Golf driving ranges
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
This section deals with separately assessed golf driving ranges which may also have bar and lounge facilities, retail outlets or other leisure facilities such as themed mini golf, sometimes referred to as “adventure golf”. The latter are a family friendly adventure, often with near life-sized animatronic creatures and water features, which have become increasingly popular. They may exist as a stand-alone attraction or be found within an existing golf driving range or golf course (Rating Manual: section 6 part 3 - section 450) where the mini golf will usually be valued as part of that hereditament unless forming a separate hereditament in its own right (Scat 426 - Pitch and Putt/Putting Greens).
However, the various other facilities on offer will generally be subsidiary to the main use as a golf driving range. Where it is considered that the driving range is ancillary to another use, the valuation considerations which follow may be of assistance to provide a cross check against the preferred method of valuation to be adopted for that class of property.
Many golf courses (SCAT Code 117) have a driving range as an ancillary part of the overall assessment and guidance on the approach to valuation in these cases is provided in Rating Manual: section 6 part 3 - section 450. It is not always appropriate to apply a full stand-alone driving range value to range/practice facilities attached to a golf course which, although superficially similar, are not designed to operate on the same commercial lines as a separately assessed driving range.
This section does not cover pitch & putt and crazy golf (Scat 426) which should be treated as leisure attractions (see Rating Manual: section 6 part 3 - section 1085).
List Description: Golf Driving Range and Premises Primary Description Code: LS2 SCAT code: 118, suffix S
This is a specialist class of property, to be valued by Valuers in each Business Unit.
The Golf Course Class Co-ordination Team has overall responsibility for this class and will provide advice as necessary during the life of the Rating Lists. Contact details are available from P/CEO1/Intranet/Reval2017/VP & CCTs. The team is responsible for the approach to and accuracy and consistency of valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists. Caseworkers have a responsibility to:
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follow the advice given at all times
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not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team
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seek advice from the co-ordination team before starting any new work
5.1 Unit of Assessment - let outs
A “golf shop” may be found to be in the separate occupation and control of a third party employed by the operator and capable of separate assessment. Similarly, any catering operation may also be let out to a third party. The individual circumstances of each case will dictate what entries are to be made in the Rating List.
The quality of driving ranges varies from uncovered, unlit ranges in rural locations, converted at little cost from farmers’ fields, often with an honesty box for payment; up to modern two-tier, floodlit ranges, with pro shops and restaurants, located in or adjoining large urban areas. Between the two extremes lie a wide variety of driving ranges. One thing they will all have in common is that, in addition to the bays from which golfers tee off, they require a large area of land (the ‘range’) into which the balls can be hit.
As well as the range and buildings the hereditament may also include a golf course, typically this will be a 9 hole beginners course. Where the course is more than a beginners course, the range may in fact be ancillary to the actual golf course. In such circumstances consideration will have to be given to whether it is more appropriate to change the description to golf course and premises (SCAT Code 117) and value accordingly having regard to the guidance in Rating Manual: section 6 part 3 - section 450.
The reception, shop area and any cafe facility should be measured to net internal area (NIA).
The following factors are likely to affect the rental value of a driving range and should be noted during the inspection:
a.location and proximity to centres of population;
b.competition from neighbouring ranges and golf courses (particularly pay and play);
c.number of bays;
d.floodlighting;
e.size and quality of ancillary buildings;
f.planning restrictions, limiting either the hours that the driving range may be used (and floodlit), or the activities permitted in the restaurant/bar;
g.car-parking;
h.retail area for golf equipment - golf range operators may let out on lease or licence the retail area to specialist golf equipment retailers, often at rents equivalent to retail warehouse rates per m2. In such circumstances consideration should be given to whether or not this comprises a separate hereditament;
i.mini themed golf attraction such as “adventure golf”;
j.type of tee such as plain artificial turf, automated ball teeing system;
k.number of double bays for example, video coaching bays.
In all cases plans and surveys should be stored in the property folder of the Electronic Document Records Management (EDRM) system.
8.1 Rentals Comparison
Rents, where available, will provide useful evidence of value but will often disregard substantial tenant’s improvements and therefore be unreliable. The analysis of such rents should be treated with caution. Where reliable AVD rents are believed to exist VOs should obtain details of rent and lease terms to ascertain the facts.
Where rental evidence is unreliable or non-existent, the Receipts and Expenditure method is the preferred method of valuation since the market rent is likely to be dictated by the actual or anticipated profit of the business carried on at the hereditament.
