The 25 million golfers in the U.S., or about 8% of the population, are an impressive group. They have an average annual income of $95,000 and average age of 54, according to industry group American Golf. They spend an average of $2,776 per year on the sport, making them an affluent and desirable demographic for luxury home builders. But even with golf’s mass appeal, it's no secret that many golf aficionados are moving into retirement and taking their recreational activities—including regularly hitting the links--with them. It’s also no question that interest in golf has changed, especially with younger Americans, which is forcing developers and builders to design and market their golf course properties in new ways.
According to the U.S. Golf Community Report, the sport has lost over 700 golf facilities since 2011. In 2016 Nike, the preferred club maker of Tiger Woods, abandoned the golf equipment business as the number of people aged 18 to 30 playing the sport has dropped 35% over the last decade.
The sport’s declining popularity muddies the future of golf course-based communities, says David Cobb, south Florida regional director for Metrostudy. “Most golf courses lose money and here in South Florida several have been converted to residential housing developments particularly in Broward County,” he says. While a few builders in his market are having success with golf, “generally builders and developers are shying away from including golf courses in their new communities.”
As Americans’ tastes in recreational activities evolve, builders are still betting on golf course communities, but with refinements for a changing demographic. “We’re really seeing an evolution of the traditional golf course community. People want a variety of amenities and activities in addition to golf – such as walking trails, fitness activities, boating, food and beverage, and communities are adapting to these changing tastes,” says Dean Lytton, regional operations executive for KemperSports, a golf course management company based in Northbrook, Ill. (Click here for a roundup of new and newly renovated golf course communities.)
For instance, developer Syd Kitson, CEO of Kitson & Partners, is the driving force behind Babcock Ranch, an ambitious development of 17,000 acres that’s being master planned for 50,000 residents near Ft. Meyers, Fla. The Babcock Ranch development team has embraced cutting-edge ideas like utility-scale solar energy and autonomous school buses and plans to include golf in the amenity mix in the form of Babcock National, an 18 hole semi-private course that can accommodate up to 1,100 homes. Sales are expected to start in early of 2019.
Kitson also continues to tout the sport and the appeal at some of his other ventures. “We’ve done numerous master planned communities with golf courses in Florida, and in New Jersey,” says Kitson. “At most of them we’ve been the second or third person in. We’ve had a lot of success with it.”
Being the second or third developer in means Kitson has been able to find ways to improve some of the golf communities he’s worked in, starting with removing the stuffing from the clubhouse. “People are tired of country clubs that are stuffy where they have wood paneling and you feel like you’re walking into a library, you have to wear a blazer, you can’t wear jeans, heaven forbid if you started laughing and having a good time,” says Kitson.
This means that developers and builders must find new approaches to the old style, snooty version of the neighborhood country club. Lennar, one of the builders putting in new homes on the Babcock National course, is testing a new model to golf course membership, which will include offering what it calls “bundled golf” that gives buyers automatic membership at Babcock National, says Kitson. “And then you pay a modest fee to play on that course. They’ve been very successful with it but it’s a different model than a high-priced country club community,” he says.
Replace and Repurpose
Builders and developers are finding success in these new approaches to golf-based communities, except in areas that have too many. “In our world it’s been exacerbated by the overabundance of golf in South Florida,” says Mike Nunziata, Division President of 13th Floor Homes based in Miami.
Nunziata’s firm specializes in acquiring defunct golf courses, repurposing the land, and building new homes on the recaptured acreage. He counts four projects as finished with another five in various stages of completion – all in Broward, Dade, or Palm Beach counties. While developers in other parts of the country are still dangling emerald fairways and manicured greens at prospective clients, development firms are eyeing several struggling courses in Florida.
“In South Florida we’ve grown very land constrained from a home building standpoint, finding large tracts of land that are developable is difficult so you have this perfect storm with golf courses going through tough economic times,” says Nunziata.
Farther north in the Sunshine State just above West Palm Beach the writing appears to be on the wall. “There is only one new golf course community in Palm Beach Gardens that I can think of that’s coming up in the near future,” says Cobb.
There is plenty of available golf course land for developers like Nunziata. The number of unused golf sites across the country has surged in the past decade, to as high as 800 failed courses, according to Bloomberg. When a golf community goes under, questions swirl around what happens to all that prime real estate. Nunziata’s firm strives to attain a mix of new homes and a good use of open space that will make old and new residents happy.
