The Covid-19 Omicron variant threatens to derail the nascent fitness industry recovery and disappoint retail owners who hoped gyms would be a powerful source of demand in early 2022.
A number of states and cities, including New York, Boston, and Chicago, have put in place mask advisories and vaccination warrants for indoor activities, including gyms, to protect people from this. which is now the dominant variant of the coronavirus in the United States. The new restrictions are setbacks for an industry that had just started to see foot traffic and rental activity recovering from the heavy losses inflicted by the pandemic.
Rental of fitness centers increased 27% in the third quarter compared to the same period in 2020, according to data company CoStar Group Inc.
The popularity of gyms, which had declined sharply during much of the pandemic, has recovered in recent months and that momentum appears to be resisting fears about the Omicron variant. Gymnasium visits during the last week of November and the first two weeks of December were above 2019 levels, according to foot traffic analysis company Placer.ai.
But the fitness industry still has a long way to go to make up for the loss of income and memberships it suffered during the pandemic. In California, gym developer Marc Thomas said membership and income, even at its top performing gyms, is still 30% below pre-pandemic levels.
Mr Thomas, who owns and operates 40 Orangetheory Fitness sites, has opened two new sites since the start of the pandemic. But that’s 10 fewer than the dozen it had planned to open over the past two years, he said.
Because of Omicron, Thomas said he plans to cut back on a big marketing and sales effort he planned for early 2022. January is generally one of the strongest months for centers. fitness as people implement New Years resolutions and come back after the holidays. workout routines.
“Once again the recovery has come to a halt,” he said.
Fitness companies were popular with shopping center owners before the pandemic because their members travel frequently and often stop at juice bars and other nearby stores. The area occupied by fitness centers grew at an average annual rate of 7.7% from 2015 to 2019 in the 54 largest markets in the country, according to data from CoStar.
The pandemic has turned weight rooms into ghost towns, as gym enthusiasts have taken to exercising outdoors and in their basements and through online programs like Peloton and Obé Fitness. As of July 1, around 9,100 fitness facilities had closed permanently, representing 22% of the 41,370 sites that were operating in 2019, according to IHRSA, a global professional association for health and fitness.
Even though the number of lease signings has increased in recent months, the total area occupied by fitness centers fell by 1% between the end of 2019 and the last quarter, according to data from CoStar.
According to Datex Property Solutions, whose real estate portfolio management platform tracks rent payments from thousands of shopping centers across the country, rental collection from fitness centers has improved this year after falling more than ‘one-third in 2020. Yet fitness center collections were more than 10% lower this year than in 2019.
“It’s a category that has been criticized in 2020, which has widened its path month after month,” said Mark Sigal, CEO of Datex.
Some gym operators have taken advantage of the downturn to rent more space and negotiate better prices and rental terms. For example, Xponential Fitness opened 388 new stores between March 2020 and September this year, according to Anthony Geisler, chief executive of the company, which has more than 2,000 franchised stores under 10 different brands.
The Xponential Fitness real estate team has avoided closing stores during the pandemic by negotiating postponements and rent cuts, Geisler said. New leases often include provisions to protect operators, such as clauses that allow them to pay rent based on a percentage of sales if Covid-19 restrictions limit business operations.
In some cases, operators are forced to rent larger spaces to give more space to customers. Data from JLL Research shows that the average fitness center footprint has grown by more than 12%, to nearly 12,000 square feet this year.
San Francisco-based Maven Commercial’s Santino DeRose said the brokerage’s fitness deal volume was down in half from before the pandemic. Going forward, he believes gyms and exercise studios will still be in demand, but membership costs could rise due to inflation and operators needing more space for the same number of people. people.
“When you have yoga studios that really fill them up, and now you’re 6 feet apart, you cut your occupancy in half,” DeRose said.
Write to Kate King at Kate.King@wsj.com
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