Designing Golf Courses to Optimize Proximate Property Values

Managing Leisure

ISSN: 1360-6719 (Print) 1466-450X (Online) Journal homepage: https://www.tandfonline.com/loi/rmle20

Designing golf courses to optimize proximate property values

John L. Crompton

To cite this article: John L. Crompton (2000) Designing golf courses to optimize proximate property values, Managing Leisure, 5:4, 192-199, DOI: 10.1080/13606710010001770 To link to this article: https://doi.org/10.1080/13606710010001770

Published online: 02 Dec 2010.

Submit your article to this journal

Article views: 66

View related articles

Citing articles: 10 View citing articles

Full Terms & Conditions of access and use can be found at https://www.tandfonline.com/action/journalInformation?journalCode=rmle21 Managing Leisure 5, 192–199 (2000)

Designing golf courses to optimize proximate property values John L. Crompton Department of Recreation, Park and Tourism Sciences, Texas A&M University

There has been extraordinary growth in the past decade in the number of golf courses that have been constructed as central components of residential developments. The reasons underlying this growth are discussed. The basic ve alternative con gurations of golf courses are de scribed, together with the edge effect which is the key to their differing impact on a development’s prope rty values.

There are 26.4 million golfers aged 12 and over $75 000 (National Golf Foundation, over in the United States. Approximately 5.4 2000). The highest per capita golf participa- million (22%) of them are ‘avid’ golfers, tion rates are among those in the 50–59 age de ned as those who play 25 or more rounds cohort and the baby boomers are now a year; a further 35% are ‘moderates’ (8–24 entering this age group (McKinsey, 1999). rounds per year); and 43% are ‘occasionals’ They are empty nesters; in their peak earning (1–7 rounds per year) (National Golf Founda- years; close to retirement; and have the tion, 2000). In 1999, these golfers played on a economic security of strong private pension total of 16 747 golf courses. This total in- funds boosted by the unprecedented in- cludes regulation, par-3, and executive length creases in the stock market in the 1990s . The courses. Approximately 70% (11 657) of these golf industr y expects a ‘natural’ addition of courses are open to the public (National Golf 3–4 million golfers and 100 million rounds Foundation, 2000). In addition, at the end of over the next decade from these favourable 1999, there were 1069 courses under con- demographics. This translates into an annual struction and 708 in the planning stage. growth rate of 1% to 2% (McKinsey, 1999). The vitality of golf in the United States is Although only 2000 of the golf courses in exempli ed by the data reported in Table 1. the United States are part of a residential Demographic and economic indicators sug- development, the trend to incorporate them gest this trend will continue. Approximately as central features of real estate develop- 40% of golfers repor t a household income of ments accentuated rapidly in the 1990s when

Table 1 Number of golf courses and rounds played in the United States in selected years

Year Number of courses Number of rounds (millions) 1970 10 848 266 1980 12 849 358 1990 13 951 502 1999 16 747 564

