Can Boutique Fitness Save Retail?

With major retailers like Macy's, Gap, and Barnes & Noble shuttering thousands of locations nationwide, property owners today must be open to creative ways to lease vacant stores. Trendy "boutique" fitness centers, which can squeeze into smaller or subdivided spaces, are one option that has attracted significant interest.

One explanation for the buzz is that small fitness centers meet an experiential need. Like beauty salons, bars, coffee outlets, and art-class studios, fitness centers offer a product—or more accurately, an experience—that can't be bought online. That element explains why people are asking for fitness boutiques to replace shuttered apparel retailers, says Barbara Chancey, owner of Indoor Cycle Design, a Dallas-based firm that helps independent owners set up boutique fitness centers.

The Feel-Good Effect

Property owners formerly frowned at fitness concepts because these businesses tend to be noisy, and they garnered concerns about parking. The fear was that exercisers will lock up so many spaces that other businesses' customers won't be able to park when they want to shop. For example, a cycling studio with 25 bikes could hold classes from early morning to late evening and occupy up to 30 parking spaces for its customers and staff.

So why are retail owners now taking a fresh look at fitness? The big reason, says Chancey, is the potential for well-heeled foot traffic—and lots of it.

"Fitness is driving traffic to the center because it's a hub of feel-good. Everyone is uplifting and full of positivity," Chancey says. "They are bringing life back to that center."

Not Your Mother's Gym

There is not one ideal size for a boutique fitness center. Chancey says her smallest project was about 1,500 square feet, and her largest measured closer to 8,000.

Larger fitness formats can occupy as much as 15,000 square feet and still have a much smaller footprint than a big-box gym. Some mid-sized fitness centers today can even claim anchor-tenant status.

In their smaller spaces, fitness boutiques offer individual or group classes for specific activities, such as cycling, treadmill, yoga, Pilates, stretching, boxing, rowing, or barre. Some boutique centers also have a cafe, coffee bar, or smoothie station, as well as retail operations that sell exercise gear or clothing onsite.

Brand names in the game include Barry's Bootcamp, Flywheel, Planet Fitness, Rumble Boxing, SLT, and SoulCycle.

Working Lunch

Boutique fitness centers work best in highly visible, high-end retail locations with easy access and ample parking, says Bethany Babcock, founder and CEO of Foresite Commercial Real Estate, a commercial property broker in San Antonio and Austin, Texas.

"Most of the concepts in this category cater to individuals looking for a convenient class before or after work, or even during a lunch hour. As a result, this concept works best in centers with a heavy daytime population," Babcock says.

Abandoned hair salons work particularly well, Chancey says, because they're already equipped with the additional plumbing fixtures that fitness centers need.

"We have some clients that are waiting for a hair salon's lease to end. They'll pay more because the [water for] showers is already there," Chancey says.

Fitness also works well near hair or nail salons, or other female-driven businesses, since women often comprise more than half of a fitness center's clientele, she adds.

Strong Industry Outlook

An April 2019 industry report from market intelligence firm IBISWorld points to an opportunity and a threat for fitness businesses. The opportunity is an expected increase in per capita disposable income, which enables more people to buy high-cost, all-inclusive gym memberships. The threat is stagnation in the amount of time individuals choose to devote to leisure and sports activities.

Some boutique fitness owners look for locations near other fitness businesses that may seem competitive, but could prove complementary, according to a recent New York Times article, "The Boutique Fitness Boom."

For example, a Pilates studio may do well near a high-intensity workout center, since the two experiences are differently paced, but both need to attract customers willing to pay $30-$40 a pop for classes on a regular basis.

In some retail centers, multiple fitness boutiques set up shop in clusters, hoping to become a restaurant row-like destination, but for exercise rather than cuisine. One Manhattan building cited in the New York Times article has four co-located boutique fitness centers on different floors. Rather than charge one all-inclusive membership fee, each boutique center sets its own prices for the specific fitness activities its customers want.

The Bottom Line

Boutique fitness centers may not be a perfect fit for every retail center, but for those with the right clientele and plenty of parking spaces or public transportation options, these small experiential businesses can work out well for property owners and tenants.