Global Edition

Development costs rise, but celebrity still sells says KPMG

12.20am 28th November 2008 - Management Topics

Golf course development costs rise by 20% The cost of developing an 18-hole golf course has increased by more than 20% in the past three to five years, KPMG Golf Advisory Practice’s latest Golf Course Development Cost Survey for Europe, the Middle East and Africa has revealed.

The report, a new, updated version of a study first conducted in 2005, shows that the design and construction costs (excluding investments related to land acquisition, clubhouse, maintenance equipment and cart fleet etc) of an 18-hole golf course now ranges between €1.5 and €5.3 million in Europe, depending on location and quality, €5.1 million in Southern Africa, and €9.5 million in the Middle East, by far the most expensive region to develop a golf course.

Andrea Sartori, head of KPMG’s Golf Advisory Practice in the EMA, said, “The Middle East features the highest concentration of new, high-end and signature golf courses, designed by recognized golf course architects and famous professional golfers, who may command higher fees, but whose celebrity also beneficially increases premiums on real estate surrounding the course by more than 10%.”

The report, based on a sample of more than 150 courses in 27 different countries, features data collected in 2008 from new courses, where the trend is towards housing communities and tourist resorts, as well as extensions to existing courses, typically in established markets such as Great Britain and Ireland.

The average cost of an 18-hole course varies according to quality, with a lower to mid-quality course costing, on average, between €2.2 million and €3.0 million, high-end €5.9 million, and a signature course €6.8 million.

In Europe, the average development costs for 18-hole courses vary from €1.5 million in Eastern Europe, €2.6 million in Northern Europe, €2.7 million in Central Europe, €3.9 million in Great Britain and Ireland, to €5.3 million in Western Europe.

While the costs are highest in the Middle East (€9.5 million), partly because of the focus on high-end and signature courses, which tend to be 2 to 2.5 times more expensive to construct, golf course revenues and profits in this region are also substantially higher (average revenues top €5 million per annum, with gross operating profits of more than 30%, according to the KPMG Golf Benchmark Survey 2007).

The cost of developing a course combines pre-construction costs (11%), including planning permits and course design fees, plus construction costs (89%), including earthwork, irrigation, grassing and landscaping, but excluding land acquisition and investment in other facilities and golf course maintenance equipment.

Of the developments surveyed, 42% were connected to a tourist resort or real estate community. All of these respondents said they had achieved a premium on the sale of their real estate units as a result of their golf course, with 60% saying it was worth over 20% more compared to comparable non-golf course homes in the locality.

Three-quarters of developments with a recognized golf course architect said having a named architect further increased premiums on their real estate sales, just under half saying this was worth more than 10%, although a third said it was below 5%. Meanwhile, all developments with a signature designer experienced premiums on their real estate sales, generally above 10%.

Andrea Sartori added, “The architects were also asked where they thought the next golf development hot spots would be and were asked to name the five markets likely to experience the most significant growth in golf course development in the next 10 years. China (58%) and Eastern Europe (55%) topped the list by some distance, with the United Arab Emirates (43%), India (42%) and Russia (30%) making up the top five. It remains questionable in what measure the recent full scale unfolding of the financial and economic downturn will affect golf course development activities globally.”

Other findings of the report include:
• it usually takes four to five years to construct a golf course from concept to realization, although planning permission can take anywhere between a few months, as it often does in the Middle East, to two or three years, in Northern Europe
• obtaining a planning permit (mentioned by 36% of the respondents) is the single most difficult issue to overcome in golf course development, followed by weather delays (28%) and environmental opposition (24%). (NB: Water availability – 14%.)
• earthwork and shaping account for 33% of construction costs, irrigation and drainage 21% and cart paths 15%
• 61% of developers stick to their budget for golf course construction, but a third overspent, 10% by a significant amount.

The full report is available at

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