Why Fitness Tenants Are Leading Retail Leasing
By Globe St. June 29, 2018
Petra Durnin is the director of research and analysis for the Southern California market at CBRE.
Fitness tenants are driving retail leasing activity in Southern California. According to a new report from CBRE that looked at retail leasing activity, fitness tenants are among the top five retail users in Southern California, and they are expanding. This is a stark change from the activity from this retail segment in the past, when fitness centers were not considered a primary tenant. Today, fitness centers are occupying big boxes as well as smaller footprints and in some cases can even serve as anchors in shopping centers. Last year, there were nearly 1.2 million square feet and 100 transactions of fitness centers in Orange County, the Inland Empire and Los Angeles. This year, there has already been 400,000 square feet in fitness leasing activity and nearly 40 transactions. We sat down with Petra Durnin, director of research and analysis at CBRE Southern California, to talk about the research and what is driving fitness center activity.
GlobeSt.com: Why have fitness tenants become such active retail occupiers?
Petra Durnin: Fitness clients seek more experiential retail options that extend beyond the workout period. Fitness centers provide a service that is internet proof, occupy much of the space left behind from big box/department store closures, fill non-peak retail hours, and attract new customers willing to travel farther for unique fitness experiences. The natural partnership between anchor tenants such as grocers is formed due to the trend towards healthy living. Nearby amenities such as restaurants, coffee shops and personal services attract gym goers, increase foot traffic and sales.
GlobeSt.com: These were once considered undesirable tenants. How have landlords responded to this new demand, and has the lease negotiation or vetting process changed?
Durnin: Fitness retailers have become much more demanding in their requirements for stronger co-tenancy, earlier termination rights, and more exclusive contracts to protect their brand and business. There is also strong demand among budget-oriented fitness clubs that require 15,000 square feet and up to provide a no frills experience and a clean/well-equipped center.
GlobeSt.com: Is the growth of fitness operators enough to absorb the space from some big box closures that we have seen? Why or why not?
Durnin: Big box product appeals to many different types of tenants, but those located in close proximity to amenities that tie in to fitness and health will appeal to gym goers and attract fitness tenants.
GlobeSt.com: Restaurants have been another tenant that has driven retail leasing, but there is some talk about a surplus of restaurant options. Is there any concern about the number of fitness spaces opening or if the consumer demand can support the trend?
Durnin: The rise of health and fitness supports the current growth and options are important in relation to the live/work/play paradigm. Both the aging population and younger generation will further drive the evolution of this sector.
GlobeSt.com: Is this a lasting trend? What is your outlook for fitness center activity?
Durnin: A future trend could be for fitness clubs to locate near residential communities or medical/hospital complexes. They could partner with mixed-use and lifestyle centers with a larger experiential platform instead of traditional retail centers. Boutique fitness clubs could look to diversify further to provide an even more personalized experience with unconventional offerings such as trampoline parks and skydiving centers.