Do New MLB Parks Create All-Star Neighborhoods?

Date:July 13, 2009 | Author: | Category:Real Estate

The Midsummer Classic is finally upon us.  This year, St. Louis will host the 2009 Major League Baseball All-Star game on Tuesday, July 14, showcasing the new Busch Stadium (above) that opened in 2006 (watch this interesting time-lapse photography of the new Busch Stadium being built adjacent to the old one).  The $346 million stadium was, remarkably, built without any government-funding assistance (today, virtually all parks are subsidized by local governments).  The last stadium that was not government-assisted was Turner Field in Atlanta, which opened in 1999. Before that, we have to go all the way back to 1962  when Dodger Stadium was completed.  Fenway Park and Wrigley Field round out the list of parks that were not government-assisted.

A common argument made for government funding is that ball parks increase the vitality of the neighborhood.  I did a bit of research and found that there have been six ballparks built since 1996 that were built in a neighborhood that did not previously have a stadium.  St. Louis is not included in the list since the new ballpark was built in the same place as Busch Memorial Stadium.  For the purposes of the study I used the ZIP code of the ballpark rather than neighborhood to get a more meaningful sample size.

They are:

I wanted to see the effect of a new ballpark on the values of surrounding homes. So I compared the relative rate of growth home values using the Zillow Home Value Index (ZHVI) of the city, and then of the ZIP code that’s home to the shiny new ballpark. This let me see if home values performed better in the specific ZIP code than in the city as a whole.

I started from the year before the stadium was built.  So if it was opened in 2000, my first comparison was the change from 1999 to 2000.  This “first” year, as may be expected, showed almost zero difference between the two rates of growth — 0.04% to be exact.

However, when looking at the three years since the park’s completion, the area surrounding the new ballpark outpaced the ZHVI in the city as a whole by an average of 1.1% per year.  This may not sound like a lot, but it has the effect of increasing the average ZHVI by almost $6,700 more than it would have presumably increased without the addition of a new stadium.  Or, as I prefer to think of it, thanks to that new stadium, your house increased in value just a bit less than the cost of a single premium Yankees’ ticket per year!  The average ZIP code in this study had about 8,000 households in it, so that increases the total worth of the local region by about $54 million over three years.

The growth seems to slow down after this point, though still outpacing the “neutral” city slightly.  It projects out that after about eight years, the average ZHVI has outpaced the rest of the city by $7,900, or $63 million total dollars in the value of the local real estate market.  Looks like in years 4-8 you’ll be in the bleacher seats!

This seems to make intuitive sense.  In the first few years after completion there is likely a significant amount of investment in the local area from both businesses and in new real estate which raises the desirability and thus pricing of the neighborhood.  Over time, this business remains, but the area reaches a saturation point beyond which significant future growth is limited.  However, the area remains an improved and more desirable place to live than previously was the case, and thus holds this increased value as well as or better than the surrounding area.

Over the last decade the average stadium has cost $470M with local governments funding an average of $230 million (49%) for the project.  Based on property tax revenue increases alone, I wouldn’t say the investment by governments is a home run, but it does seem that the theory of “If you build it, the slightly richer will come” is a hit.