8.2 Receipts and Expenditure (R&E)
Where full accounts information is available for the three years prior to the AVD, then the R&E method of valuation may be adopted to arrive at the assessment where it is clear that the driving range is operated on a fully commercial basis. Guidance on the R&E method of valuation is contained within Rating Manual: section 4 part 2.
8.3 Comparative Approach
In the absence of full accounts information the RV should be arrived at using a comparative valuation method applying a rental percentage to the estimated AVD Fair Maintainable Trade (FMT) having regard to the actual gross receipts (excluding VAT). It is likely that this will be the main method of valuation for this class and occupiers of driving ranges are sent FOR VO6030 requesting receipts information.
8.4 Valuation considerations
The primary factor affecting the value of a golf driving range is location. Industry guidance stresses the need to establish the number of customers within 15 minutes’ drive time when considering a new development. It is therefore expected that a range located within or close to a large urban area will be significantly more valuable than one of a similar size located in a rural area.
In addition to the factors referred to in section 6 above, other factors which should be taken into account include: * floodlighting (the absence of which substantially reduces the hours of trading, especially in the winter);
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whether the number of bays is appropriate given the location and demand (40 or more bays may be required in an urban location, whereas for a rural range 30 may be excessive);
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retail area;
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catering facilities.
All valuations should be entered onto the Non-Bulk Server (NBS) under the relevant Scat Code.
Additional support is available through:
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Survaid.
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Class Co-ordination Team for Golf.
1. Market Appraisal
There are a wide variety of golf driving ranges in terms of age, location, quality and facilities offered. Those at the bottom end of the market tend to be of basic construction and offer straightforward bays without any café or sales facilities. At the other end of the market there are newer ranges, some now multi storey, with bays at ground & first floor level, and those that have been modernised, offering pop up teeing areas, better catering facilities and improved retail areas.
Catchment of a driving range is with people typically being prepared to travel up to 10 miles to a range. That catchment ideally will be well populated, served by good roads, with plenty of through traffic. Competition locally will determine the success or failure of a range. How many golf courses within the 10-mile radius catchment have their own practice facilities? How many golf courses are there within the catchment? The more the better as it will increase the potential number of customers for the driving range.
Traditionally the financial performance of the driving range is linked to the popularity of golf, however in recent years this has begun to change. Since 2015, the biggest impact on the driving range industry has been attracting new
customers and encouraging new customers to stay longer. The larger golf driving ranges have been re-inventing themselves into “Golf Entertainment Centres” There has been a growth in both outdoor/indoor ranges and entertainment centres offering themed mini golf (sometimes referred to as “adventure golf”) and golf simulators which seek to attract more women and younger people and a more family orientated customer base, providing activities which can be enjoyed by golfers and non-golfers alike, offering food and drink packages to groups in a similar way to the traditional bowling alley. Against this increased competition many traditional driving ranges have increasingly embraced camera tracking technology to improve their appeal to customers.
Many golf courses and driving ranges have further diversified through the addition of a 9-hole course for ‘foot golf’, where participants kick a football around a course with enlarged holes. This has become a very popular past time with people of all ages and has provided additional income in respect of both course fees along with the sale of food and beverages.
The COVID-19 pandemic had a major impact on Driving Ranges in the period leading up to the AVD (1 April 2021). Details of the various restrictions implemented by statute in response to the pandemic, and of the vaccination rollout, can be found online. In February 2021 the UK Government published its Roadmap out of lockdown for England which set out four steps to relax restrictions. Step 1, easing restrictions on outdoor gatherings, had already taken place by the AVD.
The later three stages of the Roadmap for England included
- the opening of outdoor hospitality, and non-essential retail (Step 2, no earlier than 12 April);
- most legal restrictions on meeting others outdoors to be lifted, opening of indoor entertainment venues such as cinemas, casinos and bingo halls (Step 3, no earlier than 17 May 2021); and
- the removal of remaining restrictions on social contact (Step 4, no earlier than 21 June).
The situation in Wales, both leading up to and after the AVD, was similar although not identical.
Performance in 2020
It was reported on October 2020 one of the three UK golf industry trends, beyond simply a general rise in participation and membership that has materialised as a direct result of the Covid-19 pandemic, has been a huge demand for shorter versions of the game.
