Accessibility is another
constraint on the supply of locales suitable for high-end resorts. While
North America boasts bountiful open space, many of the most desirable locations
are hard to reach. Ease of access is one of the prime issues for sophisticated
multiple home purchasers, such as Burt Sugarman, who owns property at the
exclusive Yellowstone Club in Big Sky, Mont., as well as in other vacation home
developments. “It may be beautiful beachfront up in Northern California, but if
it’s not accessible, then it’s not the right location,” Sugarman points out. He
notes that he and his wife, Entertainment Tonight host Mary Hart, will only buy
in an area that has a nearby commercial airport serviced by a minimum of three
well-known airlines.
How do you provide five-star service to a residential resort home
development? That is a big part of what is driving
this residential high-end
housing market now. |
Developers also assert that they are careful to manage
their assets in ways that keep supply of the most exclusive properties in check.
Jacksonville, Fla.-based St. Joe Co., a publicly traded development firm that
owns vast stretches of beachfront on Florida’s northwest Gulf of Mexico
coastline, is one such business. “There is less than a mile of continuous
beachfront along this coastline,” other than what St. Joe owns, notes Jerry Ray,
senior vice president of corporate communications. The natural monopoly position
that this creates means property prices here will remain healthy, Ray argues.
St. Joe manages the rate of its development so demand for its properties always
outstrips supply, he adds.
Another factor that bears on the individuality of
the experience is the level of service. “That has really come about in the last
two years,” Hatfield explains, “and it is the issue everyone is struggling to
achieve: How do you provide five-star service to a residential resort home
development? That is a big part of what is driving this residential high-end
housing market now.”
Indeed, for high-end resort developers in locales that
are off the beaten path, like Los Cabos, providing service is crucial. “When we
went to Mexico, we knew we had to overcome second- or third-home buyers’
concerns about how they would manage their home: Who would take care of it? What
sort of service would they have access to? What will happen to it when they were
not there? Would it be ready when they arrive?” Hatfield says. “We designed our
service package to address those concerns, and I think that level of service is
becoming almost universal in higher-end residential communities.”
Still, singular resort home communities are, by definition, exceptions in
a field that is becoming crowded. The hundreds of resort communities across the
U.S.—most of them brainchildren of developers seeking to market them as
unique—should encourage buyers who view their homes, at least in part, as
investments to give the matter careful thought.
William Wheaton, of the
Massachusetts Institute of Technology’s Center for Real Estate, agrees with
Hatfield’s belief that reproducible properties are vulnerable to the inexorable
laws of supply and demand. As developers create more units, he argues,
individual values will slip.
Wheaton bases his opinion on research he
conducted into how the supply of high-end condominiums in the New England ski
resort home market affected their prices. In a paper he published in 2003,
Wheaton examined the values of these properties from 1975 until 2000. They
differed from very high-end resort communities in two ways: They were easily
reproducible, and developers expanded the number of available units to meet
growing demand. They were also individual developments, rather than gated
communities with common, high-end services. Wheaton concluded that, under these
circumstances, while the average price per square foot rose 70 percent in
nominal terms over that period, it had actually fallen by 40 percent when
adjusted for inflation (see graph).
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