Source: National Golf Foundtion (2000). Research Summary, National Golf Foundation Jupiter, FL. Managing Leisure ISSN 1360-6719 print/ISSN 1466-450X online © 2000 Taylor & Francis Ltd http://www.tandf.co.uk/journals DOI: 10.1080/13606710010001770 Designing golf courses to optimize proxim ate property values 193 almost 1000 such courses were constructed golf course. There are some examples in the (Dugas, 1997). Approximately 40% of current United States where developers have con- golf course construction is real estate related structed a golf course and then donated it to (National Golf Foundation, 2000). While the a local parks and recreation agency or a non- real estate industr y in the United States as a pro t homeowners association to operate. A whole grew at an annual rate of 2–3% in the more common strategy is for developers to 1990s , the annual growth rate of develop- donate the land for a golf course to a city. For ments which incorporated golf courses ap- example, in response to its request for proached 10%, making it one of the hottest proposals, Lee County in Florida received sectors in real estate. offers from six developers willing to donate Approximately 3.7 million or 15% of all 150 acres for a golf course, some of whom golfers are permanent residents of a golf also offered to contribute $100 000 for the course community, and 80% of these in- planning and design of the course (Winton, dividuals own their residences. Another 3% 1994). In these cases, the municipality de- of all golfers own a residence on a golf course velops the course and operates it. When the that they use as a vacation home or rent out costs of land acquisition are excluded, the as an investment property. course revenues often are suf cient to cover The appeal of golf course communities is operational costs and annual debt charges not con ned to golfers. Indeed, only approx- associated with the construction costs. In imately one-third of those who purchase addition, the city receives increased prop- houses in these developments play golf reg- erty taxes from the homes whose values have ularly (McElyea et al., 1991). For the majority been enhanced by their proximity to the of home buyers, the appeal is the open space course. and park-like ambience that golf courses There are three reasons why developers provide. A typical response from residents is, include golf courses and other amenities in ‘It’s like living in the countr y here, but with their projects: (1) to increase the land values access to the city’ (Dugas, 1997, 1B). in their development; (2) to respond to The acreage required for a viable real physical planning or ecological conditions, estate project that incorporates a golf course either voluntarily or imposed by regulation, varies. The minimum size is about 400 acres which require a real estate development to (half golf, half residential), but many con- accommodate storm water run-off, integrate sider this ratio to be marginal. In addition to wetlands or other environmentally sensitive golf, some developments offer an array of areas, mitigate a site by enhancing bio- other recreation amenities such as nature diversity through creating native habitat trails, jogging and biking trails, day care areas, or buffer disparate uses; and (3) to centres, shing lakes, swimming pools and accelerate the absorption of real estate, i.e. recreation centres. Larger projects allow de- to sell their lots more quickly. It has been velopers to spread the cost of a golf course estimated that the broadening of market and other amenities over a larger number of appeal and the enhanced image and ambi- residential units. However, the disadvantage ance that a golf course creates, speeds up of larger projects is that the interest costs of overall absorption by 20–30% which trans- the money borrowed to undertake the devel- lates into higher pro tability for the development escalate, as they have to be carried oper. for a longer period of time. The enhanced land value derives from two Golf and real estate are ver y different sources. The rst is image: ‘Golf is a way to businesses and most developers have no dress up the real estate . . . The golf course desire to be in the business of operating a tends to elevate the image of the community 194 Crom pton

Fig 1 The ve basic golf course congurations Designing golf courses to optimize proxim ate property values 195

