The State of the Industry

Through a deep historical analysis of the venue marketplace, Hunden Strategic Partners offers insights for current market conditions, how and why we got to those conditions, and offers a glimpse into the future.

  • Theater Boxes at Target Center. Photo Credit: Farm Kid Studios

At the 2017 Sports Venue Design & Build Forum, held at the annual ALSD Conference and Tradeshow in Miami, I was delighted to present the “State of the Industry” for the stadium and arena marketplace, which features more than $10 billion in new facilities under construction.

Hunden Strategic Partners has partnered with the ALSD to collect and maintain an ongoing and growing database of these sports facilities to serve professional, collegiate, and other sports and entertainment organizations. The first year of the rollout featured a focus on the history and current status of major league sports facilities.

How We Got Here

Perhaps the highlight of the presentation in Miami was a historical “movie” of the development and movement of sports teams since the beginning of each major league. ALSD members and others can download and watch the movie for each professional venue to see how each league has changed over many decades.

Rob Stephens of ICON Venue Group and Don Dethlefs of Sink Combs Dethlefs then joined me on stage to provide perspective on the history of facility design and current trends impacting new and renovated facilities. This historical look is critical because the pace of new developments and renovations is not formulaic. The initial development of each league featured a period of utilizing existing facilities in order to get up and running. Purpose-built facilities located on compelling sites took decades to come about.

For example, while professional baseball has had purpose-built stadiums for more than 100 years, football teams played in the outfields of many baseball stadiums for years before shifting to their own facilities. We have seen Major League Soccer go through the same transition most recently, first using larger football stadiums, then transitioning to soccer-specific facilities sized to their crowds.

Over time, each league found its way into facilities that were built for their sports, were located in urban locations, and had features that generated premium revenues from suites, club seats, and lounges. The final push in the new development of facilities occurred in the 1990’s, as most teams transitioned from multipurpose, multisport venues without premium seating areas. Twenty years later, the last generation of new facilities is aging and in need of updates for today’s market expectations.

For many, the generational change and expectation is not about needing new venues in most markets, but about ensuring existing facilities respond to the technology demands of today’s social-media-obsessed fans. Sports facilities are feeling more like ultra-connected coffee shops and hotel lobbies than just a place to watch your favorite team.

Where We Are Today

So what is the state of the major league facility industry? Let’s start with the number of new facilities opened each year and by league.

Chart courtesy of Hunden Strategic Partners.

 

As the chart shows, the last year with more than six new facilities opening was 1999. Since then, the pace of new facilities has slowed. However, spending on facilities has not stopped. The next chart shows the average cost per new facility.

Chart courtesy of Hunden Strategic Partners.

 

Just as the number of new facilities decreased, the average cost per new facility began to increase substantially. Why? The answers are driven by several factors, including location, size, and technology.

Location

The location of many new facilities drove costs higher. The 1970’s and 1980’s featured a move to the suburbs for many teams, cheap land, and hundreds of acres of parking. This trend contributed to the temporary death of many downtown sports environments. However, as Millennials and others flocked back to urban centers in the past ten years, newer facilities are being built in walkable locations, where they can be the heart of an urban entertainment district, surrounded by restaurants, hotels, and other entertainment venues.

Urban development, with structured parking, is simply expensive. Throw in a few new facilities in the most dense, expensive markets, like New York, Los Angeles, and San Francisco, and it is not surprising to see costs surpass the $1 billion mark for these developments.

Size

The size of new venues is also contributing to increased costs. The stadia of the 1970’s and 1980’s focused primarily on the seat count and playing surface, with some suites. However, the concourses, support spaces, amenities, and other areas were all limited in size and scope. Today’s facilities include much wider concourses, more amenities, more spaces, more places for pregame and postgame activity, lounges, larger locker rooms, and training/practice facilities. It is not unusual for a replacement facility to increase by 30% to 50% in gross square footage.

Technology

The realities and demands of the market today include instant internet and data access. Outside the facility, it’s easy to watch a game from anywhere on a smartphone. The market expects that same connectivity while in the arena or stadium. Providing internet and data access for up to 80,000 fan devices in a confined space to stream live video is no small feat, nor inexpensive.

In addition, the scoreboards and other electronic signage packages for most new facilities is incredibly robust, with larger and more numerous options covering every major piece of the facility. Advertising and sponsorship revenue is critical to the team’s bottom line, so owners have realized that ribbon boards, scoreboards, and other electronic signage on nearly every surface within the seating bowl can generate big revenues.

The next chart shows total spending on new major league venues from 1999 through 2021.

Chart courtesy of Hunden Strategic Partners.

 

So while the number of new facilities has not increased, the total spending on them has. While a dozen new facilities opened in 1999 for a total cost of under $3 billion, today’s facilities each cost approximately $1 billion, and renovations are often hundreds of millions of dollars.

