Golf Course Real Estate Investor Interest Remains Strong

 As seen in Golf Business November/December 2022 

By Scott Kauffman, Contributor, Golf Business


In the most recent “U.S. Golf Economy Report” commissioned and released by the World Golf Foundation, in 2016, there were 3,272 golf facilities in America that featured some form of residential development. 

With 14,033 overall golf facilities at year-end 2021, according to the NGF, golf course communities compose close to one-fourth of all U.S. golf properties. To put it in a different perspective, there were 1.4 million golf homes situated in and around courses 17 years ago, representing $123 billion in real estate value, Golf Research Group founder Colin Hegarty said during the opening session of the Urban Land Institute’s “Developing Golf Courses and Resort Communities” conference in April 2005.

Hegarty went on to say half of those 1.4 million homes were built between 1985-2005 during the industry’s unprecedented golf development boom, resulting in the equivalent of 4,567 new 18-hole courses throughout America. To be sure, golf residential development remained strong in subsequent years, despite various headwinds facing the golf industry, not the least of which was the real estate-triggered financial crisis of 2008, and stagnant golf participation rates and the vastly oversupplied golf market due in part to the 20-year golf development boom.

So the question that begs to be asked is whether the golf real estate asset class will remain in favor now that the U.S. economy seems to be teetering on falling into another recession, what with inflation at 40-year highs and the once “easy money” spigots suddenly drying up courtesy of the Federal Reserve’s hawkish stance on interest rates to try to tamp down out-of-control inflation.

Whether these economic forces lead to another official recession or not, the U.S. residential real estate market is in a decisive downturn heading into 2023. For instance, the average rate on a 30-year fixed mortgage doubled this year to almost 7 percent, including a rise of nearly 2 percentage points alone between late August through October. 

That’s one reason mortgage demand fell to a 35-year low in late October and existing home sales fell for eight straight months through September. So what does this negative macro-residential real estate market mean for course owners who’ve generally enjoyed a seller’s market position in recent years?

Not much for now, at least in the opinion of two of the industry’s leading brokers. 

“As far as investments in golf courses, we aren’t seeing any pullback because of interest rate hikes,” says Jeff Woolson, managing director of CBRE’s San Diego-based Golf & Resort Group, which has sold more than $2.2 billion in golf properties since 1991.

“That’s because nobody could get debt on golf courses anyways.

“So it has not impacted the golf buying market. It’s still fairly strong as investors are looking for alternative yields.”

Steven Ekovich, senior managing director of Marcus & Millichap’s Tampa Bay-based Leisure Investment Properties Group, agrees that golf properties remain as attractive as ever for real estate developers/investors now, albeit with a different mindset on the type of golf facilities they’re willing to buy. For instance, there was a period in recent years where investors were scooping up struggling facilities or permanently closed courses to convert into residential developments, especially in the booming housing markets throughout Florida and other Sun Belt regions.

Now, that investment strategy has “kind of gone away to some degree,” Ekovich says, “because there’s no more courses closing.”

“So now, there’s a lot of pressure for golf courses that are still operating as part of master-planned communities that still have upside left in the development,” Ekovich adds. “So we’re seeing developers or investors who are now willing to buy the golf to get to the excess land. Where before, say from 2016 to 2019, they wouldn’t (invest in the golf business side of the equation).”

A perfect example is the recent sale of Comanche Trace in San Antonio, a 27-hole property that Ekovich’s team sold for nearly $20 million, in part because it had developed lots in place to start building homes and “lots of excess land to develop” later across the property’s 1,300-acre footprint.

Ekovich added he has another similar deal under contract in the Pinehurst, N.C., area as well as another similar possibility elsewhere in North Carolina. And the reason for this and why Ekovich doesn’t see it drying up anytime soon is developers are finding it relatively more difficult to “get their hands on these failing golf courses because they’re not failing.”

“Plus, those secondary and tertiary 2nd-home retirement home markets,” Ekovich adds, “which were dead for the last 10 years, have come back, too.”

This article was featured in the November/December edition of Golf Business magazine.