If you’re a gym owner searching for a new location to set up your health club, here are three tips on controlling the lease negotiations.
1. Know your worth gym owners.
Gyms, fitness boutiques, and wellness centers arrive at the negotiation table with many advantages. As we wrote in our blog “Gym Leases: Four Surprising Reasons Landlords Love Fitness Today,” gyms provide steady, increased traffic through their members’ regular gym visits.
Why commercial real estate agents prefer gym clients:
- Gyms attract higher-end, more affluent clientele who shop nearby;
- Fitness members visit multiple times a week;
- Industry is less susceptible to online disruptions.
Larger gyms and wellness centers are also becoming potential retail center anchors, replacing traditional marketplace leaders such as clothing stores and grocers. Their strength and resiliency in response to the pandemic, and individuals prioritizing health and social wellness have made gym leases more valuable to land owners.
As well, the wellness industry overall has experienced exponential growth, both in the range of fitness options and in construction. A recent study by the Global Wellness Institute (GWI) projects a Compound Annual Growth Rate (CAGR) of 15.8% for the wellness real estate market. In 2023, wellness made up 3% of annual global construction output, as reported by NAI Global.
2. Know commercial property market vacancy rates to control lease negotiations.
Although it may seem as if the commercial real estate market is suffering from a vacancy problem, our research shows retail is surprisingly competitive. Among retail space across the United States, vacancy rates are at a 20-year low, with availability between 4% and 5%, depending on the source.
Malls show the highest vacancy at about 8%, while general retail experiences the lowest tightest vacancy and lowest rental increases well. Retail asking rents have risen by 3.2% nationally, while general retail saw the least increase of 2.8%, according to National Association of Realtors’ (NAR) Feb. 2024 Market Insights publication. Ironically, though, overall demand for retail has slowed, due to less retail construction.
Office vacancy rates are at about 13.7%, while the industrial market sits at about 6% vacancy as fewer businesses move into the excess space created in 2023.
According to NAR, within the industrial sector, flex space and specialized spaces have seen rent increases of 3.4% and 4.5% respectively.
Commercial vacancy and rate increase summary:
| Property type | Vacancy rates | Annual Rate Increases |
| Retail | 4% – 8% | 2.8% – 3.2% |
| Office | 13.7% | 0.8% |
| Industrial (Incl. Flex/Spec.) | 6% | 3.4% – 6.0% |
For a gym owner, this means it’s best to research all your choices. If your gym needs eyeballs and foot traffic, negotiating a high-visibility retail space might be your best option. If you are highly specialized, there could be deals among industrial flex space or even converted office buildings.
Although this last idea is a little untraditional for gyms, the commercial office market is still reeling from the shift to remote work, and city governments across the United States are considering zoning changes to encourage flex space use of these empty buildings. So keep an eye out for changes that may be underway at office spaces in your home town.
3. Bring along a buyer’s agent when negotiating a lease.
Here is where tight-fisted gym owners might disagree, but statistically, nearly 65% of people believe the lease holder’s representative has their best interest in mind. This astounding statistic shows how easy it is to fall for the idea that the person leasing (or selling) the building is interested in the best deal for you.
In truth, no one cares about the terms of the lease as much as you do. The property agent’s responsibility is to their client — not you.
CARR
Today’s lease agreement come in many stripes, from simply paying rent to being responsible for all the building’s internal costs, as well as common area maintenance (Triple Net). Bringing along a realtor who specializes in commercial leases ensures you secure the right agreement for the long-term with the maximum number of concessions. Next week, we interview Ken Jorgenson, national director of CARR, a commercial real estate company specializing in representing the healthcare industry, for a deeper dive into lease negotiations.
Why gym owners make awesome tenants and property owners
Gym owners are in the business of keeping people healthy. We contribute to the positive side of health — the proactive, make-it-happen-for-ourselves, side of wellness. Your company also brings jobs, pays taxes, and contributes to the overall economic health of your community. Overwhelmingly, as well, gym and fitness centers are owned by individuals. Regardless of whether you choose a franchise or start a new concept, it’s your manpower and hard work that will make it a success.
All this adds up to an industry worthy of respect. Show up with the facts in hand, and good luck negotiating your next property!
Gym Insight
We might be considered the positive part of the gym management software industry. We are a privately held software firm established in 2008 for the sole purpose of providing a better, more affordable solution for gym owners. Since then, our applications have expanded to include unbeatable sales tools, digital keytag solutions for door access, and a Members App to keep communication between gyms and members fresh and timely. We also provide a suite of reports and gym management tools sure to turn a 24/7 business into a well-managed, smooth operation. For a free demo, call us today at 855-FOR-GYMS (855-367-4967) and ask for Natalia or Anthony. Our U.S.-based sales team and customer service group are here to serve you every day.
