By Doug Desjardins
The fact that shopping malls are dealing with record high vacancies has been well documented but their smaller brothers – strip malls – are doing even worse and are turning to non-retail tenants like fitness centers to drive customer traffic.
According to research firm Reis Inc., vacancy rates in strip malls hit an 18-year high of 10.6 percent in the fourth quarter of 2009, far higher than the 8.8 percent rate at shopping malls. The 10.6 percent rate eclipsed a mark set in 1991 at the height of the commercial real estate depression and is likely to climb in 2010.
“Our outlook for retail properties on the whole is bleak,” said Reis economist Ryan Serverino. “Until we see stabilization and recovery take root in both consumer spending and business spending, we do not see a recovery in the retail sector until late 2012 at the earliest.”
With traditional retailers in short supply, more strip malls are turning to non-traditional tenants to fill the void and drive customer traffic. One of the best performers has been small, no-frills fitness centers that offer customers convenience and low prices. Good examples are chains like Anytime Fitness and Snap Fitness – both among the top 10 fastest-growing franchises according to Entrepreneur Magazine – and Planet Fitness.
All three operate fitness centers with small staffs, few luxuries and round-the-clock hours. And most give members their own key-cards so they can come and go as they please, a perk that has earned them the nickname” key-card clubs.”
“With the recession, it has been really hard for club owners to get the (financial) backing behind them to open new facilities,” said Pam Kufahl, editor of Club Industry magazine. “It takes less financing to open these key-card clubs and that may be one reason they are expanding.”
The gyms are good fits for strip malls because they occupy a small footprint – some as little as 3,500 square feet – and provide gym memberships for as little as $10 per month. That compares to an industry average of $40 per month, according to the International Health, Racquet and Sportsclub Association (IHRSA).
Just as important is the convenience factor. Strip malls are typically built in the middle of residential areas and provide ample parking and easy access, things customers look for in a gym. “Most important is, ‘is it convenient to home and work?’” said Shawn Talbott, spokesman for the American College of Sports Medicine. “Far and away, that’s the number one reason people use or don’t use a gym.”
But in a recession, price trumps all concerns and the growth of key-card clubs could signal the demise of larger, more expensive chains like Bally’s and LA Fitness. “The fear in the industry is people will ask why they have to pay so much for a large, established gym when they can pay so much less for something like Snap Fitness,” said Kufahl.
