ELECTRONIC SPORTS, or “esports,” is a popular global pastime that has experienced massive increases in consumer interest in recent years. Revenue from esports has expanded at a compound annual growth rate of 36 percent since 2014 and is forecast to continue posting double-digit growth through 2021, when it is expected to exceed $1 billion, according to Statista. Viewership has also demonstrated rapid growth, expanding at a 13 percent compound annual growth rate since 2014, with forecasts for more than 500 million esports viewers by 2020.
To date, only a few dedicated esports arenas exist. Most are repurposed 15,000- to 30,000-square-foot buildings. As the market continues to expand, additional demand for esports arenas is likely, presenting global development and adaptive reuse opportunities – particularly for arenas anchoring existing and new large mixed-use entertainment districts featuring complementary retail, hospitality and multifamily housing uses.
Esports is a broad category covering competitive multiplayer video games played by professional video game players, for spectators’ enjoyment, during regular season and tournament league games. Teams are generally organized by game title and geographic region. They practice regularly, have one or more coaches and are supported by sponsorship, prize money, traditional sports team owners and other revenue streams.
Live esports games, moderated by professional commentators and overseen by referees, are frequently broadcast simultaneously via multiple channels, including game-publisher websites and live video streaming platforms such as Twitch and YouTube. They also offer in-person viewing experiences at various large and small venues.
In 2017, fans watched billions of hours of esports games and additional content online, with nearly 1 billion hours of gameplay viewed across the five most popular games alone. Esports is a profitable endeavor, with 2017 revenues exceeding $500 million across the industry. Like viewership, revenue is increasing yearly at a double-digit pace, and the industry is forecast to exceed $1 billion in revenue by 2020. Revenue originates from a variety of sources but is primarily driven by sponsorship, with additional revenue streams from advertising, media rights, publisher fees and merchandise and tickets.
In the near term, esports presents a strong opportunity to drive adaptive reuse because many types of real estate can be repurposed into esports venues. To date, most dedicated esports arenas have been converted into gaming venues from a wide range of real estate product types, including casinos (Esports Arena Las Vegas), sound stages (Blizzard Arena in Burbank, California) and office buildings (NA LCS Battle Arena in West Los Angeles).
Other real estate product types, such as cinemas or warehouses, can easily be converted into esports venues given these facilities’ straightforward requirements. These primarily consist of a fast, reliable, wired internet connection for the players, Wi-Fi service for guests, ceilings high enough to install multiple large video screens for the audience, seating space, dedicated areas for concessions and merchandise, and additional space for training and practice, pregame warm-ups, one-on-one sessions with coaches, team storage and other team uses.
Given the global popularity, current low fan density and fragmented fan base among dozens of game platforms and tournaments, most regular season games attract a live audience numbering only in the hundreds or low thousands of attendees. Thus, smaller venues with a capacity from 500 to 5,000 and ranging in size from 15,000 to 30,000 square feet are ideal in the near term to host regular season games. These allow operators to maximize arena use and revenue-generation opportunities while minimizing periods when the venue is idle. Regular season games at some venues sell out regularly, even with dozens of games a week.
The decline of traditional retail creates the potential for esports to repurpose vacant mall and other retail sites into dedicated esports arenas.
A handful of ground-up development projects have either been completed or are under construction globally as dedicated esports arenas. These projects tend to be larger in scale, from 60,000 to more than 100,000 square feet, with a capacity for tens of thousands of attendees. The Chongqing Zhongxian E-Sports Stadium in Zhongxian, China, which seats 20,000, opened in late 2017. Because current esports games require minimal playing space for the team, they do not need a large court area.
Future esports stadiums will feature significantly more video displays to broadcast current games and replays. They’ll be dispersed throughout the arena, including in hallways, concession and merchandise areas, and restrooms, along with displays embedded in the exterior glass curtain walls of the venue.
New ground-up esports arena development may also include space dedicated to postproduction activities. A single esports match generates a significant amount of video and advertising material. Dedicated space for a postproduction team of editors and commentators, as well as a marketing team, will be a natural extension of arena development. Given the minimal size and operational requirements for video postproduction, it is logical for new arena development to consider dedicated space for postproduction teams, in addition to space carved out for more traditional complementary uses, such as media boxes for journalists.
Some esports games involve shorter matches running only a couple of hours, with certain sports, such as Overwatch League, offering multiple back-to-back games in an arena in a single day. Other game formats can run six or eight hours, or even longer. Either format results in a fan base that lingers for extended periods of time at the arena, and fans commonly leave their seats and meander throughout the venue.
From a real estate perspective, the long engagement period at esports events creates exciting opportunities for consumer engagement. Similar to a traditional sports venue, an esports arena can act as the anchor of a broader mixed-use district, serving as a catalyst for significant additional real estate development nearby.
Potential complementary uses surrounding an esports arena include retail, primarily restaurants; hotels for visiting teams and fans; and multifamily housing for fans who wish to live near an arena. Other complementary uses include live music venues with local or national bands playing before, during or after an esports game, as well as movie theaters that could offer another entertainment option for fans waiting for their team to play. A movie theater could also present esports highlights, replays or even entire games from previous tournaments and playoffs, maintaining fan engagement and providing additional food, beverage and merchandise opportunities. Esports venues can even program space for casual (nonprofessional) players within the broader arena or entertainment district.
To date, most esports competitions consist of players seated in a row in front of computers, playing a multiplayer video game. As technology improves, the line between traditional and electronic sports will continue to blur. Regardless of the game format, esports is a popular and growing entertainment option, and arenas hosting esports events will provide real estate development and adaptive reuse oppor-tunities for years to come.
By Adam Ducker, managing director, RCLCO, firstname.lastname@example.org
This article is condensed and adapted from an RCLCO report, “E-Sports Arenas: Are Video Games the Next Great Urban Entertainment Anchor in Real Estate?”