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Baseball Stadium Could Boost CRE Investment

Credit: City of Phoenix

By Richard Sarkis for Reonomy

Despite a recent resurgence in form – their 93-69 record was good enough for fifth-best in the Majors last year – the Arizona Diamondbacks have struggled to fill seats at Chase Field. During the D-back’s 81 home games in the 2017 season, average attendance stood at a meager 26,350, just 54.2 percent of capacity – fifth-worst in the Majors.

Similar struggles this season – the D-backs are filling 53.1 percent of seats, on average, through 32 home games – have team executives itching to downsize, a move that became a very real option in the wake of a vote by the Maricopa County Stadium Board of Directors in early May.

By a vote of 4-1, the Board agreed to sign a Memorandum of Understanding dictating that the County will provide “no new public money (for) maintenance, repair, or stadium upgrades,” settling a lawsuit filed by the D-back’s ownership that claimed the County owed them $187M in maintenance costs. In exchange, the D-backs will be allowed “to explore alternatives to rebuild (Chase Field) or to relocate.” While the team’s lease on Chase Field runs through the 2027 season, it now has the option to move to a new facility within Maricopa County as soon as 2022 without penalty.

Stadium-Adjacent CRE: A Walk in (and Around) the Park

Financing a new stadium is no small task – Chase Field, formerly known as Bank One Ballpark, cost more than $360M in 1996 – but the explosion of commercial real estate activity following the current stadium’s construction should be enticing to stakeholders throughout Maricopa County.

According to Reonomy data, sales of CRE assets within a half-mile of Chase Field’s eventual location were both stagnant and modest in the years preceding (and during) construction – eight sales each in 1995 and 1996, seven sales in 1997, and nine sales in 1998. The area’s fortunes changed quicker than a Randy Johnson fastball once the stadium was unveiled prior to the 1998 season, with CRE sales within a half-mile radius of the stadium increasing dramatically from 23 in 1999 to 61 in 2002.

The “BOB effect” was just as pronounced within a full-mile radius of the stadium, and, presumably because developers didn’t have to contend with the mess of stadium construction as directly, materialized even sooner. The area saw 59 CRE sales in 1995, 63 in 1996, and 67 in 1997, with the average sale price holding steady in the low $200,000s. In 1998, total sales jumped to 103, in 1999 they jumped to 176, and in 2000 they jumped to 245, after which they continued to increase steadily until hitting 363 in 2003. Average sales prices were more volatile from year to year, but they, too, increased substantially during the early Bank One era.

Chase-ing a Massive CRE Boost

Prognosticators have already started to highlight a handful of areas in Maricopa County that are primed for a stadium-sized project – and the accompanying CRE explosion.

The Salt River Pima-Maricopa Indian Community, a 53.6K-acre reservation directly east of Scottsdale, is arguably the foremost contender. The reservation is already home to the Salt River Fields at Talking Stick, a 140-acre complex that both the Diamondbacks and Colorado Rockies currently use for spring training. The Memorandum of Understanding includes a clause requiring the D-backs to pay Maricopa County taxes even if their new stadium is located on Native American land, meaning a move to Salt River would not deprive the (area) of critical revenue.

Glendale is another option, as there’s currently a sizeable vacant lot kitty-corner to the Arizona CardinalsUniversity of Phoenix Stadium. Similarly, a group of dairy farmers is in the process of rezoning a stretch of land in Mesa, an area theoretically large enough to house a baseball stadium and extensive CRE development.

The Diamondbacks may ultimately choose to stay at Chase Field. Or they may move elsewhere downtown. “Everything’s an option,” Diamondbacks President Derrick Hall recently told a local radio station. “That’s what (the Memorandum of Understanding) does. It makes everything an option to go look and see what’s there.”

It may be too early to make definitive predictions, but in light of the commercial sales and development spurred by the construction of Chase Field, investors would do well to keep a close eye on potential submarkets where a new stadium could be built.

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