CREJ - Retail Properties Quarterly - September 2015
The fitness facility competition is heating up in Colorado. Each facility is working hard for position in this market, much like the hard work that is taking place inside of the gyms. It has been hard to miss the facilities opening up in retail centers all over the Denver metro area. The influx of specialty fitness or studio concepts is spreading, and bigger, established facilities are paying attention. “We have taken notice of what some of the studio concepts are doing,” said Ed Williams, president and CEO of Wellbridge, which owns Colorado Athletic Club. “The competition encourages Colorado Athletic Club to be better and improve class offerings. It’s a good competition that helps all brands in the industry.” Colorado Athletic Club has seven locations throughout the Front Range, and the eighth is on its way, in Lower Downtown at 1601 Wewatta St. The fitness centers range in size from 35,000 square feet to 120,000 sf, among the largest when compared with other fitness offerings in the state. The new Colorado Athletic Club is the third facility in downtown, with one in the Tabor Center at 1201 16th St. and another at 1630 Welton St. “Union Station is a hot area to be in,” said Williams. “I see some specialty studio fitness open up in high-end retail spaces as well, and pay more rent just to be in the area.” Even with all of the fitness facilities entering Colorado, the market is not oversaturated, said Jon Weisiger, senior vice president of retail services with CBRE. Similar to retail, there are mergers, including 24 Hour Fitness’ acquisition of Denver Bally Total Fitness locations in December 2014, and clubs that are in different business cycles. Colorado Athletic Club and 24 Hour Fitness are mature concepts, while emerging facilities are trying to get a bigger slice of the pie. “There is a lot of demand for fitness clubs, and they are trying to figure out their correct size and place in the market,” said Weisiger. “We are seeing much more fragmentation in the fitness industry, with smaller clubs located alongside bigger clubs.” While big facilities like Colorado Athletic Club have established a presence downtown and in the Denver Tech Center, studio gyms are working well in smaller neighborhoods like Washington Park and the Highlands. It simply comes down to the issue of space – small clubs don’t require as much and can enter into those areas more easily. However, the argument that can be made for large clubs not wanting to get into each neighborhood is that people are more apt to travel to a bigger club. Whether people travel to a big club or walk to a nearby neighborhood studio, the one thing that all facilities are benefiting from is that Colorado is a premier setting for fitness. The state has a reputation of being a destination market for millennials and having an atmosphere of fitness-oriented people who require sophisticated training. There is more focus on health and wellness than ever before, and people in the state seem determined to get in shape and stay in shape for both the ski season and summer. “Colorado is seen as a test market for new concepts, whether it is for food or fitness,” said Matthew DeBartolomeis, vice president of retail services with CBRE. “What we are experiencing is a nationwide trend.” From New York to California, the studio fitness concept is popping up across the country, not just in Colorado. People are interested in and gravitate toward unique or more specialized fitness. Core Power Yoga, Yoga Pod and Orange Theory Fitness are a few of the studio facilities that are gaining popularity. Weisiger and DeBartolomeis said one concept that could soon enter the market and have a big impact on the industry is cycle fitness. Flywheel, SoulCycle and CycleBar are brands that have been introduced to other markets. The small class settings that these specialty studios provide only require 3,000 sf to 5,000 sf of space, making shopping center retail space the ideal fit for these concepts. Although, trying to find these spaces now is less than ideal. “Every fitness store wants to be in retail shopping centers alongside other retail, but those spaces are fewer in number,” said Weisiger. “There was a time period when some of the larger clubs were moving into second generation spaces, but even those spaces are much tougher to find because the space is not well suited or well located for where they want to be.” The options many fitness centers are left with are building a new place or a build-to-suit property, both of which drive up costs. Fitness centers have a greater need for restrooms than typical retail and, in some cases, necessitate shower facilities as well. The hours of operation for fitness varies and the parking can be more intensive at certain points of the day, depending on when classes are offered. “Because of these requirements, fitness centers are selective and, although some stores will continue to look to expand, it will be in locations that fit with rent structures and demographics,” said DeBartolomeis. Many fitness centers are thriving in Colorado because personal preferences differ. Some like the large club feel that includes tennis and swimming, while others prefer a smaller setting or more specialized program. The questions now are how many more concepts can Colorado support, and where will they go?