In three weeks, the world’s spotlight will be on the UK as the Olympic torch reaches Stratford for the start of London 2012. Gym operators hoping that the sporting fervour might also set alight the great British public’s desire to sign up for fitness memberships may well be disappointed, as recent research suggests that we are a nation of spectators, rather than participants (see box).
For property professionals, however, there are reasons to be cheerful. After a decade of relatively little activity, the gym sector is set to go through a period of change. Not all of it is good, as the landlords of properties vacated by former market leader Fitness First will point out. But as some gyms close, others open, at very differing ends of the spectrum.
The newest entrant in the luxury bracket is US operator Equinox, the reputed fitness location of choice for A-listers from Paris Hilton to Renee Zellweger. Celeb-spotters and paps will, no doubt, be heading down to west London this autumn when the first UK venue opens at 99 Kensington High Street.
For Equinox, whose parent is real estate giant Related Companies, its London debut was not driven by other operators.
“We didn’t make the decision to enter London on competition. We can compete with the mass-market mainstream very well,” says Jeff Weinhaus, Equinox’s chief development officer, who explains that the company found the site opportunely after monitoring the capital for the past five years.
Advised by Cushman & Wakefield partner Matt Hyland, Equinox is eyeing further sites in London. Weinhaus plans to sign up to eight leases across the capital, including the City and Docklands, but says the company is in no rush: “This isn’t a retail roll-out. Our goal is to be in affluent markets. We’ll be careful to understand what our catchment area is.”
The Equinox wish-list is for properties offering 30,000-40,000 sq ft with generous (14ft) ceiling heights and plenty of natural light. In return, it will take a 25-year lease.
Weinhaus is also considering the potential of wealthy suburban locations in the Home Counties (many of the firm’s 56 US gyms are in residential areas), as well as other UK cities, and whether its separate brands PURE Yoga, Blink Fitness and Soul Cycle could migrate over the Atlantic, too.
London property market observers welcome Equinox’s entry, but are sceptical about sudden growth.
“Equinox will probably wait six months and see what happens. I can’t see them going to regional centres in the next five years,” says one.
But many believe there is room for high-end expansion, and perhaps it is no coincidence that uber-exclusive KX Gym in Kensington, SW3, is now on the look-out for a second London location.
Mark Sheehan, managing director of Coffer Corporate Leisure, says: “There are definitely opportunities for existing operators to rebrand existing clubs.”
But it is the other end of the scale – no-frills gyms – that offer most growth potential. The new kids on the block offer 24/7/365 access to functional facilities at a low monthly rate (around £15-£20) with no contract. Cost-hungry, lower-intensity areas such as pools and saunas are ditched, so floorplates are smaller than for other gyms (see panel). Importantly, however, operators are happy to sign 15-year-plus leases.
The success of the low-cost entrants is understandable, says Mintel senior analyst Michael Oliver, given the previously high cost of gym membership in the UK: “Compare annual revenue of £227 per member in the US (2010) with an average yield per member of £455 in the UK, so there is clearly wriggle-room to expand the sector.”
David Bell, partner at Savills, points out that the value concept took off in the UK only two years ago, copying two-decade-long established operations in the US, Germany and Holland, but is already reaching operator saturation point.
Getting the offer right has proved to be tricky and caught out even seasoned investors. Dragons Den’s James Caan exited the market after his Nuyuu brand failed to hit membership targets.
Bell says: “There are around 20 budget operators looking for sites. That’s not sustainable. We can expect consolidation over the next five years with the bigger buying out smaller.” (see panel).
Further movement is also expected in the middle-tier of the sector, where clubs owned by Fitness First, LA Fitness, Bannatyne’s and DW Sports Fitness may be squeezed by the high and low end operations either side.
“A significant number will be swallowed up, and the market will go down to four or five large operators over the next few years,” predicts Colin White, partner at Edward Symmons.
Ultimately, total growth in the gym sector may not be as spritely as Team GB’s Olympic athletes. Even if the government decides to hand out free gym passes to tackle the country’s burgeoning obesity levels (see box), they would almost certainly be for local authority-run facilities, so unlikely to benefit private sector clubs.
And the emergence of fitness phenomena such as Zumba – which are driven by individuals and do not require a dedicated facility – will also mean that, when the Olympic flame is extinguished in September, gym operators will be still feeling the heat.
London 2012: Smartphone 1 – Gym 0
While British teams will be going for gold at the Olympics this month, it appears unlikely that the majority of the UK population will even try to emulate them. Market research by Visit England and nVision earlier this year found that only 22% of respondents wanted to “get out and about more to be involved”.
Whereas sports retailers commonly report increased sales around the time of major sports tournaments, gym operators are not expecting a rush on membership in the wake of London 2012.
David Minton, founder of the Leisure Database Company, says: “There is no history of spikes at previous Olympics, so there’s no reason why we should be any different.” LDC’s statistics help to explain why.
Although 90% of the UK population lives or works within a two-mile radius of a gym, just 12% regularly attends one, the majority opting for a privately run facility. Overall attendance has remained static for the past five years.
Rob Wingrave, director at specialist property consultancy Lunson Mitchenall, says: “The big spikes in membership are at the beginning of the year (new year resolutions) and in early summer (to tone up for the beach). But, in the future, there is big scope for the industry to swell if the government elects to offer free or reduced rate gym membership to combat obesity.”
The cost to the public purse of a dramatically larger population is estimated at £4bn pa. With a rapid increase in UK obesity – up from 6% of the population in 1980 to nearly 30% in 2012 – the government is keen to find ways to halt the rise. It may have a tough job on its hands.
Last month, consumer research organisation Future Foundation concluded that more Brits will engage with the Olympics this year via social media – what it describes as performative leisure – than will actually take part in sport.
Budget Appeal – low-cost gym operators’ typical requirements
• Size 8,000-20,000 sq ft; mezzanine potential considered
• Floors One or two; ground, basement, first
• Location All types considered; good parking (out-of-town), good transport links (city centre)
• Rents £6-£8 per sq ft (outside London); £13+ (London)
• Lease length 15-25 years, ideally with five-year breaks after year 15
• Planning Preferably existing D2
• Demographics Minimum 50,000 within 10-minute travel time
10 budget operators to watch
• Anytime Fitness (5) (F)
• easyGym (2)
• FitForFree (2)
• Fitness4Less (10) (F)
• Fitspace (8)
• Gym4All (5)
• Kiss Gyms (3)
• Pure Gym (22)
• Snap Fitness (0) (F)
• The Gym Group (23)
Source: Estates Gazette KEY: (n) = Number of UK gyms operational; (F) = Franchise