Fig 1 Continued and people are attracted to image’ (Dugas, by newer courses accepting greater responsi- 1997, 1B). Golf has connotations of af uence bility for protecting the natural environment. and prestige, and some people may seek to There has been growing acknowledgment of enhance their self-esteem or social standing the damage golf courses can in ict by deni- by buying into a development with this type grating wetlands and other types of sensitive of image. The second source of enhanced areas and using pesticides, and a recognition value is the visual and physical access to that they should be part of the solution to attractive open space that cause individuals environmental problems, rather than creat- to pay a premium price for their homes. ing them. To this end, the United States Golf The developers’ strategy mirrors that Association has linked with the Audubon which has been advocated by supporters of Society in an effort to enhance wildlife hab- public parks and open space for over a itat through improved resource management centur y, i.e. parks and selected recreation practices on golf courses. In short, golf ( features are an investment not a cost be- courses are becoming more park-like US Golf ) cause they generate more property taxes for Association, 1999 . a city than it costs to ser vice the annual debt charges incurred in creating the amenities. A ALTERNATIVE PLANNING consistent stream of studies reporting this CONFIGURATIONS value-enhancing effect of parks has emerged Five basic golf course con gurations are since Frederick Law Olmsted pioneered this recognized: core; double fairway, continu- approach with his documentation of the ous; double fairway, returning nines; single impact of Central Park on surrounding real fairway, continuous; and single fairway, re- estate values in New York from 1856 to 1873 turning nines (Muirhead and Rondo, 1994). (Crompton, 2000). These are shown in Fig. 1. Their potential for The linkage between golf courses and maximizing the value of adjacent real estate parks has been accentuated in recent years varies. A determining factor is the extent of a 196 Crom pton golf course’s circumference or edge (Little, over the single fairway continuous configura- 1990). If a 100 acre course is circular in shape, tion by providing two starting holes. Thus, then it has a relatively small circumference. If more players can begin a game, and the the 100 acres is distributed more linearly, entire course can be brought into play in two then the amount of edge increases sub- hours, compared to four hours in a con- stantially. The principle is illustrated by the tinuous layout with only one starting hole following calculations: (Muirhead and Rondo, 1994). Further, this layout allows for the option of playing only A circular park that is 100 acres in area will nine holes. have a radius of 1177.8 feet. Given that the circumference of a circle is two times pi, times the radius (2p r), the amount of edge THE ‘WINDOWS’ PRINCIPLE will be 7396.7 feet. Assume this park is unpeeled into a long strip of green which is Creating ‘windows’ is a design strategy used one square acre wide (209 feet) – in effect, to maximize real estate values in golf course laying one acre next to another in a line. To developments (Jenson, 1990). In traditional nd the length of the edge of 100 acres in golf course developments, lots were placed this con guration 209 feet is multiplied by around the entire perimeter of the course, 100 times two, since there are two sides to which locked it off from internal areas of the this strip. The result is 41 800 linear feet, project. This isolates the internal lots and 5.65 times as much edge than a circular diminishes their desirability and value. ‘Win- park of the same number of acres. That is dows’ are openings in the perimeter of the the edge effect (Little, 1990, p. 36). golf course that, much like a window in the The increased amount of edge means that side of a building, provide direct views of the more proper ty can be sited adjacent to the golf course. They are created by leaving open spaces at key points along the perimeter of golf course and the aggregate enhancement the course. Making the golf course visible value of the property is likely to be larger. from interior lots increases the value of The impor tance of the edge principle is portions of the development that are located illustrated in the alternative con gurations in at a distance from the course. Fig. 1. The single fairway con gurations have Figure 2 contrasts the impact of creating most edge and can accommodate the most windows with the traditional lot pattern real estate frontage. However, the houses on (Jenson, 1990). Windows are created by opposite sides of the course are relatively locating local interior roads and cul-de-sacs close together and likely to be in each others’ from the window into the interior lots, giving view lines. In contrast, the core course has most of the lots on a cul-de-sac views of, and least potential for real estate frontage, but secondary frontage (i.e. across the road) on, the views are likely to be uninterrupted and the golf course. At the ver y least, all home- not likely to include other homes. For this owners have a view of the course as they reason, the premium associated with the drive down the cul-de-sac past the window. core course frontage is likely to be greater The effect is to make one feel that the golf than that accruing from the single or double course belongs to the whole community and fairway options. contributes an ambience that bene ts ever y- The preferred option in most real estate body. developments is the single fairway returning Sometimes a developer may have to give nines con guration. This yields almost the up a few frontage lots to create a window. But maximum frontage for real estate, but offers obtaining premium prices for a larger portion greater exibility and ef ciency in operation of the interior lots, more than offsets this Designing golf courses to optimize proxim ate property values 197

