25gyms 1 FacebookJumbo

For Fitness Buffs and Landlords, Gyms Are Hot Again

Jenny Radke, a Broadway and television actress, was never big on joining health clubs or taking fitness classes. With a background in dance, she has long known how to keep herself fit.

But the new Life Time health club in Lower Manhattan won her over with its Kids Academy, a 10,000-square-foot space where she can drop off her 19-month-old daughter for puzzles and other developmental activities while doing Pilates, jogging on the treadmill and windsurfing. off with a hydromassage.

“She has a little yoga mat and can do what Mommy does,” said Mrs. Radke, known professionally as Jenny Laroche, said. “I get some ‘me’ time.”

As people return to personal activity with the easing of coronavirus pandemic restrictions and a drop in reported Covid cases from last year, they are making a beeline for the gym, eager to shed extra pounds they gained during lockdowns. And the $32 billion American fitness industry greets them with some new tricks.

Monthly visits to gyms from March to August rose more than 18 percent from the same period in 2019, according to data from Placer.ai, which tracks retail foot traffic. New memberships also increased, with sales per square foot at gyms up 34 percent in August from a year earlier and almost flat from 2019, said Mark Sigal, CEO of Datex Property Solutions, a software company that tracks retail properties.

The enthusiasm reflects fatigue with solo workouts along with a search for communal experiences, at a time when some home exercise equipment that became popular during lockdown — such as Peloton bikes — is falling out of favor.

Health clubs and gyms – which were hit with mandatory closures at the start of the pandemic, followed by occupancy restrictions and then waves of variants that made people wary of huffing and puffing around others – are positioning themselves for this moment. Well-capitalized chains are expanding, taking advantage of pandemic-suppressed rents, and operators are reconfiguring their spaces and adding accommodations not only for children but also for aging baby boomers.

Space newly occupied by fitness centers increased to more than 4.5 million square feet in the first three months of this year, up from about 2 million at the end of 2021, outpacing other types of retailers, according to Brandon Isner, head of retail research for the Americas at CBRE, a real estate services firm.

Budget gyms that offer basic equipment and cheap memberships do particularly well, as do boutique exercise studios at the other end of the spectrum that specialize in niche regimens, such as boxing and barre.

According to a recent report from research firm IBISWorld, the fitness industry is on track to grow by 4.2 percent this year.

“The future looks bright,” said Chris Craytor, chairman of IHRSA, a fitness industry trade group.

But questions remain about the existential threat remote exercise routines pose, especially as women lag behind men in returning to facilities. And some of the growth in membership can be attributed to people looking for new fitness homes after their old clubs went out of business.

Some operators are still experiencing “hangovers” from agreements they entered into with landlords during the pandemic, Mr. Craytor said, with many gyms still paying off deferred rent. “Operators are trying to get out from under these problems,” he added.

In the years leading up to the pandemic, retail real estate was at a standstill due to the rise of online shopping. But fitness businesses have been a bright spot, boosted by a growing awareness of exercise’s role in overall health.

As of 2019, there were 141,370 fitness facilities in the United States and 64.2 million members, according to IHRSA. Yet only 20 percent of the population used gyms.

During the early months of the pandemic, temporary gym closures cut into revenue. Operators have entered into agreements with landlords to hold their spaces and added remote and on-demand classes to retain members. Still, a quarter of the gyms went out of business, and some chains declared bankruptcy.

Rent collections have risen steadily this year, reaching more than 93 percent in August, although they were still below the same month in 2019, according to Datex.

But the real estate aspect of running a health club has always been difficult.

Most operators rent their space, and finding property – ideally with high ceilings and no freestanding columns – has never been easy. And the space required for a full-service health club, typically 15,000 to 50,000 square feet and significantly more for some high-end operations, can be expensive.

Not all landlords were on board either. Some worried that members would monopolize parking spaces at shopping centers and malls, or that tenants would undertake extensive renovations that the landlords would have to help finance.

The problems were compounded in cities where health clubs often rented space in high-rise buildings. Landlords were concerned that the clanking of weights and the blaring of music could disturb other tenants and sometimes required expensive soundproofing.

“Any environment with vertical living, that’s the big challenge,” said Brandon L. Singer, CEO of MONA, a retail brokerage firm.

But the pandemic has left many office owners with record vacancies and made them more susceptible to health clubs. Owners of older buildings, rushing to offer the latest perks to compete with newer properties, are looking to businesses, such as health clubs, that they believe can help attract tenants.

“Years ago, 90 percent of the club pipeline was us calling landlords and developers,” said Parham Javaheri, chief real estate development officer at Life Time, which bills itself as a “country club” version of a health club, with salon and spa services and $249 monthly membership. “Now at least 50 percent of the work is from incoming interest.”

Health club operators may be rethinking where to locate in light of the work-from-home trend, industry experts say.

Before the pandemic, downtown business areas were attractive to gyms because commuters could exercise before or after work. Now many workers are in the office fewer days a week, if at all, and prefer to join a club near where they live.

Fitness clubs open in shopping centers, where they can generate foot traffic that benefits other tenants. A retailer in a mall with a gym receives an average of 2.5 percent more visits per month than the same retailer’s locations in centers without fitness businesses, according to Creditntell, which analyzes location and financial data.

Mall owners are also eyeing fitness businesses as they broaden their reach to include co-ed, residential and experiential store offerings, and look for tenants to take over empty big-box stores.

Inside clubs, operators are creating more open areas, reflecting lingering concerns about contamination; sometimes they do this by getting rid of cardio equipment, in recognition of the fact that many people have taken up cycling and other forms of outdoor exercise during lockdowns.

At the same time, many businesses are adding new equipment, such as air-powered resistance training equipment for the benefit of older members. As remote and on-demand fitness remains popular among some groups, operators are mounting cameras to record classes.

Gymage in Miami Beach caters to social media influencers with tripods, ring lights and a mile of LED lighting, said Carlos Enguídanos, the company’s CEO. “Every corner you take a picture is going to be a great place,” he said.

There is also an emphasis on common spaces where members can hang out and perhaps get work done from laptops.

Boutique fitness businesses naturally require less space in general. Studios range from 1,500 to 5,000 square feet and can be cheaper and easier to get up and running quickly.

“It’s a very different thing to roll into some rowing machines and have a desk in front,” says Barrie Scardina, a retail expert for Cushman & Wakefield.

Exponential Fitness, a franchisor of boutique brands including Rumble Boxing, has 2,100 studios in the United States. One of its fast-growing brands is devoted to stretching, with sessions starting at $49 for 50 minutes.

But low cost, no frills also do well. Planet Fitness — which has 2,324 stores, mostly in U.S. malls — added 300,000 members in the second quarter of the year.

Sam Rogers, a recent college graduate, joined the company’s gym in Portsmouth, NH, in June, lured by the $10 monthly membership. “It doesn’t break the bank,” he said.

He also likes the attitude-free atmosphere. He runs on the treadmill, then moves on to the free weights while others do their own workouts at their own pace.

“You just walk in, do your thing and go,” he said.

Related Posts