In our last two blogs, we’ve discussed how a gym owner can secure the best possible position when signing a commercial lease. In this final piece, we go over common mistakes gym owners make when searching for a new location and signing a lease. Thank you, Ken Jorgenson, national director for CARR, a commercial real estate firm specializing in the healthcare industry and fitness facilities, for your vital input.
What is the most common lease mistake a gym owner makes when searching for a new location?
Confessing to the property owner why you love their location.
Gym owners telling the property owner too much, too soon is the most common lease mistake. Jorgenson explains, eager gym owners often call the number listed on a building and confess everything to the person who answers the phone. These conversations usually include details such as why the building is perfect: it is close to home, has good cross traffic, and offers tons of parking.
By the time the conversation is over, you’ve given away all your negotiating power.
“Everything you say in that initial call can and will be used against you,” Jorgenson warns. The property representative’s responsibility is to the property owner, not to you, the prospective tenant. At this point, you’ve given them all the ammunition they need to construct the optimum gym lease crafted in their own best interest.
Instead, here’s how Jorgenson suggests gym owners approach a new property:
- Examine the market as a whole, targeting multiple properties at the same time.
- Negotiate several leases at the same time.
- Compare property offerings and use them as a negotiating tool to secure concessions and terms best for your gym.
- Hire an independent commercial real estate representative who works exclusively for you. Many commercial real estate agents represent both the property manager and the lease holder. This is not to your advantage. In these cases, the agent’s fiduciary responsibility (loyalty) is to the property owner – not the prospective tenant.
“The one with the most options wins,”
Ken Jorgenson, national director, CARR
The second most common mistake a gym owner makes when negotiating a lease.
Not retaining a commercial real estate representative.
Gym owners often assume hiring a commercial real estate representative is too expensive. That’s not correct. The listing agent, or property owner, pays the tenant’s broker fee and the rates are negotiated.
Jorgenson recommends an independent commercial real estate agent/broker with experience negotiating for the fitness/healthcare industry. You know fitness is unique. Gym build-outs often include water spaces, changing rooms, heavy equipment, interior and exterior uses, offices, and sometimes subleased space. Don’t get caught with the wrong space design because the commercial real estate representative put the landowner’s needs before yours.
The third most common mistake a gym owner makes when signing a lease:
Ignoring exclusivity clauses.
Gym owners often ignore the exclusivity clauses tucked deep in the lease’s legalese. These are clauses added by the property owner to protect other tenants in the plaza. By allowing these clauses, or choosing to stay with this particular location, you limit the growth of your gym. For example, let’s say your long-term plans include offering medical aesthetics, such as vitamin therapy and telehealth services. Then the adjacent chain pharmacy starts offering healthcare services, which triggers their exclusivity clause, forcing you to curtail future plans.
Leases are complicated documents, with dozens of details covering who is financially responsible for what. These include hidden costs, use and maintenance of space, insurance and liability expectations, fees, and other surprises noticed only by a lawyer or savvy agent. The American College of Sports Medicine does a great job of defining a few of these gym leasing issues.
If there is a single piece of advice we can offer, it is: Don’t go this alone. Hire a commercial real estate agent or review your lease with a trusted attorney. Gym rental space is often an owner’s single biggest expense with the greatest impact on long-term business success.
So take it easy. Take your time. Keep the cards close to your chest. And understand your options.
It will all be to your advantage after you’ve signed the best possible lease for your gym.
Gym Insight
We are a privately owned gym management software company offering fully integrated payment processing systems that simplify billing and won’t cost you a fortune. We pride ourselves on charging a flat rate for our gym software, and never taking a percentage of your sales. Unlike other gym software companies, we allow you to choose your own payment gateway, never hold your financial accounts hostage, and do not take your late fees. Wow! Also, we bring a full suite of automated gym management tools that make it easy and profitable to run a highly efficient gym. From 24/7 digital key tag door access to a Member’s App and highly customizable reports, you keep full control over your business — every day with Gym Insight. For a demo, call us at 855-FOR-GYMS (855-367-4967) and ask for Anthony or Natalia.
