Bubbles, Blips and Booms

December 5, 2006
Cotton & Company

The constantly evolving state of golf course real estate

Stuart, Fla (December 5, 2006) Bursting bubbles. Today’s blip heralds tomorrow’s boom. Real estate editors around the country always look for ways to predict the next big thing.

Yet for the last half century the golf course lifestyle has maintained its allure. Today golf communities continue to thrive and evolve as new areas open for development and the game itself commands international attention.

Current industry figures show that over 60 billion dollars was spent on new golf course homes last year. This figure is for new construction only and does not include the substantial resale market.

The strong economy following WWII provided the fertile ground for the golf course lifestyle. This generation had a passion for golf in a way that they wanted to play. The dream was to play at least six times a week in their retirement years. They could not get on a typical course at the prime times so they were willing to pay for private memberships that provided this access.

An important factor spurring growth in Florida was the advent of affordable central air-conditioning for homeowners in the late 50’s. Combined with the splendid climate that gave it the “sunshine state” nickname and vast expanses of undeveloped land, Florida was a natural place for developers and investors to explore.

The Country Club Set

In the late 60’s and the early 70’s, golf course communities typically centered on the country club lifestyle. Membership definitely had its privileges, which included socializing with equally status-conscious individuals in a private setting. As a result, golf course properties began appreciating faster than the traditional real estate market because of the prestigious image of the address.

Initially at least 75% of the residents in these golf communities played golf on a regular basis. Today that ratio is closer to 50% as communities expand their amenities to attract a broader customer base. The appeal to the non-golfer includes security and the social lifestyle that attaches to the community. Typically this includes a busy social calendar of club activities with dinner dances, cocktail parties, art shows and holiday events.

Both groups – players and non-players – continue to be drawn to the golfing lifestyle. There is still that certain cachet and heightened status that comes with living in one of these communities.

These first communities were built around the equity membership model. In the mid-80’s we witnessed a significant market shift with a “bigger is better” mentality taking hold and super communities like BallenIsles, Ibis and Palm Beach Polo were introduced. These new communities often featured multiple golf courses, expanded membership programs and expanded amenity programs. During this time the pitfalls of equity also became apparent as the reality of liability and assessments that attach to ownership were realized.

During the mid-90s the trend shifted from equity membership to bond membership programs. This allowed the developer more discretion in the running and maintenance of the club. Because the land value of the real estate is directly related to the structure and success of the club, it became necessary for developers’ to maintain this control in order to guarantee success throughout the build-out. This offered some protection in the event of a real estate slowdown when homes and home sites remain on the market longer than initially expected.

Boomer Impact

Most experts in the golf industry predicted the baby boomers would be the salvation for the golfing community. In fact, what happened, was that the baby boomers ended up marrying later than the previous generation, had children later in their lives and did not approach retirement in the traditional manner of their parents before them. The typical baby boomer also found more demands on time for both professional and personal commitments therefore less time for golf.

Women also changed their approach to golf course living. Previously focused on the social aspect of country club living, women are increasingly active golfers with strong skills on the course. Couples now look for a full complement of amenities that appeal to a variety of ages.

A good example of a recent club specifically targeting this market is Treviso Bay in Naples, FL. In addition to the Tournament Players Course, the core community will include an extensive fitness club and spa with an over-sized resort style pool, “tot lots” and children’s programs, tennis and gourmet dining in a magnificently landscaped setting.

The response to Treviso Bay continues to be overwhelmingly positive. In a four-day sale this spring when Naples was being proclaimed the most expensive real estate market in the country by the national media, $126 million dollars worth of sales took place.

Critical to the success of this and other projects has been the explosive growth of the Internet as a marketing tool. Because time is such a critical factor to today’s buyer, the Internet provides invaluable access. Instead of devoting hours driving to various locations, buyers can “explore” communities and product offerings on-line prior to visiting a sales office.

With the new technology, it is possible to show 3-D presentations, aerials, vital statistics of a community and the surrounding area, product inventory and contract information. In addition to saving time and energy, the Internet is a “green” tool cutting down on paper and mailing costs.

By integrating sophisticated survey techniques with custom databases, it is possible to provide developers with critical insight into market demand making it possible to customize the project with finite detail that was previously not available. This allows the developer to provide homes that meet the needs of the consumer – whether it is allowing for a third bedroom/study or single floor living or custom wine cellars and state-of-the-art home theaters.

There is also a shift inland as coastal properties became less available and continue to escalate in price making it financially unfeasible to dedicate land to a golf course in these areas. The inland communities, however, offer interesting elevations and the same year-round playability that makes this region so attractive to the golf lifestyle.

Golf course development is also seeing a real surge throughout the Caribbean. Five years ago our agency had an occasional Caribbean client. Right now we are working on Rum Cay Resort Marina in The Bahamas plus projects in the Turks & Caicos on the islands of Providenciales, North Caicos and Grand Turk. We also have a Greg Norman Troon managed course being developed at Le Paradis on St. Lucia. In addition, we are involved in projects in both Mexico and Costa Rica. All together we have 50 projects under development in these areas.

The Next Fairway

From 2004 through 2005 the market experienced what can best be described as a “perfect storm” of buyers. This was primarily the investor market that held back after the September 11th disaster in 2001. When they all decided to reenter the market it was with an abundance of capital. At the beginning of 2004 and for the next two years, most communities benefited from an incredible number of sales. Prices increased proportionately to the growing demand.

Regardless of the investor, today’s golfers are making an impact on today’s development. With higher handicaps than years past, this new breed of golfer is looking for the challenges of longer courses with more terrain changes in elevation, better draining greens and more interplay with water.

We are currently working on a project with Jack Nicklaus and Tony Jacklin called “The Concession” which celebrates that incredible moment at the 1969 Ryder Cup when Nicklaus conceded a 2-foot putt to British Team Captain Jacklin resulting in the first tie in the history of this historic cup. Located just outside Sarasota, this 7,740 yard, par 72 course is set on 520 natural acres of stately live oaks and slash pines. It is a very different concept from the manicured and stylized courses of the past reflecting the trend to have the course embrace the environment as opposed to imposing a course on the land.

Most buyers to day — as in years past— are looking for a lifestyle, not just a home. As new golf course communities debut we will see increased amenities that appeal to all members of the family as well as more demanding courses of play. Developers need to always pay attention to the laws of supply and demand being careful not to over-saturate any given market.

Still market considerations show the demand for this lifestyle is strong and growing throughout the southeast and expanding beyond our borders as this international sport and lifestyle continues to capture the attention of today’s consumer.

Stephann Cotton, founder and president of Cotton and Company, brings over 30 years of experience marketing more than 1500 planned communities and resort developments throughout the United States, Canada, the Caribbean, Bahamas, Mexico and Costa Rica. Based in Stuart, FL., Cotton & Company’s team of over sixty designers, artists, account executives and public relations specialists offers a complete suite of marketing services for the luxury residential and resort development market.

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