The 2002 World Cup and the Impact on the Real Estate Markets of Host Nations

Jones Lang LaSalle, the world`s largest real estate services and investment management firm recently released a research report, which examines the impact of the 2002 World Cup on the real estate markets of the host nations. The report also looks beyond 2002 and draws out the implications of the experiences of previous hosts for Germany the hosts of the 2006 tournament.

Ben Sanderson, Associate Director, Asia Pacific Research, based in Tokyo and the lead author of the report said “The 2002 World Cup represents the largest ever capital investment in a football tournament and is unlikely to be matched in the foreseeable future.” He continued “Total investment in new stadiums and refurbished facilities, including additional infrastructure is estimated to be US$5 billion for Japan. James Tyrrell, Director, Investor Services, based in Seoul, said, “In South Korea 10 new stadia have been built at a total cost of US$2.5 billion”

The host nations are hoping for a significant economic boost from the tournament equal to 2.2% of GDP in South Korea and 0.6% in Japan. However Jones Lang LaSalle suspects that these forecasts are likely to prove overly optimistic. “It is important to try to separate the World Cup effect from normal cyclical economic movements and to take account of the “crowding out” effect on spending in other parts of the economy. We suspect that the World Cup will probably have little or no statistically significant impact on the host nations` GDP.” Sanderson said

But the World Cup will have a real estate impact.
The effects will not be evenly distributed across the real estate sectors. Michelle Webb, Vice President of Marketing and Research based in Sydney and one of the co-authors of the report said, “Hotel operators will benefit the most. They can expect a significant short-term boost from the World Cup. We estimate that hotel operators could boost their average daily rates by 20%, revenues by 30% and that occupancy could rise by around 9% during the month of June.” The report suggest that the impact is likely to be concentrated. “Hotels in Tokyo and Seoul will gain the most and visitors will use these “gateway cities” as a base to travel to and from games and between the two host countries” Webb continued.

Retailers will also feel the benefit driven by boosts in domestic and international spending “The World Cup will have a positive short-term effect on the retail sector through increases in retail sales and rises in domestic consumer confidence. Our research suggests that this may be connected to the performance of the Japanese and Korean national teams. The host nations do not have to win. Providing that they perform above expectations, it is likely that the positive effects will be greater” Tyrrell said.


Potentially the most significant impact on real estate is the long-term legacy of the stadia themselves. Sanderson explained, “For the first time, the organizers hope to use the World Cup as a catalyst for urban regeneration. 17 new stadia have been built in 20 host cities. This is the largest number of World Cup venues ever used” Jones Lang LaSalle`s research suggests that it is difficult for sports stadiums to generate economic benefits in their own right as they often compete with other higher value, best use options. Sanderson continued “Stadia need a viable and sustainable business plan to be useful after the tournament is over”

Tyrrell said, “Unlike the Olympics, the World Cup does not have a concentrated impact on any one city and therefore the possibility of a successfully leveraging urban regeneration benefits from the tournament is reduced. Many of the new stadia for 2002 do not appear to have the necessary mechanisms in place to leverage the regeneration benefits they are hoping for.”

Jones Lang LaSalle`s analysis of the experience of previous hosts had a series of important lessons for the 2006 hosts, Germany. Sanderson explained, “Future hosts need to consider carefully the number and location of host cities. Hosts have a choice between a smaller number with a more concentrated impact and a larger number with more diffuse real estate benefits.”

However, Jones Lang LaSalle`s report concluded that despite the potentially significant impact of the World Cup on real estate markets there were other attractions to being a host. Sanderson said “The host nation or an immediate neighbor has won nine of the 16 previous tournaments. The real attraction for hosts could be a rather old fashioned, sporting one. Being the host increases the chances of doing well in the tournament. Although it might be too much to expect a Korea-Japan final, the host nations must be among the more likely candidates to outperform their global ranking. “Home advantage” will likely again prove significant in 2002”.