A report published in May 2021 confirmed the increasing popularity of driving ranges. In the last year driving range use had almost doubled, the vast majority being new people to golf using the driving range.
In previous generations entry points to golf were often via municipal golf courses which were affordable and provided a more relaxed setting and introduction to golf. However, the last decade has seen municipal golf course closures. A survey conducted in March 2021 found since the Covid-19 outbreak, driving ranges now form a significantly bigger part of the introduction to golf for those who stated they began playing golf in the last decade. This trend is set to continue with facilities becoming a more prominent window into golf. Driving ranges could soon be what municipal courses were to previous generations.
Diversification is a continued tend in the driving range market with additional activities and services being offered, aimed at a younger, family orientated target audience. An example is the new driving range at Binfield, Berkshire which has two driving ranges, a 9 hole short course, a footgolf course and an adventure golf course. It also has a Cafe Bar which serves hot food, beverages (including alcohol) and plays host to children’s birthday parties.
Due to the complicated nature of the golf swing and its tendency to desert the average golfer, there will be a demand for practice facilities as long as people continue to play golf. Golf driving ranges are inexpensive to use and the golfer need not even own a set of clubs as most ranges offer club hire. The ranges that will succeed in the future are those that maximise the potential of their catchment area and provide value-for money services that will appeal to golfers of all levels.
With golf club membership falling and golfers playing 18 holes less regularly it is likely that well located driving ranges with a variety of offers will become increasingly popular.
2. Changes from the last practice note
There are no changes from the broad principles followed for the 2017 Rating Lists and the approach therefore is the same.
3. Ratepayer discussions
There have been no ratepayer discussions for Revaluation 2023.
4. Valuation scheme
In the absence of reliable AVD rental evidence and/or full accounts information the RV should be arrived at using a comparative valuation method applying a rental percentage to the estimated Fair Maintainable Trade (FMT) as at the Antecedent Valuation Date (AVD), of 1 April 2021, having regard to the actual gross receipts (excluding VAT).
FMT is an estimate of annual receipts that could be derived by occupying the property and conducting the golf driving range operation with the skill and expertise that could be reasonably be expected from a potential tenant of the hereditament. This figure will represent the gross annual receipts from all sources (exclusive of VAT).
The effects of the COVID-19 outbreak need to be taken into account as they would have been anticipated by the parties at the AVD. Trade evidence that includes long periods of lockdowns is unlikely to provide good evidence of the FMT at the AVD. Valuers are advised to take as their starting point the closest reliable trade, which is likely to be the 2019/2020 trading year (ending March or before) and any previous trading years.
Having established the likely FMT for the 19/20 trading year (ending March or before), the valuer should then consider any further adjustments needed to reflect the receipts envisaged as at 1 April 2021. The reasonable efficient operator (REO) will take a view not only on the trade immediately achievable at AVD, but the trade over a period of time ahead, as they are assumed to be taking a tenancy with a reasonable prospect of continuance.
Analysis of the available evidence indicates that the rental percentage bid range should generally fall within 12% to 16% of the FMT. Various receipts may be identifiable such as range income, retail equipment sales, catering sales and the single rental percentage adopted should reflect this range. However, consideration could be given as to whether different rental percentages should be applied to each individual income stream to reflect its likely profitability. Where the driving range operator receives a franchise income, for example from an equipment shop in the hereditament, then this should be excluded from the FMT figure to avoid double counting.
Franchise income should be valued at a percentage within the range of 25% to 50% depending on the level of the rateable occupier’s expenditure. This will be at the higher end where the receipts involve the rateable occupier in minimal expense, and at the lower end where the rateable occupier is responsible for all repairing liabilities, provision of services or significant non-rateable items. The resultant figure should then be added to the RV for the main part of the hereditament to produce an overall RV to be entered into the Rating List.
If forming part of, and in the same occupation as, the golf driving range any mini themed golf facility, such as “adventure golf”, will be valued as part of that hereditament by applying the rental percentage bid applicable to the driving range facility to an estimate of the FMT (gross receipts excluding VAT) for the mini themed golf at the AVD.
However, it is essential that a stand back and look at the final figure is carried out and that, where appropriate, full regard is had to the different revenue streams within the hereditament.
Where the mini themed golf is a stand-alone facility any rent passing is unlikely to reflect the many improvements made by the tenant. In such circumstances the RV should generally be arrived at by applying a rental percentage, in the range of 12%–16%, to the estimated FMT (gross receipts excluding VAT) at the AVD.