Developer Steve Wynn’s uber-posh course in Las Vegas was closed late last year as new plans for the land included a manmade lagoon. In Palm Springs, Calif., a cultural touchstone for the sport, a failed course is being turned into an orchard of olive trees by Freehold Communities that's building a community called Miralon. The tide in amenities has already turned away from the sport.
“The people living there are looking for open space, hiking or walking trails, more wellness related amenities as opposed to golf which appeals to a very specific section of the population. We try to create amenities not just for the new homes but the surrounding community helps mitigate and offset that loss of that golf course,” says Nunziata. For instance, the cart paths for defunct courses that used to carry golfers chasing balls are now serving as de facto walking and running paths.
Empty nesters living in a golf community who are interested in downsizing can also create opportunities for builders and developers. Gregg Carlson, CEO of Wetherington Homes in Sarasota Fla., another golf mecca, has also done a few golf course makeovers including buying land in the River Wilderness community and building new, smaller homes. Interested customers began calling about it even before groundbreaking was announced.
“We have a high volume of residents who live in larger homes still inside this country club community looking to downsize while others in similar sized homes also in the community simply wanting something new. We are feeling really good about the growing prospect list and anticipate a very strong opening,” says Carlson.
The Cypress Glen project, an enclave within River Wilderness, presented a unique opportunity for Wetherington that made sense for a golf gamble. “We acquired our parcel within an existing golf course community,” says Carlson. “The overall community is mature, very well maintained and has an established club. This is the only gated golf course community located North of the Manatee River. We looked at the recent success Taylor Morrison has had in their new active adult golf course community Esplanade, which is south of the Manatee River and saw that the market is not oversold for golfers looking to live close to where they play.”
The Financial End
While using golf as a marketing lure or a land banking hedge fund that can be tapped when reserves run dry is not a new idea, Nunziata believes developers and community stakeholders have been a bit naïve about the future of the sport. “It was put into these master communities not because the golf course itself was to be a financially stable enterprise that was going to make money, but really, just to sell homes,” he says. “This was without much consideration about what happens down the road, regarding what happens to the golf course or who ends up owning it.”
There’s also a bit of myth in play about the value of golf course living. “There’s this misconception that ‘I live on a golf course therefore my house is so much more valuable,’” says Nunziata. “We don’t see those homes growing at the same pace as the other homes on the market. It puts a big question mark over the property. It has a paralyzing effect on the value.” So while living on a golf course may not pull property values down, they don’t automatically raise them either – kind of like a swimming pool.
What About the Neighbors?
When a developer moves into a golf community development, whether to expand the housing stock or plow under the fairways, executives must contend with the people already living there. Usually there are covenants in place to protect the golf course and benefit the members of the local HOA. Breaking all that up is not so simple. “There is an emotional attachment to a lot of these courses,” says Nunziata. “We try to help the people who live there understand what the market preferences are today.”
In some cases, Nunziata’s firm is dealing with courses that are already closed and clubhouses that have been vandalized. A recent project at Delray Beach had him making a presentation for a standing-room only crowd in a 600 seat theater-style auditorium located in a golf community. The developer needed to convince two thirds of over 3,700 people living in the community that getting rid of the golf course was in their own financial best interest. Despite the poor condition of the course and the clubhouse it was not an easy sale as some in the community were not ready to give up on golf.
“We still had people who came out and thought they owned the golf course and that golf needed to come back which was a false hope, not even close to reality,” says Nunziata. “We had to find the logical segment in the community and eventually they realized the values around them were skyrocketing while their clubhouse was crumbling.” The pitch worked as the community jumped onboard and after some negotiation gave the greenlight to over 500 new homes.
In the end, developers and builders say that golf course communities are evolving to become more inclusive and multi-faceted to accommodate buyers who don’t golf but still enjoy having a view of the greens. Even though many golf courses have gone out of business or are struggling to remain afloat, the dream of retiring to a home on golf course in Florida still rings true for many Americans.
Even with all the other amenities offered at Babcock Ranch, Kitson says he hears from potential buyers who are primarily interested in golf course living. “There is a segment of people who say ‘Call us when you guys introduce a golf course.’ It is a segment of the market that is still there and we want to address it,” he says.