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Job growth is outpacing new home construction in the Greater Washington, D.C., metropolitan area, and the shortage of housing is sending property values soaring, as undeveloped land becomes a hot—and much sought after—commodity. For some range owners, the price tag placed on dirt has them exiting the business earlier than planned. In the past four months, three ranges have closed, their owners cashing in and selling the acreage to residential developers, and more closings are on the horizon.
“Over the years, we had hundreds of phone calls from people wanting to purchase our land,” says Tim Landres, owner of Fair Oaks Golf Park in Fairfax, Va. But the last offer he received was too good to turn down, and at the end of November, after 11 years in business, Fair Oaks shut its doors for good. “The buildout of Fair Oaks Golf Park was not done with the intent of selling it after 11 years. The thought was 20, 25 or 30 years,” Landres says. “We did know someday it would happen, but we never thought in a million years the boom would happen this quickly.”
Since 2000, the metro D.C. area has gained some 400,000 new residents, most settling in Maryland’s and Virginia’s inner suburban counties of Montgomery, Prince George’s and Fairfax, where the majority of the region’s almost 5 million inhabitants live. The ranges that have closed—Fair Oaks, Powerline Golf in Woodbridge, Va., and White Flint Golf Park in Rockville, Md.—are near the Beltway and other major transportation nodes, where there’s the greatest demand for higher density, multifamily housing.
“I wondered how these guys were going to survive, in particular because we’ve had [property] price increases in the double digits for the past four years,” says John McClain, senior fellow at the Center for Regional Analysis at George Mason University in Fairfax. The center has been closely monitoring the region’s housing growth relative to job growth in the past nine months. McClain says the pending population boom has homebuilders looking to acquire property as far down as the southern Shenandoah Valley—about two hours, depending on traffic, from D.C.
By all accounts, the demand for housing and hence available land is only going to grow.
The Metropolitan Washington Council of Governments predicts that by 2030, the region will gain 1.4 million new jobs, bringing 2.1 million new residents and 821,000 households with them. Forecasts, however, show building and development patterns falling behind projected job increases by 92,000 households.
As a result, observes Clem Gailliot, president of Hilltop Golf Club in Alexandria, Va., “Privately owned open land that is not currently public recreation is going to be developed into housing, offices or whatever.” This includes his 17-acre driving range. Once zoning is complete, in the next two years, the club’s practice facility will be sold and replaced with age-restrictive condos. The adjacent nine-hole course isn’t for sale—the capped landfill underneath limits development—but the hope is that its nearby location will be an incentive for seniors to move in next door.
“The range is quite a business, but it’s a marginal operation,” says Gailliot. He predicts that all Northern Virginia ranges, at least, will close eventually because the land is too valuable. This leaves many asking the question, where will golfers go?
“It’s going to be more inconvenient for people to practice and, in turn, the outcome will, I guess, make it harder to grow the game,” says Fair Oaks’ Landres. The interesting reality, however, is that the number of U.S. golfers hasn’t changed in some time, yet new suppliers, new courses and new ranges were being built, he notes, creating too much development, and that hurt everybody. “It’s a pretty simple equation if the numbers of golfers aren’t growing and new facilities are going through the roof, that it’s going to take from even the best,” Landres says. “In Fair Oaks’ heyday, where we had little competition, it was unbelievable—we had two and three deep waiting to hit golf balls.” But new competitors to the market took dollars that had been Fair Oaks’.
Landres faced a similar situation with his second facility, Olney Golf Park in Olney, Md., when Mid-Atlantic Golf Center at Norbeck opened in 2001, just a mile down the road in Silver Spring. But a reversal of fortune is headed Landres’ way. Already, Olney has gained former White Flint customers and, in as soon as three years, it will welcome Mid-Atlantic’s golfers when that property is redeveloped for housing.
Carl James, Mid-Atlantic’s general manager, says customers have seen the rezoning notices and some ask if the facility is closing, but otherwise, it’s business as usual for now. It took four years of red tape to get the center open, he says. “If it took that long to zone the land for a driving range, it’ll take at least that long going in the opposite direction.”
Since the $3.5 million practice center opened five years ago, the 13-acre range and the 18 undeveloped acres surrounding it have surged in value, with the property recently appraising at $10 million.
“Nothing happened other than the fact that the price of land is worth more than the business,” says James. “We’re so close to D.C. and Rockville [Md.], and housing prices have skyrocketed, and the value of land to build the houses has gone up with it.
“For the owners, it’s a great situation,” he adds. “They could operate the business for 10 years and not make the money they’ll make by selling it.”
Property values haven’t risen to Manhattan real estate levels in most markets, although nationwide, range and golf course development has slowed, an indication that construction—and the industry overall—is coming back in line with demand. National Golf Foundation data show that the number of new 18-hole courses being built has decreased every year since 2000. In 2004, there were 150.5 course openings and 62.5 verified closures. The 2005 numbers haven’t been released, but the prediction was that about 160 courses would open, nearly a quarter of the number built five years earlier. Looking through rose-colored glasses, Landres sees this as a positive trend for an industry where supply has outpaced demand for a number of years.
“Growing the numbers [of golfers] may not be a reality,” says Landres. But if the numbers can be maintained and there’s less competition among facilities, then those ranges and courses that survive will be more successful and “operate at a higher, more professional level because they have the money to do that.” And that, he says, will benefit existing golfers and those looking to get into the game.
Landres’ Maryland range will be among those survivors. Unlike its sister facility in Northern Virginia, Olney Golf Park isn’t in danger of being turned into tract housing. “The master plan in Olney is anti-commercialization, and it’s restricting land values at this time,” Landres says. Olney’s RE2 zoning limits residential development to one house for every two acres (neighboring counties are building four houses to an acre). “If you have a 21-acre site and you can build a house every two acres, you’re talking 10 to 11 houses. It wouldn’t warrant selling [the land].”
The danger of fewer recreational outlets to serve the region’s growing population isn’t lost on local government officials. Members of the Metropolitan Washington Council of Governments have expressed concern about how the region’s growth will affect residents’ quality of life.
“Land is a finite commodity, and balancing growth, balancing economic growth as well as population growth with commiserate needs for recreational facilities, those are very difficult challenges our local governments wrestle with on a day-to-day basis,” says Paul DesJardin, chief of housing and planning for the council.
After having managed two ranges, Landres “felt pressured” to scout out an affordable parcel to build a new, second facility that could serve area golfers and also benefit from the administrative infrastructure he developed to support his corporation, WestLand Golf Inc. But no such luck. “Finally, I came to the realization that what goes up must come down. We’re already starting to see that here in the housing market,” he says. “From a business perspective, it is certainly my belief and hope that the land values sort of come back to reality. If that does happen, not only would we move forward again, but there would also probably be another cycle of golf development like we saw in the ’90s.”
But this time, George Mason’s McClain says range owners would do well to find property that’s not on the fringe of development, but rather to look at lower-priced, industrial-zoned land or a more rural address. “Go far enough out where the pressure on land value hasn’t gotten there yet,” he says.
Landres has another perspective on future golf development: “Because so many of the super large tracts of land have been eaten up at this point, if there’s another cycle of golf development, it could be more of the alternative use facilities—ranges, short courses—and those types of facilities are not only invaluable to golfers but also to growing the game.”
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