In January 2018, the National Capital Commission (NCC) announced that it reached an agreement in principle with RendezVous Lebreton to develop LeBreton flats. The deal will see the construction of a new downtown NHL arena surrounded by housing and amenities such as shopping and community centres.
The announcement was well-received by the Ottawa community. After all, LeBreton has been an undeveloped yet desirable slice of real estate for decades. If all goes according to plan, Ottawa will get a new arena and vibrant 21st century living space by 2025.
Since new sports stadiums aren’t common news in Canadian cities, savvy investors are looking into how to capitalize on this deal. In this article, we’ll look at the impact Ottawa’s new arena will have on real estate and rent.
A bit of background
LeBreton Flats is a 21 hectare site which used to be a trading hub, and later, an industrial centre. The federal government expropriated the area in the 1960’s to build offices however, those plans never materialized and the lot stayed vacant for decades.
Since, several investors and developers tried to develop the land without success. Bureaucratic red tape and reaching agreements on who decontaminates the soil scuttled these plans.
The NCC’s recent announcement is a landmark in the area’s history. Unlike past in attempts, the NCC has already invested millions into decontaminating part of the site’s soil. Additionally, the NCC’s CEO stated that the cost of decontamination will be deducted from the price of the land. This suggests some government body will take on the cost instead of the developer, further reducing the chance the deal will fall through.
What will be built?
When the NCC announced it reached an agreement, most news outlets focused solely on the new NHL arena. However, much more will be built. This is important because as we’ll see below, a sports venue isn’t enough to drive up real estate and rent. Supporting entertainment districts, amenities and living areas are necessary.
As it stands, the proposal includes:
– A cultural and social meeting space with a capacity for 28,000 people
– A multi-use sports and recreation centre
– A public space featuring a water feature
– Affordable living and condominiums
– Shops, cafes and restaurants
In other words, they will build an entire community centred around the arena.
An automatic increase in rent prices?
Academic studies looking at the economic impact of arenas show a mixed bag of results. In some, new arenas barely improve the general economy while in others, jobs and real estate go up while poverty goes down. How are investors and landlords supposed to draw conclusions and translate them into wise decisions?
The problem with North American studies on the subject is that many look at the impact of NFL stadiums. NFL teams only play 8 home games a year – that’s a lot of days the stadium stays empty! In many NFL cities, there is also an existing and diversified market for venues suitable for concerts and conferences. This means that for the 350+ days there isn’t an NFL game, the stadium (and surrounding areas) isn’t buzzing with activity. Consequently, residents see no appeal in living in an area and this doesn’t translate to an increase in real estate.
But what if we were to look at baseball stadiums? These are generally placed in the middle of urban areas, used for 80+ home games and create a vibrant community around where they are built. A study compiled by Trulia found that properties near MLB stadiums had home values 15% higher than their greater metro area.
What’s even more interesting is that the stadiums built in or before 1999 had rents above the median market rate. It’s worth noting this last point since those old stadiums are located in cities like Boston (Fenway Park), Chicago (Wrigley Field) and Cincinnati (Great American Ball Park). In those cases, the stadiums are located in the middle of dense urban areas and surrounded by restaurants, nightlife and shopping.
The conclusion to draw here is that for any sports infrastructure to have a positive impact on real estate, an ecosystem of entertainment, residential spaces and amenities needs to be present alongside it.
An NHL case study
An interesting case study is Montreal’s Bell Centre, home to the NHL’s Habs. This arena is located in the heart of downtown Montreal and surrounded by restaurants, recently-built condo towers and a few steps from the major work centres.
When there aren’t hockey games, the Bell Centre hosts high-profile concerts. There’s always a hustle and bustle in the area and buzz in the air. It’s a desirable spot to live. At the time this article was written, renting a 1 bedroom in the Habs Tower (annexed to the Bell Centre) cost at least $1,800 for a 1 Bedroom and $2,500+ for a 2 Bedroom. If you consider that the average rent in Montreal is $698 for a 1 Bedroom and $782 for a 2 Bedroom, that’s a hefty premium to live in the heart of the action.
When it comes to Ottawa and LeBreton Flats, the new arena will be surrounded by high-rise condos, shopping and community centres similar to the Bell Centre. But beware: landlords shouldn’t expect to be able to raise rents to astronomical heights as it’ll take years for the area to develop.
What about the other areas?
In our estimate, it’s not just LeBreton that will see a boom in real estate. LeBreton is a 4 minute train ride away from Little Italy. The area was already in the middle of rapid gentrification, but the arrival of the Confederation Line will now connect the O-Train and Little Italy to the rest of Ottawa. The neighborhood is already home to great restaurants, a growing nightlife and green space. The new arena will likely have a positive impact of rent in the area.
Next up are Hintonburg and Mechanicsville. Like Little Italy, these two areas are in the middle of gentrification. When the arena will be built, these two neighborhoods will be sandwiched between Westboro and LeBreton and everything these spots have to offer. Not only that, the new Confederation Line will help its residents get around Ottawa that much faster.
Investors with properties near old arena
Once the Senators move to LeBreton Flats, landlords in Kanata shouldn’t expect to see a marked decline in rents. Kanata is in an economic boom fueled by an influx of high-paying tech jobs. The area won’t lose its appeal from the arena closing down.
Wrapping This Up
If all goes to plan, the LeBreton Flats development will likely have a positive impact on rent and real estate in some areas. Investors and landlords who buy into LeBreton, Little Italy, Hintonburg and Mechanicsville will be able to get a few extra dollars of rent every month. However, the project spans several years and LeBreton will need to create a name for itself before rents can be raised.