Where driving ranges incorporate golf course areas, depending on the nature of the site as a whole, it may be appropriate to consider whether the property should be valued in accordance with the Golf Course basis. This is set out in Rating Manual Section 5a: Valuation of all property classes - Golf courses. In such cases it will be necessary to determine whether the bulk of the revenue-generating potential lies with the golf course or the driving range.
1. Market Appraisal
There are now a wide variety of golf driving ranges in terms of age, location, quality and facilities offered. Those at the bottom end of the market tend to be of basic construction and offer straightforward bays without any cafe or sales facilities. At the other end of the market there are newer ranges and those that have been modernised offering pop up teeing areas, better catering facilities and improved retail areas.
There has been a growth in both outdoor/indoor ranges and entertainment centres offering themed mini golf (sometimes referred to as “adventure golf”) and golf simulators which seek to attract a younger and more family orientated customer. In competition against these the latest driving ranges offer more extensive and higher quality facilities. An example of this is Greenwich Peninsular driving range on the bank of the Thames overlooking Canary Wharf where a state of the art 60 bay two tier driving range shares the site with a high quality restaurant, wine school and a large sports retail shop. The range has flags and holes offering targets on raised greens with each bay having a private entertaining area.
With golf club membership falling and golfers playing 18 holes less regularly it is likely that well located driving ranges with a variety of offers will become increasingly popular.
2. Changes from the last Practice Note
There are no changes from the broad principles followed for the 2010 Rating Lists and the approach therefore is the same.
3. Ratepayer Discussions
Central discussions have taken place with agents acting for and advising the English Golf Union, the Association of Golf Course Owners and ratepayers. The guidance contained in this Practice Notice has been discussed with and sent to the agents who have not dissented in principle from the recommended approach.
4. Valuation Scheme
In the absence of reliable AVD rental evidence and/or full accounts information the RV should be arrived at using a comparative valuation method applying a rental percentage to the estimated AVD Fair Maintainable Trade (FMT) having regard to the actual gross receipts (excluding VAT).
Analysis of the available evidence indicates that the rental percentage bid range should generally fall within 12% to 16% of the FMT. Various receipts may be identifiable such as range income, retail equipment sales, catering sales and the single rental percentage adopted should reflect this range. However, consideration could be given as to whether different rental percentages should be applied to each individual income stream to reflect its likely profitability.
Where the driving range operator receives a franchise income, for example from an equipment shop in the hereditament, then this should be excluded from the FMT figure to avoid double counting.
Franchise income should be valued at a percentage within the range of 25% to 50% depending on the level of the rateable occupier’s expenditure. This will be at the higher end where the receipts involve the rateable occupier in minimal expense, and at the lower end where the rateable occupier is responsible for all repairing liabilities, provision of services or significant non-rateable items. The resultant figure should then be added to the RV for the main part of the hereditament to produce an overall RV to be entered into the Rating List.
If forming part of, and in the same occupation as, the golf driving range any mini themed golf facility, such as “adventure golf”, will be valued as part of that hereditament by applying the rental percentage bid applicable to the driving range facility to an estimate of the FMT (gross receipts excluding VAT) for the mini themed golf at the AVD.
However, it is essential that a stand back and look at the final figure is carried out and that, where appropriate, full regard is had to the different revenue streams within the hereditament.
Where the mini themed golf is a stand-alone facility any rent passing is unlikely to reflect the many improvements made by the tenant. In such circumstances the RV should generally be arrived at by applying a rental percentage, in the range of 12% - 16%, to the estimated FMT (gross receipts excluding VAT) at the AVD.
1. Co-ordination
This is a split class with Southern Specialist Rating Unit being responsible for those golf driving ranges in London Central, London North and London South Groups and Groups having responsibility elsewhere. Responsibility for ensuring that appropriate co-ordination takes place lies with the Groups and Southern SRU. Co-ordination responsibilities are set out in RM Section 6: part 1
For R2010 Special Category Code 118 should be used. The suffix letter should be G or S as appropriate.
As there is likely to be limited rental evidence and the valuation ‘location’ will be extensive, it is important that Groups co-ordinate across boundaries with adjoining Groups. Each Group has a “golf” class co-ordinator in place and there is a National Co-ordinator for the wider geographical area.
