and, with the approval of Farmer’s Field and the Convention Center expansion, another $5 Billion in development is anticipated. Having been close witness to the renaissance of Downtown L.A. over the past year, to us, it is undeniable that now is one of the most propitious times to buy (or
hold) property within proximity to Farmer’s Field.
Billy Rose and Mauricio Umansky are, respectively, the President and CEO of The Agency, a full-service, luxury real estate brokerage committed to bringing a high level of expertise, customer service and attention to detail to the marketing of world-class properties. The Agency is the exclusive marketing and sales representative of The Ritz-Carlton Residences at L.A. LIVE, and the above commentary is the opinions of the authors only and does not necessarily reflect the opinions of anyone otherwise associated with AEG or The Ritz-Carlton.
