Reimagining the Future of Church Real Estate
by Nick Bonner
The Great Opportunity Before Us
Over the last century, the Church in America has seen a precipitous decline despite being one of the wealthiest Christian nations in history. It is clear that our current operational methods of “being the Church” require a more efficacious approach. Unless we change the current model, roughly 40% of Americans born into Christian families over the next 30 years will disaffiliate from the faith of their parents. According to The Great Opportunity report,[1] we are quite literally living in the greatest opportunity for evangelism and discipleship in American history. Based on the age when most people form their world view, we have less than 30 years before that window closes. The GO report unpacks this in detail, but one major takeaway is that thriving churches, particularly church plants, have an outsized impact on reaching the lost. To seize the opportunity, we need to triple the current rate of church planting. The problem is that this solution has a 5.6-billion-dollar annual price tag.
The Church in America is Facing Strong Headwinds
Moreover, the Church in America is not thriving. Initial estimates are that 30,000-70,000 churches will close their doors due to COVID, but even before COVID, the statistics did not look good. Even when COVID is far behind us, these fundamental issues will still be hindering the church unless they are addressed.
80% of churches are in plateau or decline.[2]
>60% of a decline in church revenues is projected over the next 30 years.[3] [4] [5]
~50% of most church finances go to real estate.
3,700 churches are closing annually, and this is projected to increase by 50% over the next 30 years.[6]
With revenues declining quickly and half of its finances going to real estate that is actually hindering its operations, the Church desperately needs to reduce its infrastructure cost and increase efficiency in its operations. Like most organizations, the two biggest line items in a church budget are people and real estate. Most church staff already don’t make enough. Therefore, clearly the low hanging fruit for change is in the real estate.
So, what if there was a better story for churches? What if we could reposition the church to turn these headwinds into a tailwind?
Facilities Are Hindering the Church’s Mission
Before I answer those questions, it is important that you understand how facilities are hindering the Church’s mission, especially in urban environments where the largest populations exist.
Most churches do not have access to good facilities. Current options available to churches are typically either an old, high-maintenance building that is surprisingly expensive or something temporary that requires weekly setup/teardown (like in public schools, gyms, or community centers). Whether we like to admit it or not, the current church model is, to some extent, a retail business, and our buildings are actually creating barriers to our “customers”—particularly the unchurched.
Unfortunately, this is the best that most churches can do because quality church buildings are incredibly tough to find and extremely expensive. In my 17 years working in commercial real estate, my hardest assignment by far was locating a space for my church. It was a nightmare. Church real estate is a nightmare, especially in cities, where it is most critical for them to multiply. Culture is being formed in cities, and they are where the ratio of churches per capita is lowest.
Most facilities hinder pastors. Whether it is a young church plant located in a middle school or an established church with an expensive building, pastors either end up managing set-up teams and constant relocations, or in an effort to cover the building cost, they manage the facilities themselves, run building capital campaigns, and manage other tenants in order to provide other income streams. All of these tasks take valuable time away from their God-given callings and are typically outside of their skill sets. Many pastors view their buildings as a security blanket, but in reality, they are more like strait jackets than they may realize. Church facilities have become a golden calf of our era, which has opened the door to “Country Club Christianity,” and we need to help pastors see that they are too often putting their trust in a building instead of in Jesus.
Temporary facilities limit congregations. Most churches in temp spaces start to decline after five years, and they rarely make it past seven in good health. If you think about it in business terms, it makes sense. Their cost of “customer acquisition” is more expensive due to their lack of visibility, and once they have a customer, the customers burn out by running setup/teardown on their Sabbath. So, 12 months later when the school makes them relocate, it is a natural transition for worn out members to part ways.
Put differently, if you were an investor evaluating a company whose core model was migrating from one pop-up location to another in high-maintenance facilities with a CEO who spends a good portion of his/her time managing non-core functions that are likely out of his/her skill set, would you invest? Why do we expect it will be any different with churches?
We need better models to give pastors a better chance. If we can free up pastors and significantly reduce their cost of occupancy for a quality space, then we might really be able to seize the Great Opportunity.
The Church in America Has the Resources to Solve This Problem
The average church spends half of its finances on a building it only fully utilizes 5% of the week. There is an abundance of room in both the schedule and the budget for truly missional work.
Reliable data on church finances is scarce, but what I have aggregated suggests that there is roughly 1 trillion dollars of equity tied up in church real estate in the US, 80% of which is in plateau or decline. If we could unlock that latent capital buried in our real estate and use it for church planting, we could cover the tripling of church planting for even the most expensive plants, for the next 180 years!
So, why are churches so intent on owning their own buildings? 12% of companies in San Diego own their own buildings.[7] Why do 84% of the churches own theirs?[8] Shouldn’t we be investing our resources into our mission in the same way companies do instead of burying them in the real estate? You might argue that there simply are not better long-term solutions for churches, and for the most part, you would be right. But my friends, I have good news for you. We no longer need to settle for 3% annual appreciation and a property tax write-off. The door has been opened to invest in whatever mission God has called His church to so that it will see returns of 30, 60, and 100-fold.
