Real Estate — Location is Everything

real estate

Although it may be a tough pill to swallow, the fact that your club’s real estate location has a major impact on its success is without question. Therefore, before you sign the lease or purchase a building in which to establish a new club, take these real estate scouting tips into consideration to ensure you don’t end up with buyer’s remorse down the road.

Do your homework, and consider convenience.

People love convenience — having your club in a convenient location that aligns with your audience’s wants and needs could make all the difference in attracting customers to your gym.

According to Eric Casaburi, the CEO of Retro Fitness, doing research and knowing the area well will you help discover if there are any convenience issues to solve. He recommended investing in area analytics to see if the data matches well with your business model and goals.

“There’s a lot you can know from seeing a site and seeing the data and the people there,” explained Casaburi. “You see locations where buildings look beautiful — good sizes, good ceiling heights — but what you don’t look at are the traffic patterns. If it’s only a right turn in and right turn out, that can ruin what looks like a beautiful site, if you don’t know what people want and if you’re not in a destination-oriented environment for convenience.”

Melissa Sowell, the chief administration officer for Chuze Fitness, agreed there are many unseen convenience barriers that could ultimately lead to a club’s downfall. “There are natural barriers and there are mental barriers,” she explained. “You’ll notice somewhere is miles closer, but the red light on the way takes twice the amount of time to get through, or there’s a weird bridge to cross. Unless you’re local or your real estate agent knows the area well, you may not pick up on that.”

To avoid this issue, Sowell recommended visiting the area on what you predict to be the busiest days, to further understand traffic patterns in relation to your location. “Drive the area at different times of the day when you know what your opening hours will be, just to make sure there aren’t any major issues,” she suggested.

In terms of convenience, Casaburi also noted the businesses that surround your gym should be taken into consideration when choosing a location. “If you’re selling a $99 membership [in a bad area], you may want to reconsider locations due to the buildings and businesses around you,” he advised. “You need to look at co-tenancy.”

Consider parking.

You found the perfect place; it has just the right amount of square footage, it’s in a prime location for a reasonable price — but there’s no parking. Is that something minor?

It may be, but you have to make that decision after you consider the demographic you’re targeting and the way they will be traveling to and from the gym. Are you investing in a club in a central location where a lot of people will get dropped off? Is it a location where you expect a lot of on-foot traffic from people who live nearby?

Sowell believes everyone should be more in-tune to parking, stating members shouldn’t have to worry about missing or being late to a class due to the unavailability of a parking space.

“It will upset your members when they’re trying to make a class in time and can’t find a parking space,” said Sowell.

Understand the commitment.

According to Sowell, signing a 20-year lease is essentially signing up for a 20-year relationship with your landlord. Her advice: Make sure you get off on the right foot, because leases are hard — and typically expensive — to get out of. “You have enough to do with running the business, you don’t want the relationship to be bad, you want them to help you with any issues that come up,” she said.

Casaburi agreed that considering the length of the commitment is important, adding, “If you sign a 10-year lease, that’s a huge commitment. You need to align yourself with a very strong broker in the market that has good real estate knowledge — ask them if they’ve worked for businesses like yours. And don’t rush the process. A bad commitment can cost you your business.”

If the real estate deal you’re getting seems too good to be true — it very well may be. It is important to understand every part of every document before sealing the deal with a signature.

“Pay attention to the details, because those can bite you,” said Sowell. “There can be some really expensive things that can happen if you don’t know your city and know what you need to do.”

Take Casaburi’s example as your proof of concept: At Retro Fitness’ first location, it cost him $50,000 to get out of the lease. “I was just trying to sell the location … but there was a clause that said I couldn’t transfer without the landlord’s permission [even to a qualified buyer].”

Have a welcoming storefront.

In such a competitive market, it’s important to grab a potential customer’s attention so you can be the first to pop up in their mind when they make the decision to join a club.

Along with considering your surroundings, Sowell added a good storefront, along with good signage and lighting, is essential. In fact, she said it is one of the most important marketing tactics there is for gym owners, and something that tenants need to fight for in the letter of intent stage when negotiating a lease.

Figure out whether leasing or owning is right for you.

Both Sowell and Casaburi agreed that for many gym owners, it may be more practical to lease versus own.

“If you’re going to own a property, you need to have a management company lined up, understand the laws, the tax laws — it’s a lot more savvy and if you don’t have that knowledge, it means you have to hire it,” said Casaburi.

Sowell said while leasing is seen as a safer option, it’s nice to be your own landlord and make decisions in regards to your property when you own it. But on the flip-side, if you want to lease it to someone other than yourself — you’re then in the property management business.

“Once you enter the property management business, you’re dealing with tenants, and the default turnover,” said Sowell.

Keep your emotions out of it.

Signing a lease or becoming a property owner shouldn’t be an impulse decision. Casaburi said it’s important to keep your emotion out of it and be logical before making such a big decision.

“You’re jumping into an arena with some big dogs — this industry is a very competitive environment,” said Casaburi. “If you want to be on the best corner, you have to pay for the best corner — don’t think you’re going to get Main and Main paying $5 a square foot. Make it quantitative, so it doesn’t become emotional. Use data and numbers to keep emotion out of it. If you make an emotional decision to be on that corner but the lease is bad, it will suck. You need to be neutral.”

Leave a Reply

Your email address will not be published. Required fields are marked *

Club Solutions Magazine