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September 2023

Residential Golf Revival

By Michael Williams

In the boom times for golf that were kindled by the Tiger Woods phenomenon, it seemed that everyone wanted to play the game. The demand for golf dovetailed with the housing boom, leading to an explosion of upscale daily fee courses that were the centerpiece for residential communities. Seemingly overnight, residential construction became the driving force in the golf industry.

Companies such as Pulte Homes and NV Homes became major players in the golf space, with golf courses in dozens of their residential communities.

But the party didn’t last forever.  The Great Recession of 2008 that threw the world economy into chaos and the accompanying housing bust that put a halt to new course construction by the big homebuilders wreaked havoc on the residential golf sector. While the economy eventually rebounded, the residential golf sector is a shadow of its former glory days. Many of the residential golf courses were either allowed to return to nature, repurposed as additional homes or open space, or operated at a much lower level of quality to keep costs to a minimum.

In the article called “Implications of the Rise and Decline of Golf” published by the National Parks and Recreation Association in June 2020, South Carolina is cited as the birthplace of residential golf in America. The symbiotic relationship between golf and real estate that sparked the boom in courses in the latter decades of the 20th century was led by the highly-publicized Sea Pines Plantation development on South Carolina’s Hilton Head Island that began in 1960.

The legendary developer Charles Fraser demonstrated that golf courses could be designed so they could be threaded through less attractive land to enhance its value as residential property.

The movement reached its peak in the 90s and 2000s as Frasers’s concept was adopted in residential communities across the country and as the demand for single family homes as both a residence and generator of income increased. Per NGF statistics, there was a 20-year golf course development boom during which a total of 4,567 18-hole equivalent courses were added to the nation’s supply (+44%).

National Golf Course Owners Association (NGCOA) CEO Jay Karen remembers those days well. “At the time, this “country club for a day” phenomenon was in the DNA of these new golf courses. Rivertowne Country Club in Mount Pleasant (SC) was exactly what we're talking about here. Beautiful golf course and new housing development. All that pieced together was going to be great, a gem in the Mount Pleasant market. But when the supply and demand curve wasn't working in everybody's favor, suddenly their pricing structure had to come way down. They built the golf course with millions and positioned it for a $175 experience; but at some point demand dropped and they dropped their prices to $95 or $85. And there was a cascade effect as other courses that were charging $85-$95 had to drop their prices.”

Continued Karen, “You could immediately see the depressive price impact that the increase in supply was having. That was just a result of economic levers that business owners pulled to try to keep the demand coming. So the exuberance quickly went to a temperature of concern in the industry.”

The market correction began in 2006, when for the first time since the Great Depression the U.S. golf market finished the year with fewer courses than it started. Each year after, except 2008, the number of 18-hole equivalent courses fell, with a total reduction of 1,645 (-11% from peak supply).

But the world changed in 2020 with Covid-19. In search of a safe haven for exercise and recreation, people rediscovered golf. As has been reported many times by many outlets, the pandemic led to a renaissance for golf, with rounds increasing across all at historic rates. In addition, the proliferation of Topgolf, Toptracer and simulators has presented the public with easy, fun and affordable ways to interface with golf. As the technologies evolve, could these new forms of “recreational golf” revise and revive the concept of residential golf?

Steve Lapper thinks so. Lapper is the founder of Playground Golf, a company that in his own words is providing “multi-feature golf entertainment facilities with enhanced technology above and beyond what exists today.” Lapper is also the owner of two golf courses, giving him a unique perspective on the recent past and the imminent future of the game.

Lapper has observed the changes in the residential home building business and how it values the use of a large tract of land. Notes Lapper, “In the 20 years that have transpired since the millennium, the developers out there now don't view golf as an amenity, so they are taking over golf courses just to build more [houses] and then rent them out to prospective home buyers or home renters who ultimately turn into home buyers. So imagine a community with an 18-hole course and 400 homes. Now, the developer would come along and buy the golf course and put another 200 homes on the golf course.”

“That is where the paradigm has to shift from full-size 18-hole golf courses in these communities, whether it's a 18-hole par three course or maybe you're using synthetic turf on tees and fairways. The idea is to make an amenity that is affordable, desirable and sustainable.”

And the idea of having a Toptracer range or even a private Topgolf installation has merit, although it would require some flexibility and ingenuity to fit the residential paradigm. Said Lapper, “It is absolutely an attraction. But you still have to make sure that the aesthetics of the amenity are exceptional. Remember, you're not asking people to just visit there. You're asking people to live there.”

Lapper continues, “Because people are being asked to live there, not just visit there, like [a public] Topgolf where you come visit the facility, there are cocktails, you hit your balls, and you leave. But when you have a facility in your backyard, the aesthetics have to be pretty darn good because that amenity impacts the value of your residents considerably. But that said, I couldn't agree more that alternative or entertainment golf is a very attractive opportunity for golf residential communities.”

At the end of the day, there’s no debating the fact that the demand for entertainment golf is on the rise. And with the technology that is out there already and new technology on the horizon, residential developers could very well return to their former place of prominence in the golf industry.

“There's certainly a renaissance going on right now with golf,” says Lapper,  “and work from home has clearly positioned people inside their homes for longer periods of time in a more informal and relaxed setting, and they want to take advantage of nearby amenities. Whether it's golf, pickleball or any other kind of amenity packages that are situated near homes, people are using them more.”

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