Florida Business Climate Great for Pickleball, But Risks Are in Play

When discussing the ever-evolving landscape of Florida’s commercial real estate (CRE) market, one trend has begun to stand out — the rise of pickleball. This sport, once a leisurely pastime, has turned into a compelling investment opportunity, transforming the CRE sector and driving significant shifts in property acquisition and development strategies throughout Florida — but not without risk.

For those unfamiliar, pickleball is a paddle sport that combines elements of badminton, tennis, and table tennis. While around since the 1960s, pickleball has quickly become one of the most popular sports in the United States, with an average of three new facilities opening every day.[1] In Florida, pickleball is especially popular, with more than 100,000 players statewide.[2]

Industry Bangers

Recognizing Florida’s thriving pickleball demand across diverse demographics, The Pickleball Club, a leader of private membership-based, high-amenity indoor pickleball facilities in the state, has strategically expanded, securing a three-acre site in Fort Myers and a location at The Villages, a large retirement community in Central Florida. [3] Its strategic acquisitions, amounting to $4 million in land, have extended the company’s footprint to seven key locations statewide. Meanwhile, the Boca Raton-based World Pickleball Group made a significant move by purchasing South Florida’s first pickleball franchise, and its new pickleball center in Sarasota is rapidly expanding. Adding to these individual efforts, a group of entrepreneurs has pledged $180 million to grow pickleball clubs in Florida.[4] On a national scale, a couple of former Major League Baseball senior executives co-founded Pickleball4America and, over the course of the last two months, the organization held its inaugural “Pickle4 Ballpark Series” at renowned venues like Fenway Park in Boston and Oracle Park in San Francisco.[5] The Ballpark Series resulted in “over 1,000 hours of gameplay…saw more than 936 competitive amateur matches, and awarded 336 medals to [the] winners.”[6]

Florida’s 2023 Live Local Act

The recently enacted Florida Live Local Act[7] (the “Act”) presents a unique opportunity for investors in the commercial real estate sector, particularly those capitalizing on the pickleball trend. This Act encourages the development of affordable housing, allowing for mixed-use developments that may potentially include pickleball facilities. With incentives such as low-interest loans, tax credits, and the ability to bypass local zoning restrictions, investors can strategically integrate pickleball facilities into their development plans. This approach not only caters to the growing demand for the sport but also provides a promising avenue for enhancing investor returns and financial performance. We went into a deeper summary of investor incentives under the Act in an article published earlier this year.

Liability and Concerns

While pickleball offers an appealing investment opportunity, addressing the challenges accompanying the sport’s rise is crucial. An increased incidence of pickleball-related injuries, leading to a substantial burden on the insurance industry, coupled with noise complaints, adds complexity to this investment landscape.

1. Noise Complaints: Pickleball’s distinctive, resonating sound has been a significant source of contention. Neighboring residents, particularly in densely populated areas, are fighting against pickleball’s apparent takeover due to the noise. The ball’s impact on the hard paddle and court creates a “pop” sound, boasting about 70 decibels, that can carry over a large area, leading to disruptions and a surge in noise pollution complaints and lawsuits. This issue has reached a point where some companies are seeking technological solutions to reduce pickleball’s noise, including pickleball noise curtains and using alternative materials for related equipment.[8]
2. Insurance Costs. The surge in popularity has brought with it an increased incidence of pickleball-related injuries, from sprains to surgeries, causing an unexpected, and expensive, ripple effect in the insurance industry. Pickleball injuries are expected to result in a yearly cost of nearly $400 million for insurance carriers.[9] Consequently, due to injuries and noise pollution complaints, property coverage is expected to continue to skyrocket and will be tougher to write, with some insurance carriers even refusing to get near pickleball facilities.

Conclusion

Addressing these risks is not insurmountable. Community associations and other pickleball facility owners should ensure they have comprehensive rules and guidelines, including those related to noise control, while also maintaining adequate insurance coverage. Thoroughly conducting due diligence prior to acquiring or developing a property, as well as proper coverage and usage of noise-dampening technology, can assist in reducing legal concerns. Considering these potential risks, it is advisable for associations, investors, and developers to engage with legal counsel throughout the acquisition and development process to review and execute plans in a cost-effective and protective manner. This proactive approach is the only way to serve an ace.

——————————————————————–

This DarrowEverett Insight should not be construed as legal advice or a legal opinion on any specific facts or circumstances. This Insight is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation and any specific legal question you may have. We are working diligently to remain well informed and up to date on information and advisements as they become available. As such, please reach out to us if you need help addressing any of the issues discussed in this Insight, or any other issues or concerns you may have relating to your business. We are ready to help guide you through these challenging times.

Unless expressly provided, this Insight does not constitute written tax advice as described in 31 C.F.R. §10, et seq. and is not intended or written by us to be used and/or relied on as written tax advice for any purpose including, without limitation, the marketing of any transaction addressed herein. Any U.S. federal tax advice rendered by DarrowEverett LLP shall be conspicuously labeled as such, shall include a discussion of all relevant facts and circumstances, as well as of any representations, statements, findings, or agreements (including projections, financial forecasts, or appraisals) upon which we rely, applicable to transactions discussed therein in compliance with 31 C.F.R. §10.37, shall relate the applicable law and authorities to the facts, and shall set forth any applicable limits on the use of such advice.

[1] https://www.washingtonpost.com/sports/2022/09/20/pickleball-growth-tennis/

[2] Id.

[3] https://www.businesswire.com/news/home/20230425005957/en/The-Pickleball-Club-Secures-Two-New-Locations-for-Future-Clubs-in-Venice-and-Pinellas-Park

[4] https://www.einnews.com/pr_news/619928098/boca-raton-based-world-pickleball-group-purchases-south-florida-s-first-pickleball-franchise

[5] https://frontofficesports.com/former-mlb-execs-team-up-to-bring-pickleball-to-big-league-ballparks/

[6] https://www.pickle4.com/ballpark-series

[7] Senate Bill 102.

[8] https://thehustle.co/one-mans-quest-to-make-pickleball-quiet/

[9] https://fortune.com/well/2023/06/27/pickleball-injuries-may-cost-americans-nearly-400-million-this-year/