Former Pariahs, Fitness Industry Now the New Anchor Tenant in Malls

Fitness Industry Now the New Anchor Tenant in Malls

Mall owners, who once treated gyms like pariahs, are now recruiting health clubs as the new anchor tenant.  As a result, health clubs are helping to transform malls once again into hubs for living, working and playing. Malls have felt the pinch as many retailers have closed their stores across the country due to competition from online retailers. Many malls are struggling with reduced foot traffic and increasing vacancies.  During the same time period fitness centers have experienced resurgence, as many have diversified into smaller boutique style gyms that cater to high-end customers.

“Twenty-five years ago, the best real estate was given to the department stores,” says Sandepp Mathrai, CEO of Chicago-based GGP Inc.  “And department stores sort of prevented you from doing anything but having retail shopping.  So today, their sort of slow retraction is giving us the opportunity to reinvent the wheel.” GGP plans to establish fitness centers in about half of its 115 malls during the next decade, he said. GGP is replacing a Macy’s department store in the near future with a 180,000 square foot Life Time health club with indoor and outdoor pools and tennis courts, in Oklahoma City’s Quail Springs Mall. Locally, Citadel Mall recently turned to sports to draw in more foot traffic. Since its sale earlier this year, the mall has built a basketball court near the entrance to the shuttered J.C. Penney’s, with plans by the new owners for more sports related events to follow.

In the past health clubs were “on a long list of prohibited uses that included massage parlors, billiards halls and pawnshops,” says Steven Gartner, managing director of retail at CBRE, a commercial real estate and investment firm. If gyms were part of a mall, they were located in a low traffic area in the back corners.

But these days fitness is booming with more than 57 million people signed up for a health club in the last year, or 19.3 percent of the United States population.  There has been an increase in memberships by 26 percent since 2009.  There are some risks in the fitness industry including a rise in streaming fitness services remotely, and the growth of health clubs that have outpaced new memberships, according to the International Health, Racquet & Sportsclub Association. Many mid-price gyms have been unable to compete with the high-end boutique style health clubs cropping up and the bargain gyms.

Source: Wall Street Journal, “Malls Never Wanted Gyms, Now they Court Them,” by Rachel Bachman, November 26, 2017

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