Gyms Feeling The Crunch Of Latest Pandemic Shutdown
A new round of gym closures is putting landlords and tenants in a financial bind as officials in Boston and surrounding suburbs attempt to curb the coronavirus’s spread.
Yoga studios, cycling studios and other boutique fitness clubs are among the indoor facilities barred for three weeks as cases of the virus, hospitalizations and deaths in Massachusetts continue to rise following a post-Thanksgiving outbreak.
Gym owners are weighing their finances after the sudden directive while landlords said they’re making rent concessions when possible. Both are taking issue with the laws targeting what they claim are safe workout environments.
The UFC Gym at 76 Lincoln St. in the Financial District is hosting permitted one-on-one training sessions following Mayor Martin Walsh’s order beginning Wednesday, but Managing Partner Jason Dunton called the ban on already-restricted gym capacity “brutal."
“My payroll is generally $20K a month, myself included,” Dunton said, noting the gym’s fixed costs exceed $40K monthly. “I can’t eat that cost for a month or two. I’m a local guy, I’m not a wealthy corporation. I can’t take on a ton of debt, that will ruin me long-term.”
The gym lost some customers during the coronavirus pandemic as workers have largely stayed out of downtown offices. Dunton hasn't had to lay off workers because many have moved away on their own, he said. Coaches, who have taken on double-duty to help clean the gym, haven’t had to take major pay cuts and the gym hasn’t had to close over a COVID-19 positive test by a member or staffer.
“We can make it, but you can only go so far in debt,” Dunton said. “If I take on hundreds of thousands of dollars in debt in a couple of months, the notes in the debts that I’ve taken on is greater than what I can pay.”
The closure of nearby restaurants and gyms has painted a bleak picture of his future, Dunton said.
Northeast fitness chain Town Sports International in September filed for Chapter 11 bankruptcy but was attempting to keep clubs operating. Its nearby Boston Sports Club faces a lawsuit alleging it continued to charge fees to customers who attempted to cancel memberships during gym closures, WBUR reported.
Linear Retail owns the UFC Gym Space, and while Chief Real Estate Officer Joel Kadis declined to discuss its rent arrangements, he said he feels Dunton’s pain and wants the workout space to succeed.
“It’s just not smart, and it's not who we are personally, to say ‘tough,'” Kadis said. “You have to take a more collaborative and creative approach.”
Landlords still have obligations to pay their own mortgages on gym properties, triple net charges and city taxes, Kadis said.
Fitness chain Planet Fitness strongly rebuked orders to close gyms across Massachusetts cities, citing company data showing a 1.1% positive test rate per 100,000 check-ins since their 75 franchises reopened in the Bay State throughout the summer.
Core Development and Management owner Brian Kablik owns three Planet Fitness franchises affected by shutdown orders in Newton and Brockton, and he said fixed costs at the approximately 20K SF facilities make closures “extraordinarily” costly.
“The damage this does to our business, for our employees, it’s nothing that we’re going to ever be able to recoup,” Kablik said. “It’s extremely unnecessary from a COVID-control standpoint.”
Kablik’s locations saw their share of membership freezes and cancellations in the spring, but bounced back strong, he said. Planet Fitness touts “Social Fitnessing” in a 98-page reopening playbook including social distancing between benches and fitness machines, modified ventilation systems, mask requirements and 40% capacity limits.
Boutique gym B/Spoke just moved into a South Boston warehouse and was operating smoothly before the sudden shutdown announcement in Boston, said its landlord, National Development Managing Partner Ted Tye. Like other retail properties, B/Spoke had to call an audible and switch to virtual classes to keep business flowing. A representative for B/Spoke didn't return messages for comment.
“Frankly, some landlords have dealt with it better than others, and some tenants have been more adaptive than others,” Tye said. “In our case, we sort of wrapped up our third round of working with tenants and trying to extend them out for several months to get them out over the winter. I’m hoping this is the last round.”
As boutique gyms around the country have either shut down or reduced capacity, companies that specialize in at-home fitness have grown rapidly. Peloton, which makes stationary bikes and treadmills and has a popular fitness app, has seen back orders for months, and its sales have spiked 172% since last winter, with revenues rising past $600M, Business Insider reported.
Fitness centers have attempted to migrate to online classes, but the growth of home brands has made it difficult for gyms to compete, said Newmark Managing Director Jonathan Martin, a retail broker.
"I think part of that business model is the camaraderie of being together for a class," Martin said of home fitness services. "You just don’t get that on the online class. For a couple of weeks they might be able to do that, [but] this has been an ongoing thing for six-to-eight months now."
Gym operators said they aren’t holding out hope for new Paycheck Protection Program funds in a new federal stimulus package, which may include checks of $600 to $700 per person.
Dunton's wife is an emergency room nurse, and he said she has seen the surge of COVID-19 patients that prompted Walsh to put forward the indoor facility restrictions. He said he just wants city officials to empathize with the business owners.
“I actually know Marty,” Dunton said. “He’s a good guy, I know he’s looking at the hospital surge capacity. But people need to eat.”