Phoenix Has Plenty of Room for Big-Box Gyms

Article originally posted on Phoenix Business Journal on March 8, 2019
A rendering of the planned Life Time Fitness to be built at Biltmore Fashion Square.

 

While there is momentum behind smaller-format fitness concepts, it is still a good time to operate a big-box gym in Phoenix.

Businesses such as OrangeTheory and Jabz Boxing are popular because they offer specific experiences and create a sense of community, but the fitness market consumer base is so large, there is still a demand for large, all-purpose gyms such as those run by Irvine, California-based LA Fitness or Scottsdale-based Mountainside Fitness.

But there’s another factor spurring the growth of bigger fitness facilities in Phoenix that some other markets across the country aren’t experiencing.

“It’s mainly driven by these vacant grocery stores,” said Darren Pitts, executive vice president of Velocity Retail Group. “Phoenix leads the country in vacant big-box spaces, by far.”

Indeed, big-box gyms expanding their presence across the Valley, such as Eos Fitness or Planet Fitness, are targeting shuttered grocery stores in the region.

“Ground-up construction is expensive right now,” Pitts said. “It’s a lot easier to take an existing building and retrofit it than it is to buy dirt and do site work and building the buildings.”

Another player entering the Phoenix Market is Utah-based Vasa Fitness. Pitts said Vasa is more attractive to shopping center owners because it takes up a larger footprint so it could move into an entire grocery store, while an Eos or Planet Fitness need the space cut in half. It can be upwards to $50 per foot to split a building, Pitts said.

Pitts doesn’t believe fitness anchors are better for a center than a grocery store, but they are the best option available now. Chad Tiedeman, senior managing director at Phoenix Commercial Advisors, said he has seen a swing in attitudes towards gyms by retail center owners.

A rendering of a VASA Fitness location.

 

“Years ago, everyone was focused on grocery tenants, and gyms were an afterthought. People didn’t want them in the centers because they took up parking and they weren’t as active,” Tiedeman said. “But now adjacent retailers like having them around.”

Some people go to gyms more than they frequent shopping centers, Tiedeman said. He’s found businesses such as restaurants and dry cleaners like being near fitness centers.

Merchandising around the fitness, including other concepts, food-and-beverage and retail is a big deal right now for shopping center owners, said Kerry Linthicum, vice president of retail leasing at CBRE. Cryotherapy, stretch studios, acupuncture and other shops related to the fitness industry are blossoming nearby.

“It gives developers options as the retail goes through changes,” Linthicum said.

The success of fitness centers filling vacant big-box stores has led to increased new construction. Macerich Co. (NYSE: MAC) is building new upscale fitness concepts at the Biltmore Fashion Park and Scottsdale Fashion Square, two of the Valley’s — and the country’s — best-performing malls.

People run on treadmills at an LA Fitness location.

 

In this case, high-end, country club-like brands Equinox and Life Time Fitness are having new stores build from the ground up at Scottsdale Fashion Square and the Biltmore, respectively.

“I don’t see it slowing down. I’ve seen lenders be more receptive as well to gyms as a category,” Tiedeman said. “They are more and more accepted as a good anchor tenant. The good operators make a lot of money.”

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