2. Scope of Practice Note
Many golf courses (SCAT Code 117) have a driving range as an ancillary part of the overall assessment and guidance on the approach to valuation in these cases is provided in RM Section 6: pt 3 It is not always appropriate to apply a full stand alone driving range value to range/practice facilities attached to a golf course, which although superficially similar are not designed to operate on the same commercial lines as a separately assessed driving range.
This Practice Note deals solely with separately assessed golf driving ranges. Whilst such properties may have bar and lounge facilities, retail outlets or other leisure facilities, these will generally be subsidiary to the main use as a golf driving range. Where it is considered that the driving range is ancillary to another use, the valuation considerations which follow may be of assistance to provide a cross check against the preferred method of valuation to be adopted for that class of property.
3. State of the Industry
Very few new golf driving ranges have been built since 2003. However, operators of the more profitable units have been continually modernising and updating their premises including the introduction of automatic pop-up teeing facilities, better catering and improved golf equipment retailing.
4. Central Discussions
Central discussions have taken place with agents acting for and advising the English Golf Union, the Association of Golf Course Owners and ratepayers. Views were sought on improvements which could be made to the approach adopted for the 2005 lists. The guidance contained in this Practice Notice has been discussed with and sent to the agents who have not dissented in principle from the recommended approach.
5. Valuation Factors
The primary factor affecting the value of a golf driving range is location. Industry guidance stresses the need to establish the number of customers within 15 minutes drive time when considering a new development. It is therefore expected that a range located within or close to a large urban area will be significantly more valuable than one of a similar size located in a rural area.
Other factors which should be taken into account include:
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competition from neighbouring ranges and golf courses (particularly pay and play);
-
floodlighting (the absence of which substantially reduces the hours of trading, especially in the winter);
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whether the number of bays is appropriate given the location and demand (40 or more bays may be required in an urban location, whereas for a rural range 30 may be excessive);
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size and quality of ancillary buildings;
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planning restrictions limiting either the hours that the driving range may be used (and floodlit) or the activities permitted in the restaurant/bar;
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car-parking;
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retail area;
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catering facilities.
6. Valuation Method
6.1 Rentals Comparison
Rents, where available, will provide useful evidence of value but will often disregard substantial tenant’s improvements and therefore be unreliable. The analysis of such rents should be treated with caution. Where reliable AVD rents are believed to exist VOs should obtain details of rent and lease terms to ascertain the facts.
6.2 Contractors Basis
The Court of Appeal held in its decision in Garton v Hunter (VO) 1969 RA 11 that all evidence of value is admissible but the question is the weight which should be attached. Although evidence of current costs of construction may be available in respect of individual driving ranges, the contractors basis method is not thought appropriate for this class. Where rental evidence is unreliable or non existent, the Receipts & Expenditure method is the preferred method of valuation since the market rent is likely to be dictated by the actual or anticipated profit of the business carried on at the hereditament.
6.3 Receipts & Expenditure (R&E)
Where full accounts information is available for the three years prior to the AVD, then the R&E method of valuation may be adopted to arrive at the assessment where VOs are satisfied that the driving range is operated on a fully commercial basis. Guidance on the R&E method of valuation is contained within RM Section 4: Pt 2.
6.4 Comparative Approach
In the absence of full accounts information the RV should be arrived at using a shortened valuation method applying a rental percentage to the estimated AVD Fair Maintainable Trade (FMT) having regard to the actual gross receipts (excluding VAT). It is likely that this will be the main method of valuation for this class for R2010 and occupiers of driving ranges have been sent FOR VO6030 requesting receipts information.
Analysis of the available evidence indicates that the rental percentage bid range should generally fall within 12% to 16% of the FMT. Where the driving range operator receives a franchise income, for example from an equipment shop in the hereditament, then this should be excluded from the FMT figure to avoid double counting. Franchise income should be valued at a percentage within the range of 25% to 50% depending on the level of the rateable occupier’s expenditure. This will be at the higher end where the receipts involve the rateable occupier in minimal expense, and at the lower end where the rateable occupier is responsible for all repairing liabilities, provision of services or significant non-rateable items. The resultant figure should then be added to the RV for the main part of the hereditament to produce an overall RV to be entered into the Rating List. However, it is essential that a stand back and look at the final figure is carried out and that, where appropriate, full regard is had to the different revenue streams within the hereditament.
This property is valued using the non-bulk server. The manual can be accessed here.
7. IT Support
The development of a new facility on the Non Bulk Server will enable the input of factual data to achieve valuations that follow the recommended approach.