After Olympics, What Happens to Sochi Structures?

While the Winter Olympics were under way, media attention was focused more on the international competitions and less on development and site issues (such as security concerns and the not-quite-ready living quarters of some athletes). The Games are over and a perennial question has re-emerged: What becomes of the buildings and structures created for the Olympics, now that the athletes and spectators have gone home?

Over the years, host cities have addressed this question with varying degrees of success. For cities that need to sell the concept of hosting the Olympics to their own populations as well as to the International Olympic Committee (IOC), the idea of spending $1 billion or more on temporary arenas and housing to be torn down afterward is a non-starter. More often, cities have tried to leverage their existing infrastructure and venues, or have used the Games as an excuse to build a new stadium or rejuvenate a run-down area.

A great example of the latter is Atlanta, where the 1996 Olympics prompted a renaissance in a section of downtown that had fallen on hard times—it’s now the site of CNN Center, a world-class Aquarium, the new World of Coca-Cola museum and other civic and for-profit development.

1996 was also the year that IOC added “environmental protection” as the third pillar of the Olympic movement, alongside sport and culture. Sustainability, including the re-use of buildings after the Games, has been on the minds of Olympic planners ever since. How is re-use considered a sustainability priority? For starters, consider that the energy expended to construct a commercial building is roughly equivalent to the energy used in 65 years of its operation. Add in the impact of using natural resources in construction and then sending those materials to the landfill, and it’s easy to see why this is a high priority to everyone involved.

The concept of “sustainability” applies not only to environmental impact but also to long-term thinking on economic viability. Environmental and economic sustainability are intertwined—a city with insufficient water or too much pollution has trouble competing for global companies. Certainly, London recognized this in its successful “One Planet Olympics” bid to host the 2012 Games. The Athlete’s Village and Stratford City, where much of the Olympics took place, were designed as sustainable commercial and neighborhoods with some assets pre-sold to investors before the Olympics even took place.

Which brings us to Sochi, by far the most expensive Olympics in history, with an estimated $51 billion price tag. Some $6.5 billion of the cost is for the Games themselves, while the rest is devoted to infrastructure, described by the official website as including “roads and railways, new transport hubs, a modernized engineering infrastructure, modern hotels, a landscaped waterfront, an increase in energy capacity, hundreds of kilometers of gas pipes, new purification facilities, as well as telecommunications, digital television and fiber optic communication.”

Funding from private investors is estimated at $2.6 billion for tourism-oriented development, as the Russian government intends to use the site for the Russian Grand Prix for at least the six years following the Olympics. Investors also contributed $370 million for transport and power infrastructure, and $500 million to the creation of numerous Olympic venues, many of which will remain after the Games. Later this year, Sochi will also host the G8 Summit of world leaders, so the city will continue to be in the public eye.

Does all this add up to an opportunity for real estate investors? The answer probably depends on how well Sochi comes across as a tourist destination. That might not seem likely at the moment, with Ukraine facing civil unrest just a couple hundred miles away and protests against Russia taking place during the Games. On the other hand, we heard that Sochi was enjoying 70-degree weather at a time when the Southeast region of the U.S. was hit by snowstorms. It’s possible that those newly built hotels will be put to good use.

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