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Why Specialty Fitness Centers Are Enjoying a Healthy Run in Chicago

Today we have a choice in virtually every retail segment, and choosing a place for your favorite workout is no different. Specialty health clubs are a growing trend in Chicago, ranging from cycling at Flywheel or SoulCycle to high-impact cardio and weights at Shred415, Orange Theory or Barry’s Boot Camp.

You can take ballet-inspired classes at Pure Barre, The Bar Method, Daily Method or The Barre Code, or yoga at Core Power Yoga, Yoga Six or Yoga By Degrees. You can even take rowing classes at GO Row or practice wake boarding with ChicagoSUP. But classes are not cheap, ranging from $20 to $30 per visit to unlimited yearlong memberships for $1,900.

Despite the high price tag, these types of workouts are increasingly popular. While a full-service health club offers much more than just one type of workout, specialty fitness does just that — it specializes.

Unique features 

Jaime Platt Bertsche, Mid-America Asset Management

Jaime Platt Bertsche, Mid-America Asset Management

These fitness classes focus on just one exercise, making the classes more challenging and better with teachers who are experts. They also provide different levels of classes compared with a gym, which may only offer one yoga, weight or spin class.

Specialty fitness spaces are smaller than a full-service health club, but generally come with nicer amenities to make the experience feel high-end and less grimy. This helps explain why someone may spend nearly $2,000 a year for this type of experience. When compared with the cost of a personal trainer a few times a week, it seems like a bargain.

New era in fitness

With so many specialty fitness centers opening up across the country, it appears as if there is a customer shift away from traditional full-service health clubs.

While mainstream clubs including LA Fitness, 24 Hour Fitness, Blink Fitness, Xsport Fitness and Planet Fitness may be appealing to landlords due to their ability to anchor a shopping center and their long-term stability as a credit tenant, the future of the health and wellness sector is increasingly catered to more niche providers.

Mainstream, full-service clubs provide standard equipment, showers and locker rooms but may be light on the amenities in order to attract the more value-oriented customer. These clubs are definitely the cheaper option for customers with rates starting as low as $9.95 per month for first-time members up to $105 per month for a 12-month contract.

However, you have to commit to the club, which may detract people from signing up in the first place. While specialty clubs do offer one-year contracts at a better price, you can also choose to buy a limited pack of classes or drop in for a single class.

Game changer?

With the addition of Class Pass, a service that allows you “one pass for unlimited classes” at all participating studios and health clubs, it allows you to create your own personalized gym experience.

You pay a $175 monthly membership fee and get access to hundreds of the best specialty fitness studios that specialize in yoga, spinning, bar/barre, crossfit, kickboxing, pilates, rowing, dance, weight training and more. It’s the best of both worlds, the custom gym experience without any type of ongoing commitment.

The specialty fitness clubs are both corporate and franchised companies expanding in urban and suburban markets. They generally range from 2,000 to 3,500 square feet compared with a full-service health club’s footprint that is 35,000 to 50,000 square feet. While they do not provide landlords with an anchor tenant that drives as much weekday traffic, they are still effective at bringing in the convenience-oriented customer on a weekly basis.

Be aware of exclusives

Specialty fitness clubs generally do not prevent landlords from leasing to full-service health clubs as they do not believe they are direct competition, and may even provide them with crossover customers. However, they will want an exclusive in their lease to prevent the landlord from leasing to one of their direct competitors.

For example, a yoga studio will not allow another yoga studio in the same center. As a result of this growing category of new tenants, when negotiating a lease with a full-service club, it’s best to try and carve out language in its exclusive to allow for a specialty fitness center so they can co-exist together, although most often the health club anchor may push back.

Recently there has been a more positive response to this growing category of tenants who fulfill the health club void with smaller spaces and less parking requirements. The build-out costs are moderate, and each deal should be evaluated separately based on the credit behind the lease.

Is this new craze here to stay or will it go (or possibly row) away? Or is this wellness trend here to stay? These are other factors landlords need to ask themselves.

Still, if the option presents itself, a landlord will likely choose to secure a health club anchor, but in the meantime this smaller scale trend is heading in the right direction.

— By Jaime Bertsche, Vice President, Mid-America Asset Management Inc. This article originally appeared in the June 2016 issue of Heartland Real Estate Business.

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