Arena-Led Urban Revivals

When the 18,000-seat Sprint Center opens in Kansas City next year, local officials hope that the arena will give downtown an economic jolt. After all, other large cities have used arena-led redevelopment campaigns to revive blighted districts.

What Kansas City officials are hoping for is an instant replay of what happened when Denver plopped a new major league ballpark in the middle of a rundown industrial area. It became the centerpiece of a $2 billion redevelopment that has produced a vibrant new neighborhood.

Kansas City has all of the pieces of the puzzle — the $276 million arena is part of more than $2 billion in subsidized redevelopment activity — except one: The city has yet to land an NHL or NBA franchise.

A speculative stadium or arena project is indeed a high-stakes proposition. In San Antonio, where the $186 million Alamodome was built 13 years ago, the city is still trying to lure an NFL franchise. To get the Tampa Bay Devil Rays to commit to playing in the $110 million Sun Coast Dome in 1998, the City of St. Petersburg had to pony up $67 million for renovations to the eight-year-old facility.

But filling the stadium is only the first step in the ambitious redevelopment projects that Kansas City and other cities have planned around sports facilities. It's not enough to bring fans to the neighborhood 80 nights a year: The new urban arenas like Sprint Center are expected to justify their massive public subsidies by generating permanent improvements to the surrounding neighborhoods.

“The Sprint Center has already made a vital contribution to the redevelopment of downtown Kansas City,” says Kevin Grey, president of the non-profit Kansas City Sports Commission. “The arena has already created some strong momentum among local businesses that want to be near it.”

Commercial space within a few blocks of the Sprint Center is slowly filling up with tenants. But one local leasing broker says that much work remains to be done before the CBD can be called vibrant. Phillip James, senior vice president at Grubb & Ellis/The Winbury Group, believes that momentum is gradually building downtown. “I'm hoping that our growing residential base will help fill restaurants and office buildings downtown,” he says.

Mile high miracle

When a downtown sports attraction clicks, the results can be impressive. One example is Denver's Coors Field. Back in the early 1990s, local officials decided to build the 50,250-seat, $380 million stadium in a rundown district along the northern edge of the Denver CBD.

One Denver City Council member described this strip of dilapidated 1930s warehouses and industrial buildings as “double ugly.” Instead of facing the usual not-in-my-backyard objections, Denver's big worry was if suburban sports fans would venture to this seedy part of town.

“People were really skeptical, but Coors Field was a home run in just about every way,” says Sherman Miller, executive managing director of Cushman & Wakefield's western region.

Since Coors Field opened in 1995, the surrounding Lower Downtown area has been reborn as “LoDo,” a hip residential district known for its restaurants and art galleries. Fans who throng to the team's 81 home games routinely circulate through the district where they shop and eat.

More than 90 restaurants, thousands of residential units and dozens of art galleries are located in the 25-square block district. Retail and residential property values have tripled over the past decade, says Miller. Lofts in the area are among the city's priciest apartments.

Even the LoDo office market is thriving. Unlike Denver's metro market, which was 14.9% vacant at the end of September, the LoDo submarket had a 6% vacancy rate, according to Cushman & Wakefield data. The district is still growing, too.

In September, local developers won the bidding to create a mixed-use project on a 19.5-acre Union Station site located only a quarter-mile away from Coors Field. “The stadium is really what got LoDo started,” says Miller, who adds that critics nearly foiled plans to build Coors Field on that site.

Foul ball

The success of Denver and other cities such as Pittsburgh has encouraged planners and developers to believe that the introduction of a sports facility can act as a catalyst for neighborhood upgrades.

Steve Weathers, president and CEO of the Regional Growth Partnership in Toledo, Ohio, says that successful downtown arenas all share certain traits. Most tend to be near bus and subway stations, which reduces the hassle of stadium parking. It's also ideal if a critical mass of residents and office workers live and work within walking distance. Many will spend money along the way, he says. Another ingredient is keeping the facility active with concerts and other events when the team's away . “You need to draw people to the arena all year round,” he says

Despite the enthusiasm for in-town stadium developments — more than a dozen have been built around the country since 1990, according to the Urban Land Institute — experts continue to debate the overall economic benefits.

Andrew Zimbalist, an economics professor at Smith College in Northampton, Mass., has studied the economics of arena development for decades. He says that arenas absorb dollars that could have been spent more effectively for economic development elsewhere in the city while imposing new costs, including security for patrons and residents.

According to Zimbalist's analysis, rental fees and revenue-sharing deals with sports teams rarely cover the direct and indirect costs of a new arena. He says that when the construction costs borne by the city and/or state are factored in, even the most successful stadiums rarely break even. Zimbalist says that building a speculative arena development such as Kansas City's Sprint Center is “irresponsible.”

Central access

Whether or not arenas and stadiums can jump-start economic revival in urban neighborhoods, it's clear that when such projects are built on sites away from business and residential centers, it's hard to discern any community-wide payoff.

