Abandoned golf courses are ripe for redevelopment and offer ideal locations for distribution.
E-commerce fulfilment does not usually trigger an image of grassy meadows and gently rolling landscapes, but there’s a growing convergence as industrial developers search for available land on which to build. Up against tight market conditions, along with increased values for land close to consumption points, developers and investors have to get creative with their real estate portfolios. One way is to take advantage of the large supply of defunct golf courses, which often have large-acre tracts and be located on major transportation corridors.
Conversion projects are not unique to industrial real estate; other high-performing sectors, such as multi-family residential and data centres, are also ripe for more development. But the case for industrial may be strongest, given market fundamentals. Demand has outstripped supply by an annual average of 72.4 million sq. ft during the past decade, driving up industrial rents by more than 50%, according to CBRE Econometric Advisors.
More recently, the covid-19 pandemic has increased e-commerce’s share of total retail sales, fuelling demand for industrial space. Online sales penetration is expected to reach 26% by 2025, up from 16% prior to the pandemic. By the end of 2020, there was 325 million sq. ft under construction. Despite robust development activity, the overall industrial vacancy rate remains near a historic low of 4.6%. New developments are getting leased up quickly, with 41% of buildings under construction having already secured commitment from an occupier.
The US is home to 14,145 golf courses, or over a third of the global supply, according to the National Golf Foundation. Since 2006, closures began to outnumber new course openings. The reason is twofold. Number one, there is an oversupply of golf courses. More than 4,000 golf courses were built during a 20-year stretch from the 1980s to the early 2000s. Many of these courses were attached to residential communities. Maintenance became too expensive, making the courses financially unsustainable. Coupled with declining interest from the Millennial generation, this led to more than 800 courses being closed over the past decade. Sports and Fitness Industry Association data shows a 35% decline in those playing golf between the ages of 18 and 30.