The next chart shows the number of new openings by decade, and suggests that the pace of new facility development is slowing.

So where are we in the cycle now? How old is the current crop of 100-plus major league venues?

Chart courtesy of Hunden Strategic Partners.

Chart courtesy of Hunden Strategic Partners.

 

Nearly 40% of current facilities were built in the 1990’s, another 32% built in the first ten years of the 2000’s, and 15% built during the 2010’s. The balance are more than 30 years old, with several old iconic venues over 100 years old, such as Wrigley Field. Given that most facilities are renovated every 10-15 years and replaced every 30-40 years, the numbers suggest that dozens of facilities will be renovated or replaced in the next ten years. In fact, the reality is that most money is being spent on renovations today than new builds.

Chart courtesy of Hunden Strategic Partners.

 

Yet consider the number of facilities built in the 1980’s and 1990’s that have not had a major renovation since being built. There will be increasing pressure on teams and cities to ensure that those facilities are kept up to date.

What’s Next for the Venue Marketplace

In Miami, Rob Stephens, Senior Vice President for owner’s representative firm ICON Venue Group, shared some trends from sports facilities that his firm has managed over the last 13 years. Specifically, Stephens highlighted how the venue of today is much more flexible and adaptable than its predecessors.

“Today’s facilities must respond to the market’s desire for variety, experiences, and personalization,” said Stephens. “T-Mobile Arena in Las Vegas really exemplified how owners and operators are thinking outside of the box to offer new seating and premium products to the venue to meet market demand.”

“Today’s facilities must respond to the market’s desire for variety, experiences, and personalization.”

– Rob Stephens, ICON Venue Group

He explained how AEG and MGM Resorts International worked with Hyde to create the Hyde Lounge in a mezzanine above T-Mobile Arena’s upper concourse, which is an area historically underutilized in arena spaces. They took an ultra-premium concept and adapted it to an in-venue product that is packed on a regular basis, generating a much larger return on investment than typical upper concourse seats. Stephens also noted the integration of indoor and outdoor spaces in several areas of the venue to take advantage of the climate in Las Vegas.

Stephens also detailed one of ICON’s projects currently under construction, the renovation of Vivint Smart Home Arena in Salt Lake City. The home of the Utah Jazz is an example of a team and owner responding to the needs of their unique fan base. A series of top-to-bottom upgrades on all six levels will elevate the guest experience with redesigned lower and upper bowl concourses, vibrant social spots from private clubs/suites to open gathering spaces, more food choices with the installation of “live” kitchens, and a new 12,000-square-foot indoor lobby. The enhancements to the arena interior space will maximize traffic flow and will result in a substantial reduction of the building's environmental footprint.

The Modern Sports Venue

Unlike venues of the past, today a building is more successful if it is adaptable and accommodates a variety of interests. Modern event centers are designed and renovated to be as much about the patron journey as they are about the event.

The variety of activities and opportunities inside a modern venue are numerous and strive to offer something for everyone. In today’s venue, the die-hard fan watching every play of the game is the exception. Individuals attending an event can seek and find varying types of entertainment that often come with an associated cost.

“Attending an event is no longer about a ticket and a seat, but about the overall experience, often away from the event floor.”

– Don Dethlefs, Sink Combs Dethlefs

Mixed-use developments are also a modern venue phenomenon, which have altered the concept of a building centered in a sea of parking. Some buildings have created exterior entertainment zones where fans can go to be a part of the action without even entering the building. Often new arenas are combined with commercial uses on the same site. A patron can arrive on site hours before an event and be entertained without entering the building, and the venue can begin collecting revenue before a ticket is used.

While certain aspects of all venues, such as safety and security, continue to be of importance, every venue patron is seeking a unique experience. The modern venue strives to please them all.

“Today, teams, operators, and fans are looking for a variety of personalized experiences that cater to the wants and needs of every patron,” said Don Dethlefs, CEO of sports architectural firm Sink Combs Dethlefs. “Attending an event is no longer about a ticket and a seat, but about the overall experience, often away from the event floor.”

As Sink Combs Dethlefs redesigned and renovated the Target Center in Minneapolis, flexibility and responsiveness to today’s expectations and tomorrow’s unknowns were key factors.

“Future-proofing facilities is about flexibility, versatility, and ease of expansion,” Dethlefs said. “Venue operators and owners should make informed decisions to ensure that in the future, they will not be handcuffed by technology infrastructure, square footage, or structural limitations.” #

How is your venue responding to changing market conditions?
Email Rob at rhunden@hundenpartners.com.

 

Hunden Strategic Partners looks forward to the 2018 Sports Venue Design & Build Forum to unveil the updated and expanded database and trends analysis, which will include MLS stadiums. To review the historical presentation of overall stadium development, visit www.hundenpartners.com.

 

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