Padel courts are popping up everywhere.
John Jack of Galetti and Roger Barrow of Padel Building Company unpack local padel court trends – the challenges that new investors face, detail that is required to establish a successful padel court, the associated costs and investor returns, and debate whether this is a lasting trend or a soon-to-be fad in light of the sharp downturn reported in places such as Sweden.
Padel court investment 101
What first began in Mexico in 1969, has since spread all over the world. There are 40 000 padel courts globally, with the latest tally in South Africa sitting at about 200 courts and counting.
Since the first court was erected just five years ago at Val De Vie in Paarl, the sharp demand has given rise to an increasing number of investors looking to cash in on one of the most popular new sports in the country.
Prominent players such as South African REIT, Attacq Limited, are finding unique ways to reconfigure prime commercial real estate to accommodate padel courts, such as the Mall of Africa that now boasts six padel courts.
Serving up space
“There is a high demand for padel courts, but the reality is that space is a limiting factor for many upcoming investors,” comments John Jack, chief executive officer of Galetti Corporate Real Estate.
“The likes of Virgin Active, hotels around the country, prestigious golf courses and the country’s big REITs with flagship shopping centres have space earmarked for reconfiguration.
However, the biggest barrier for new investors is access to prime real estate in areas yielding high foot traffic, visibility, demand and ultimately high returns.”
One of the opportunities is the reinvention of old, dilapidated tennis courts. “Tennis courts have been revitalised into padel courts. However, the opportunities are now few and far between, and we as commercial real estate brokers note more enquiries for padel space from investors.”
What makes for a successful padel court?
While there is some land available in South Africa for development purposes, Jack notes that padel has its own unique set of criteria:
- Accessibility.
- Security.
- General atmosphere.
- Amenities or space for development thereof (restaurants, toilets, showers, saunas, kids play areas etc.).
- Courts need to be 21m x 11m and have drainage.
- Must be north-south facing.
- Ample, safe parking.
Jack adds that the area must be well researched prior to investment and that the weather conditions cannot be overlooked. “If you are considering an outdoor court, then you need to factor in the weather, which will limit your profitability in times of heat, wind and rain. This is particularly prevalent in rooftop set-ups, which are proving to be quite popular at the moment.”
Costs and returns
Roger Barrow, a former Olympic rower, member of the Barrow Construction family and general manager of Padel Building Company, discusses the growing popularity of padel courts.
“The cost to build a court is anywhere between R600 000 to R1 million (excluding the land) and including civils, steel erection etc.”
When investing, economies of scale do help to bring down the costs. “One of the biggest unforeseen costs is that of glass and steel. As it stands, most of the courts in the country are in fact plug-and-play solutions from China.”
Barrow says that the return on investment varies greatly. “The early adopters of padel were able to operate at 70% capacity and pay off the court in a period of about one year. However, it depends on the total investment – did the investor add a restaurant, what are their staff and running costs?”
One of the stumbling blocks for padel courts today is the occupancy rate. “Most courts in South Africa operate at a 30% to 50% occupancy rate. Anything over 60% requires you to fill dead hours like 1pm to 3pm and anything after midnight. As it stands, most of the courts perform well between 5am to 8:30am and 4pm to 10pm,” says Barrow.
For those operating at 30% occupancy (and depending on what they have invested in terms of amenities), there is a possibility that a court can be paid off over a period of about four years.
Fad or everlasting trend?
“It’s no secret that people get bored easily,” comments Jack. “Whether or not this is a sustained trend, or an imminent fad, remains to be seen.” Internationally, Sweden, one of the early adopters of padel courts, has recently cited over saturation in the market.
“While this is most certainly a possibility, I do believe that inventive investors are paving the way for something bigger. So often, the courts are entrenched in beautiful areas, feature great amenities and cater for the whole family.
“Regardless of whether padel remains as popular as it currently is, I do believe that investors who think out of the box will continue to see the biggest returns,” he concludes.
Issue: Is there still investment value in padel courts?
Solution: Local padel court experts discuss the trends, challenges and associated costs and investor returns for establishing a successful padel court.
Full acknowledgement and thanks go to Padel Building Company for the information in this article.
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