One example is Atlanta's Turner Field. Built in 1996 as an Olympic stadium and future home of the Atlanta Braves, the $235 million project is hemmed in by highways and surface parking — two miles outside of downtown Atlanta. And it's not conveniently connected to the MARTA rail system, so fans must either utilize a shuttle bus or find their own form of transportation. After a decade, few restaurants or retail businesses have sprung up near Turner Field.

“The city didn't want to take any risks by developing a stadium in downtown Atlanta, so it built Turner Field on the edge of the city in the middle of highways,” says Janet Marie Smith, former vice president of planning and development for the Atlanta Braves. In her career, Smith has worked on Turner Field, Camden Yards and Fenway Park.

“Baltimore's Camden Yards was really the first urban ballpark whereby officials actually made the arena part of the city,” says Smith, adding that in 1988, Baltimore officials viewed the stadium as a way to grow the downtown economic base. The stadium is an easy walk from Baltimore's popular Inner Harbor seaport district, making it a tourist draw, and has attracted restaurants, museums and shops. “It has ended up being the model that many other cities have tried to copy,” she says.

Steel City success story

Pittsburgh is another example of how a sports project in just the right spot can spur development. The 65,050-seat Heinz Field opened five years ago near the site of the old Three Rivers Stadium on the northern edge of downtown. On another side, the Steelers' new home adjoins the $216 million PNC Park, which was built in 1999 for the Pirates.

“The idea was to create a mixed-use district between the two stadiums on what was formerly a bunch of parking lots,” says Bernard McShea, senior vice president of business investment at Pittsburgh economic development group Allegheny Conference.

The new development also played off the northward expansion of the business district, which includes the $67 million Alcoa headquarters that opened in 2002 just 100 yards away from PNC Park. McShea says that Alcoa's decision to occupy space across the Allegheny River was viewed as a bold step at the time.

“Once they moved into the area, we started seeing some restaurant owners lease space. It definitely helps that the office is only a short walk across the Roberto Clemente Bridge from downtown Pittsburgh, too,” says McShea. There are now roughly 1,000 new housing units in what has become known as the North Shore district.

“When we began redeveloping the Three Rivers site in 2003, the city made it clear that this would become a mixed-use area,” explains Barry Ford, president of Continental Real Estate, which helped redevelop the 12-acre Three Rivers stadium site. “The stadiums were a way for them to create added opportunities for this area. They also demanded that an esplanade and park be developed on the riverfront.”

Earlier this year, Continental built a $30 million, two-building headquarters for Del Monte Foods. And in May, Continental announced plans to develop its fourth office building in the North Shore district. Ford says that this 190,000 sq. ft. property, between the football and baseball stadiums, is already half-leased.

Tough sell in the heartland

For Kansas City, igniting that kind of new urbanist spark may be more difficult. The city, with a population of just 460,000, sits at the edge of an 18-county metro area of 2 million that spreads out north and west across a landmass roughly six times as large as the city of Pittsburgh.

Many upper- and middle-class white residents left Kansas City during the 1980s and early 1990s for booming suburban areas. That trend began to reverse itself in the mid-1990s and Kansas City has its share of loft conversions and downtown condo projects now. But it is still a struggle to lure upscale consumers downtown. In late October, the city announced a plan to raze four problem buildings in downtown Kansas City (one is an old Greyhound Bus Terminal).

A major focus of redevelopment is the so-called Power & Light District project. This $850 million mixed-use project, which is being developed near the Sprint Center by Baltimore-based Cordish Development, is one of the largest mixed-use projects in the Midwest.

Anchored by H&R Block's recently completed 1.3 million sq. ft. headquarters, the Power & Light District will also feature shops and galleries styled after Manhattan's hip SoHo district. The project's title harkens to the early 20th century when the district had a coal-fired power plant, which was demolished in 1930.

“It's hard to go downtown and miss all of the redevelopment activity,” says Thomas Willard, CEO of Kansas City-based Tower Properties. Willard owns a 5 million sq. ft. portfolio of mostly office properties in the Kansas City metro area.

“There are two or three different catalysts driving the growth downtown, and the Sprint Center is clearly one of them. Buildings near the center are in greater demand, too,” says Willard, adding that Class-A office vacancy rates in the metro region have been slowly declining in recent years.

Still, by any measure, downtown Kansas City is a troubled market: Grubb & Ellis data shows that the CBD office vacancy was hovering at 21.5% at the end of September, up from 20% at the end of 2005.

New office supply doesn't appear to be an issue: There was only 550,000 sq. ft. of new office construction underway at midyear, which is a small fraction of the 12.8 million sq. ft. CBD office inventory.

“We see the Sprint Center as one very important piece of the puzzle here because the entire CBD is economically depressed,” says developer Willard. “We're now just waiting to see what happens.”

Parke M. Chapman is senior editor.

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