The Way Forward
I have spent the last 3 years researching, ideating, modeling, and praying through the construction of a new model that could answer the above-mentioned questions, and I give it to you freely. Rather, I implore you to please take it, and use it to unlock the potential of church real estate to accelerate the Church’s influence.
Go employ a team of professionals to buy, renovate, lease-up, and then professionally manage all aspects of the real estate facilities for churches so that they can focus on their mission. Provide attractive and affordable facilities that offer a long-term home for multiple church tenants to share for Sunday services and programming throughout the week when they need the space. When they don’t need the entire space during the business hours of the weekdays, lease the children’s area to an anchor preschool tenant, and lease the kitchen, lobby, and sanctuary space to a coffee shop and coworking space that the church and community can use together. This is the third space that communities are looking for. Make it the living room of the community, and make it attractive to the unchurched so that you will give the Church instant credibility by creating an opportunity for the unchurched that did not exist before. Each of these uses will synergistically drive foot traffic for the other as well as subsidize the churches’ cost to rent. In doing so, you will place the proverbial “well” inside of the building so that divine collisions can occur with anyone who wants a cup of coffee, who drops their kids off at preschool, or who wants a desk with Wi-Fi.
By doing this, you will provide 4 big sources of value to churches:
Lower their “customer acquisition cost” by leveraging synergistic models that are already successfully operating across the US and are proven to connect more people to the church. For instance, there is a Christian preschool that makes over 60 church connections on average per year to their unchurched preschool parents across each of their >10 locations.
Facilitate missional collaboration through shared outreach with programs like AWANA, MOPS, and community service that smaller churches could simply not offer on their own.
Enable time savings so that church leadership can stay focused and on mission.
Provide more than a 60% reduction in the cost of the current own or lease models for its most expensive time slot. And since you provide it in turn-key condition, you will save churches millions of dollars in up-front costs so that they can put their capital back on mission.
Can churches really share a building? Roughly 8% of churches in the US already do. Unfortunately, it is typically only considered as a last resort.[9] If secular businesses can figure out how to share space in a coworking environment, then why can’t churches?
Unfortunately, if the stats I shared in the beginning come to bear, most churches are not going to have much of a choice.
Statistics Driving the Need for Density, Multiplication, and Visibility
I support the Church in all of her forms, be it mega, multi-site, or micro. However, as an investor, if I were looking to place a bet on a church from a perspective of eternal ROI, my criteria would be a church intending to stay under 500 people, in the city, and meeting in a public place, that is planting “pregnant” with a church planter in residency who intends to plant another church within its next 5 years. Here is why:
New church plants that launch daughter churches within their first 3 to 5 years average more than double as many weekly attenders compared to those that do not replicate—250 versus 100 weekly participants on average after four years. Their long-term success rates also double.[10]
Churches that are 200 or less in attendance are four times more likely to plant a church than churches of 1,000 or more in attendance, while churches between 200–500 in
attendance are twice as likely to plant a church than their larger counterparts.[11]
Churches that meet in public locations have double the weekly attendance after four years compared to churches meeting in less public spaces.[12]
Conclusion
My friends, we need new wine skins. The stakes are high, and the opportunity is great. As the philanthropists and business leaders that our churches look to in order to help them launch multimillion-dollar building capital campaigns, we have the opportunity to offer a more thoughtful way forward and to influence a more impactful stewardship of Kingdom resources. As the thought leaders and investors in our Christian spheres, we also need to practically encourage the creation of new models for church real estate with our time, talents, and treasures. I hope you will seize this great opportunity before it is too late.
Article originally hosted and shared with permission by The Christian Economic Forum, a global network of leaders who join together to collaborate and introduce strategic ideas for the spread of God’s economic principles and the goodness of Jesus Christ. This article was from a collection of White Papers compiled for attendees of the CEF’s 2019 Global Event.
[1] The Great Opportunity (www.greatopportunity.org) (Pinetops Foundation).
[2] Mark Clifton, Reclaiming Glory (2016).
[3] Ibid.
[4] Daniel Cook, 10 Tsunamis Impacting Ministries: How do we survive what’s coming? (Ogden, UT Building God’s Way Services, 2015).
[5] Carol Fleck, “The Boomers Most Generous at Charitable Giving” (AARP Money Talk, August 8, 2013)
[6] The Great Opportunity, op. cit.
[7] CBRE, San Diego Research Department
[8] National Congregations Study, Religious Congregations in 21st Century America
[9] Ibid.
[10] The Great Opportunity, op. cit.
[11] Ed Stetzer, Leadership Network Report (2007)
[12] The Great Opportunity, op. cit.