Last night, I read about a major Philadelphia Area Mall owner making plans to repurpose some of their properties. Pennsylvania Real Estate Investment Trust (PREIT) wants to build thousands of apartments on its mall properties to help pay debts, according to an article in the Philadelphia Inquirer. This may not seem newsworthy to the golf industry in today’s (at least currently) healthy golf market. But, it wasn’t long ago when many golf course owners and clubs were seeking a way out by converting all or a portion of their properties to an alternative use. My home town of Harrisburg, PA lost several of its golf facilities in the past 10 years to repurposing and vacancy.
Of course, nobody knows the ultimate and lasting positive impact on golf from COVID, but this article illustrates how owners of real estate need to be flexible in their thinking and ideally have a plan if things go poorly.
As a career-long real estate professional, I’ve said for years that the internet and preponderance of home computers could be the bain of both the retail and office real estate sectors. The COVID pandemic accelerated this trend as many people have learned how and converted to shopping and working from home. During the past two years, we’ve all learned new ways to move forward. While altogether likely that many will return to their old ways, the convenience offered by working from home and online shopping is not only hard to overlook, but reduces the need for companies to invest in purchasing or renting real estate. Thus, many of these properties are now being repurposed for alternative uses.
Golf courses and clubs, in many instances are experiencing growth and prosperity not seen in more than 20 years. One interesting statistic I’ve heard is that more than half of the private golf/country clubs in the US have a waiting list for membership. The National Golf Foundation reported significant increases in rounds played in both 2020 and 2021. This is all good, and I wish very strongly that this windfall from COVID is at least partially, if not completely sustainable. That said, I suggest the golf industry needs to be prepared.
Several months ago, I attended a golf industry event for the first time in almost 2 years and thought of the old saying from my flying days “fat, dumb and happy”. Everyone was giddy about golf’s growth, their bottom lines and future prospects for the game. For sure, we have seen improvement in golf property value indicators and there is reason for the positive outlook. However, golf courses still represent an inefficient use of real estate based on how many people can utilize it at any given time. Basically, lots of land is used by relatively few people.
Accordingly, I’m suggesting that all golf courses and clubs develop plans for the future should golf decline in popularity again so that they’re ready in the event of a downturn.
Recently, for instance, we were asked to consult with a municipal government seeking to purchase and revitalize a distressed golf course (yes there still are some). There is limited competition, but unfortunately, the community is not an enthusiastic golf market and there is a very limited market to draw from. Should the client invest heavily in creating a quality public recreational facility? Should they improve nine holes and use the balance of the land for something else? Should they even consider the acquisition? These are all questions to be asked. We’re currently consulting with private clubs considering many of the same questions, despite the current positive environment.
Repurposing for alternative uses is one way to plan for leaner times. There are other options as well. Golf courses and clubs can explore open space conservation easements or government funding of open space projects and reduce their real estate tax burden. They can identify portions of their properties that may be suitable for outparcel or redevelopment and the golf course may be able to be reconfigured or reduced to more accurately meet demand.
Some in the golf industry still believe more contraction is necessary to bring supply and demand into balance. Obviously, that depends on the sustainability of recent growth. Golf courses and clubs have a significant real estate asset and while I never like to see a golf course go away, advanced planning is never a bad thing.