Home, Office Fitness Offerings Are Giving Traditional Gyms A Run For Their Money
The way people work out is changing drastically. Whether people are hopping into their office fitness centers before work, taking a late-night trip down to the gym in their apartment building or going to an afternoon SoulCycle class, the health-conscious have fitness options all around them. This surge in fitness centers as amenities, combined with the rise of specialty concepts, is taking a toll on the traditional sports club model.
The push for wellness in the office environment, coupled with a fierce competition to attract and retain workers, has led to a fitness center arms race as landlords aim to top each other with the largest gyms and the most workout offerings.
Midtown Center, the 812K SF office Carr Properties is building for Fannie Mae in Downtown D.C., will feature an 8K SF fitness center with a cardio workout area, weight machines, free weights, a bike room and two fitness classrooms for group sessions.
It is not just limited to new projects either. Market Square, an office building on D.C.’s Pennsylvania Avenue, recently underwent a $15M first phase of renovations in which it tripled the size of its fitness center to 9,500 SF. The gym includes a yoga studio and the landlord, Columbia Property Trust, has hired a full-time on-site trainer who will offer four complimentary fitness classes to tenants each week.
“They’re using these to attract tenants,” Savills Studley Senior Managing Director Nicole Miller said. “It makes a lot of sense where you just pop into the gym quickly and come back upstairs, versus having to go into a traditional facility, change and come back after you work out. It saves time and it saves money.”
An Amenity That Pays
The same shift is happening in multifamily buildings. Evolve Fit founder Corey Saunders, who consults on the fitness centers for some of the largest multifamily projects in Boston, said the apartment boom the city is experiencing has led developers to focus more on expansive fitness offerings.
Saunders consulted on the gym for The Kensington, a 387-unit apartment building in Boston that delivered in 2013. The 3,500 SF fitness center includes a wide range of new machines and studio space for yoga and classes.
"This property has everything you need so it makes no sense to go have a gym membership with Boston Sports Club or Equinox," Saunders said.
He said he has seen residents pull the trainers from their old gyms, who work on an independent contractor basis, to come train them at the apartment building gyms.
"It's taking away money from gyms like Equinox because the trainers are going against the grain and training right at the luxury residential property," Saunders said.
Perry Brokerage Director of Intelligence Brendan Carroll said he sees a direct correlation between multifamily developers putting in extra effort to build competitive fitness centers and people wanting to live in those buildings.
“It appears there is a certain amount of a performance gap between buildings that are allocating more space to the gyms,” Carroll said. “They’re essentially outperforming and achieving higher occupancy rates faster than the buildings that skimped a little bit.”
Retailers Take A Piece Of The Pie
Retailers are muscling in on fitness centers, too.
Before the wellness trend gained momentum in the workplace, department stores like Sears and J.C. Penney positioned themselves as destinations through photo studios and beauty salons. Now bix-box retailers like Bloomingdale's, Saks Fifth and Urban Outfitters are offering in-store fitness classes to draw customers. Saks’ New York flagship has devoted an entire floor to the 16K SF wellness sanctuary that opened in May and offers fitness classes, a salt chamber and meditation alongside other merchandise.
Fitness retailers have leaned into the trend too. Adidas opened its Runbase store in Berlin last year, which includes training facilities and a health-focused restaurant. In SoHo, Nike customers can test a pair of sneakers on the in-store basketball court, a football field or a treadmill.
It may be too soon to tell how much the wellness business has increased sales — or if it has. But while clothing stores struggle, U.S. activewear sales have increased. In 2016, they rose 11% over the previous year to nearly $46B, according to The NPD Group.
Traditional Gyms Take A Hit
With the growth of fitness centers in office/multifamily buildings and retail businesses, people have more options to work out without having to pay a monthly membership, and it appears to be hurting the traditional sports club model.
Washington Sports Club recently closed one of its locations in D.C.'s East End. The broker who is leasing out the now-vacant space, Cushman & Wakefield's Chris Hunt, said the company likely could not keep up with rising rents.
“As people have been flocking back to the city and as the urbanization trend has continued to be popular, rents have risen," Hunt said. "Certain retail categories can only afford so much.”
The closure does not appear to be an outlier. Dochter & Alexander Retail Advisors' latest market report said Washington Sports Club is looking to give back more space from its D.C. footprint. Town Sports International, the parent company of Washington Sports Club and Boston Sports Club, did not respond to requests for comment.
Dochter & Alexander principal Dave Dochter said high-end brands like Equinox and Vida Fitness are performing well, as are inexpensive clubs like Planet Fitness, but those in the middle of the sector are hurting.
“That’s where Washington Sports Club is finding themselves,” Dochter said. “They’re losing the identity of what they are. They’re not at the top and they’re not a discount provider.”
A Casual Workout At Home vs. An Intense Session At The Gym
One major problem with the traditional gym model is the payment method, typically contract-based. Canceling your gym membership can be a workout in itself. The problem is so prominent it was the basis of an entire episode of "Friends." Contract disputes and billing issues are the most common complaints to the Better Business Bureau. Consumers are increasingly choosing to skip the headache altogether and just use a workout facility they already have access to, but that only works for some.
Danny Beer is a performance dietitian, personal trainer and former sales rep at a gym in Texas. He is constantly in the gym, splitting his time between his home gym, his work gym and his actual gym. As a longtime sales rep, Beer is not too worried about the business model of fitness centers. He pointed out that typical gyms at work or at home do not have the type of equipment necessary for anything other than a casual workout. Until he has access to all of the equipment he needs from home, he will be keeping his membership at the gym.
Some customers are choosing to upgrade from traditional gyms to popular emerging fitness clubs. Some, like Equinox and Vida Fitness, have created luxury brands customers are willing pay to more for, while others like SoulCycle offer specialty classes.
Equinox has been growing its footprint in D.C., signing on for a new East End location in December and another across the river in Arlington, Virginia's Clarendon neighborhood this week. Specialty fitness clubs like SoulCycle and OrangeTheory Fitness have also been growing their footprints in the area.
“I’m hearing a lot of buzz around those,” Miller said of high-end and specialty fitness clubs. “Those specifically seem to be garnering a lot of attention and a lot of members. I’m not hearing the same buzz around some of the other clubs.”
Hunt attributed the success of high-end and specialty gyms to their ability to create an experience that young people are willing to pay more for.
"You look at millennials, they like to go out to the cool new restaurant, the cool new bars and really have different experiences," Hunt said. "The SoulCycles and Orangetheorys of the world offer that. They can go in a class and have instructors. There’s energy in the room. It's a different model that is attracting not only millennials but it's making exercising appealing to the masses."
In Boston, Saunders is also seeing luxury fitness clubs outperform their cheaper counterparts as more workout options become available.
“Boston Sports Club, Planet Fitness and other smaller corporate gym companies are definitely taking a hit from this,” Saunders said.