2006: Golf real estate: Use caution

I have seen the future, and it looks like a whole lot of real estate.

However, those who see the latest housing boom as a much-overdue opportunity for the golf industry to rebound need to take a closer look. Golf real estate, as it turns out, is far more about real estate than about golf.

The statistics are clear, according to Bernard Markstein, director of forecasting for the National Association of Home Builders: 2.1 million housing starts in 2005, a figure that is up more than 50 percent from the early 1990s and that is expected to drop only marginally through 2014.

Everywhere I visit these days in the Southeast and Southwest, I see lots of road construction, cranes, trucks, bulldozers, dust and debris and piles of wood, siding and roofing. I see vast horizontal sprawls of housing pods, strip malls and highways. And I see ambitious plans worked out by developers and presented to municipalities for headlong expansion into open space.

It’s one thing to read about the nationwide housing boom, another to see it firsthand.

It means finding my way in a rental car through areas that don’t (yet) appear on directions or road maps – or even on my GPS. It means occasionally feeling like a pioneer on dusty, not-yet-paved roads to golf courses where the clubhouses aren’t built, the homesites have only been staked out, and the only signs of human activity are construction workers.

Unfortunately, it’s often best to see some of these golf courses in their pre-real estate build out phase, while the natural views are still available. I remember visiting Legend Trail Golf Club in January 1995, before any homes were built on what was a stunning site in

the Sonoran desert foothills of northern Scottsdale, Ariz. When I came back five years later, I barely could see the land because of the housing that overwhelmed the site. The same aggressive placement of homesites all but ruined for me the experience of the

two Troon North courses nearby. Otherwise admirable golf courses got overwhelmed with development. That might make for impressive returns on investment for developers, but golfers who buy in or hope to play there, there’s a palpable loss in the golf experience.

On a recent flight into Atlanta, I saw what seemed like miles of red clay construction sites radiating outward from south of the airport. Ten years ago, when I drove into Duluth to visit the TPC at Sugarloaf, I was beyond the outer reaches of suburbia, into horse country and farmland. No more; residential development has hopscotched well beyond the golf course site. In the process, the individual holes there have been lined from tee to green with expansive homes, not densely packed but still conspicuous on every shot, including the home placed directly behind a green. Klein’s No. 1 rule of residential golf development: keep the homes generously set back, and (ideally) cluster them in pods rather than stringing them out along every fairway.

Our country is going through an extended phase of rapid growth and construction outward from cities and town centers. All of which means opportunity for home builders and road contractors.

The growth of housing market covers the gamut, from aspiring first-time homeowners to “empty-nesters” looking to settle into luxury communities or retirement homes.

But the numbers can be misleading. Those looking for a burgeoning luxury golf market point out that real estate-related golf development now comprises 61 percent of the new course market, up from 40 percent in the 1990s. That number, while accurate, hides a deeper reality, namely that the number of new real estate golf courses last year – 76 (in hole equivalents), according to the National Golf Foundation – represents an absolute decline from a decade ago, when more than 125 real estate courses were opening annually. It’s not that more real estate courses are being built. Rather, far fewer new courses are coming on line. When the denominator shrinks, the value of the numerator only appears to increase.

The vast majority of home owners at residential golf courses don’t play golf. The standard industry figure is that only 30 percent are golfers. The rest buy for all sorts of reasons having to do with the perceived value of the homesite as an investment, and the desirability of green space views.

Golf real estate is driven by the real estate market, not the golf market.

Developers, worried about taking a risk on an unheralded golf course architect, usually will make the safe choice of picking an architect whose name and reputation can be marketed to nongolf homeowners. And in an effort to draw national attention and make the scenery attractive, developers often jazz up the course designs with fancy features and impressive slopes, most of them requiring extensive maintenance.

When the homesites sell out and the developer leaves, the golfers usually find out that maintaining the golf course and the clubhouse amenities is beyond their reach. That’s because the golf course was designed to impress home buyers, not to serve as a solid test. That’s when the management of the course becomes a major headache, with members often stretched beyond their means, and golfers (and the maintenance team) required to negotiate with home owners associations and property owners associations.

Ten years ago, developers and industry observers went gaga over a perceived golf boom that they oversold to the public and to themselves. Let’s not make the same mistake now with the golf real estate market. The forces driving this market have to do with homes, not with the demand for golf. Overbuilding and overhyping only can lead to financial stress down the road.






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