Padel courts are popping up everywhere. What first began in Mexico in 1969 has since spread the world over and South Africa is no exception.
As it stands, there are 40,000 padel courts globally with the latest tally in South Africa sitting at around 200 courts and counting.
Since the first court was erected just five years ago at Val De Vie in Paarl, 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.
And as the craze continues, prominent players such as South African REIT Attacq Limited are finding unique ways to reconfigure prime commercial real estate to accommodate padel courts, like the Mall of Africa which now boasts six padel courts.
Serving up space
While the prospect of padel court investment is on everyone’s minds, for most, space – and the right space at that - is of key concern.
“There is high demand for padel courts but the reality is that space is a limiting factor for many upcoming investors,” comments John Jack, CEO 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 that investors have gravitated towards 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 are noting more enquiries for padel space from investors.”
And while there is some land available in South Africa for development purposes, Jack adds that padel does have its own unique set of criteria.
What makes for a successful padel court?
“Factors such as accessibility, security, general atmosphere, amenities or space for the development of amenities such as restaurants, toilets, showers, saunas, kids play areas etc. must be considered.”
In addition, Courts need to be 21 x 11m, have drainage, must be north-south facing and ample, safe parking, according to Roger Barrow, a former Olympic rower, member of the Barrow Construction family, and General Manager of Padel Building Company.
Jack adds that the area must be well researched prior to investment and that weather conditions cannot be overlooked. “Consider the demographic of the area, know your target audience, calculate your investment and returns, and do thorough investigations prior to investing alongside trusted experts,” he says.
“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.”
He adds that what continues to prove popular in particular is the country’s CBDs as a lot of working professionals opt to play padel before or after work. “This presents an opportunity for the office sector resurgence, particularly in Johannesburg where the vacancy rates remain low.”
Costs and returns
In an interview with Jack, Roger Barrow discussed 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.”
Barrow adds that when it comes to 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, majority 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 around 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. “Majority of courts in South Africa operate at a 30 – 50% occupancy rate, anything over 60% requires you to fill dead hours like 1pm – 3pm and anything after midnight. As it stands, majority 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 around 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 to something bigger. So often, the courts are entrenched in beautiful areas, feature great amenities and cater to 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.