Fig 2 Lot patterns loss. Roadway windows frequently can be labour and materials in the area. However, it placed at points along the course where it is substantial and the cost of constructing an would be dif cult to t in perimeter lots – at 18-hole course exclusive of land costs, may drainage ways, at the outside edges of dogleg range from $2 million to $8 million. If all the golf holes, and at unusually shaped parcel acreage in a project is suitable for develop- boundaries. Such placements minimize the ment into lots and no oodplain land is amount of frontage given up for the window involved, then a developer forfeits the reve- and often lead to greater ef ciency in devel- nue that would be forthcoming from the sale oping lots elsewhere on the site. of lots on the 150 acres of land needed for the course. If one-acre lots were sold at $40 000 THE BOTTOM LINE each, then the loss to the developer of the The magnitude of investment in creating a 150 acres would be $6 million. If the devel- golf course varies widely according to topo- oper paid another $4 million to construct the graphy, soil conditions, irrigation needs, course on this land, then the total cost would drainage requirements, landscaping, the be $10 million. quality of course features such as greens, A larger set of amenities beyond a golf bunkers and water features, and the costs of course results in commensurate increases in 198 Crom pton cost. For example, Del Webb Corporation Although it is dif cult to generalize about the developed a 5800 acre master planned sub- magnitude of premiums, in percentage terms division in Phoenix known as Anthem golf’s enhancement of land values tends to (Fletcher, 1999). The recreation amenity decrease as the base land values rise. package cost the corporation $77 million. It When the averages shown in Table 2 are included two golf courses, a rock climbing applied to the course con gurations shown wall, a children’s railroad, a skating rink, a in Fig. 1, the dif culty of recouping the costs roller hockey rink, a 4 acre shing lake, a of a golf course using a core or a double water park, 30 acres of soccer and softball fairway con guration becomes apparent. In elds, and an array of parks. Table 3 the real estate income accruing from To justify investment on this scale, there a double fairways returning nines course is has to be substantial enhanced value of a compared with that from a single fairways development’s real estate. How much value returning nines layout. The analysis assumes does a golf course add? Generalizations or that 75% of the frontage in both cases in averages obscure substantial variations usable for real estate development, and that among courses, but results from a study of the premiums for properties with golf course master-planned golf communities across the frontages average $25 000 for detached United States yielded the averages shown in homes, $20 000 for town homes, and $15 000 Table 2. for garden apartments. The estimates in Lots and houses throughout a golf-course Table 3 show that the single fairway return- community bring premiums over compara- ing nines yields substantially more income, ble lots/units in non-golf developments irrespective of what type of housing is devel- (Table 2). Prime sites fronting on greens or oped. The income estimates in Table 3 are enjoying water views or fairway and open- conser vative because they do not include the space vistas can command twice the average premiums associated with golf-view home- fairway-frontage premium. Non-frontage sites or interior homesites (Table 2). They property offering views of the golf course and also do not show the loan cost savings that par tial vistas also commands a substantial accrue to the developer from selling the real premium. Even interior sites located within estate more quickly as a result of the golf the gates of a golf-course community com- course. Nevertheless, these estimates do mand a slight premium (McElyea et al., 1991). illustrate why the single fairway returning

Table 2 Golf real estate premiums

Lot value Housing value Base homesite1 $50 000 $180 000 Golf-course community Interior homesite $52 000 $185 000 Golf-view homesite 60 000 200 000 Fairway frontage 75 000 225 000 Prime golf frontage2 100 000 260 000

1 An interior lot in a master-planned community without golf. 2 Homesites fronting on greens, lakes, and other particularly desirable features of a golf course. Source: Economics Research Associates cited in McElyea et al. (1991). Designing golf courses to optimize proxim ate property values 199

Table 3 Income advantages of the single fairway returning nines course Types of Double fairway returning Single fairway returning Differential development nines with 18 000 feet nines with 33 000 feet premium available frontage available frontage bonus

Possible Premium Possible Premium number of income number of income units units

Detached houses 180 $4 500 000 330 $8 250 000 $3 750 000 (100 feet lots) Townhouses 424 $9 480 000 868 $17 360 000 $7 880 000 (38 feet width) Three story garden 720 $10 800 000 1320 $19 800 000 $9 000 000 apartment (40 units of frontage per 1000 feet) nines con guration is preferred in golf course McElyea, J.R., Anderson, A.G. and Krekorian, G.P. developments. (1991) Golf’s real estate value, Urban Land, February, 14–19. McKinsey & Company and The National Golf Found ation (1999) A Strategic Perspective on REFERENCES the Future of Golf, Florida, National Golf Foun- Crompton, J.L. (2000) The impact of parks on dation, Jupiter. property values and the property tax base, Muirhead, D. and Rondo, G.L. (1994) Golf Course Ashburn, Virginia, National Recreation and Developm ent and Real Estate, Washington, DC, Park Association. The Urban Land Institute. Dugas, C. (1997) Golf drives housing trend, USA National Golf Foundation (2000) Frequently asked Today, 18 November, p. 1B. questions about the gam e and business of golf in Fletcher, J. (1999) Is this Disneyland? No, the new the US, Florida, Information packet. National suburbs–skating rinks, climbing walls are now Golf Foundation, Jupiter. basic amenities; good bye, Levittown. Wall United States Golf Association (1999) Golf courses Street Journal, 4 June, p. 12. bene t people and wildlife, Mountains and Jenson, D. (1990) ‘Windows’ and ‘Focals’, Urban Shores, Fall, 6–7, 14. Land, Augus t, 26–29. Winton, P. (1994) Developers scramble for shot at Little, C. (1990) Greenways for Am erica, Baltimore, public golf course, Fort Myers News-Press, 3 John Hopkins University Press. Augus t, p. 1.