Commercial Investment Real Estate Winter 2022 | Page 16

INVESTMENT ANALYSIS
By Chris Gary

FROM FAIRWAYS TO FORKLIFTS

Considering the growing demand for industrial real estate , golf courses are popular targets for conversion to warehouse and distribution centers .

With the appetite for industrial warehouse and distribution space continuing to grow , more developers have begun to eye — and buy — golf courses for conversion to industrial parks . These large parcels of land , many near highways , can be attractive sites for the facilities required by e-commerce and other users . Even Amazon , which used to shy away from golf courses , has begun to develop these manicured green spaces into warehouse and distribution centers .

An oversupply of golf courses — and U . S . consumers ’ growing preference for online shopping and close-to-immediate delivery — are making these expansive acreages , once reserved for an afternoon of birdies and bogies , too attractive to pass up . While not welcome by all communities , these conversions for industrial uses are likely to increase in the future .
AN INCREASING SUPPLY Golf as a participation sport has been in decline in the United States for about 15 years . Today , about 5 million fewer individuals play compared to 2005 , a drop from 30 million to 24.3 million , according to the National Golf Foundation .
The main reason for this decline is that young people have not taken to golf the way their parents and grandparents did , finding it time-intensive and expensive . Despite a bump in interest in golf during the first year of the pandemic because it offered people a way to socialize outdoors safely , that interest seems to have dropped off again as other activities became available . Rounds played in July 2021 were down 3.9 percent nationwide from July 2020 , according to the NGF .
With demand falling , it ’ s clear the U . S . overbuilt golf courses , a lot of which occurred during the
The more the demand accelerates , the better underutilized golf courses look . Before the current jump in industrial demand , golf courses were not necessarily considered good sites for industrial development . late 1990s and early 2000s , when Tiger Woods was popularizing the sport . Leading the charge were municipal park districts and residential golf community developers , especially in the suburbs , where too many golf courses were built too close to each other without thought of market oversaturation . With fewer players , many of these suburban courses were particularly vulnerable , leading to the nearly two-decades ’ -long shakeout . In all , about 2,500 courses have closed since 2005 , according to the Internet Golf Database .
Buying , running , and maintaining a golf course is expensive ; margins are slim ; and operators need to be disciplined about pricing , expenses , and maintenance . According to the NGF , one-third of public golf facilities did not make enough revenue in 2019 to cover all on-site expenses . Private and municipal courses have similarly struggled .
INDUSTRIAL ’ S BOOMING DEMAND As golf courses are struggling — and in many cases , failing — e-commerce is propelling the need for warehouse and distribution facilities . With more of us buying online during the pandemic and increasingly expecting next-day or same-day delivery , e-commerce providers are all desperately seeking large , well-located warehouse and distribution centers near railroads , expressways , and airports , with proximity to population centers . Demand for warehouse space hit 350 million square feet in the top 22 markets in 2020 , according to CBRE , up 20 percent from 2019 . Industrial vacancy nationally was 4.3 percent in 3Q2021 , according to JLL , and rents increased to $ 6.76 per sf , up 7.1 percent from a year earlier .
Users want large , modern , newly constructed facilities with all the bells and whistles , like 36-foot clear
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COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE WINTER 2022