The death of retail may be one of the best things to happen to the fitness industry

The death of retail may be the best thing that ever happened to gym owners.

As retailers close, malls are desperate for tenants, paving the way for gym owners to find a deal on real estate.

“Retail’s demise isn’t hurting us,” said Ben Midgley, CEO and co-founder of Crunch Fitness Franchise. “It’s a big boon for our industry in terms of the availability of space.”

In Manhattan, the number of available storefronts increased from 129 in the first quarter of 2016 to 213 in the first quarter of 2017, according to a May 2017 report from real estate services firm CBRE.

And that increase in supply has led to a drop in rent prices. The average asking rent in Manhattan has decreased 21.1% since 2014, and CBRE also said that landlords are doing everything they can to lure in tenants.

“Landlords are offering additional tenant incentives, allowances and free rent periods,” according to the report.

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And it’s not just Manhattan. As many as 324 department stores will close in 2017, turning about 36 million square feet vacant, according to a study from JLL Research. M, -1.31% Macy’s announced plans in 2016 to close 100 stores, and JCP, -4.07% J.C. Penney said it would close 130 to 140 stores this year.

“The last time I remember seeing rent deals like this was back in 2007,” Crunch Fitness’s Midgley said. That’s when Midgley was serving as Executive Vice President of Planet Fitness PLNT, -1.10% and the beginning of the financial crisis.

Now is one of the best times to open a gym.
Midgley estimates that about 65% of a gym’s success is contingent upon what types of real estate deals gym owners can secure.

“With the amount of people shopping online, the deals we have seen lately from landlords have been amazing,” Midgley said.

Upscale gym Life Time Fitness Inc. is replacing the closed Macy’s building in Ardmore, Pa., just outside of Philadelphia. In York, Pa., a former J.C. Penney location reopened as a Gold’s Gym.

And in new developments, gyms are becoming the anchor tenant. Huntington Beach’s Pacific City shopping center is anchored by an Equinox gym, while another Equinox gym will be the anchor tenant at Anthem Row, a shopping center in Washington, D.C., expected to open in 2018. And the new Westfield mall in Century City, Calif., which opened this April, is anchored by an Equinox.

Low rent prices, coupled with other trends, including an increased awareness for health and fitness, has been a boon for Crunch. Midgley said the company expects to hit a million members shortly.

Of course, it’s not just gyms that benefit from the death of retail.

“Better quality malls are adapting and introducing ‘internet resistant’ concepts,” according to a report from Green Street Advisors. “Newer entrants, such as restaurants and movie theaters are becoming increasingly important anchors to the mall.”