Ben Midgley, the CEO of Crunch Franchise, shares what operators should know about the real estate market before expanding locations.
According to CBRE, a leader in commercial real estate services and investment, sales per square feet of U.S. retail space have been on the rise since 2010. However, the COVID-19 pandemic caused unprecedented times in real estate.
While the commercial real estate market has had significant economic recovery, it’s important as an operator — especially one looking to expand locations — to understand the changing economic and real estate climate.
CBRE reported consumer spending is forecasted to rise in 2022 as a build-up of personal savings during the pandemic is released. This is great to keep in mind when looking for locations, especially those in complexes or centers, and this is exactly what Crunch Fitness does.
“Crunch has focused on market awareness of the brand and how much having a Crunch in a center improves traffic flow to other tenants,” said Ben Midgley, the CEO of Crunch Franchise. “Crunch has become known as a very strong tenant for centers. We draw a diverse member base known to patronize other businesses in the center as our clubs average 6,300 members. This has allowed us to be ranked as one of the Top 10 lessees of commercial space nationally.”
Due to rising interest rates, inflation, supply chain disruptions and geopolitical uncertainty, The Daily Herald in Chicago reported many retail businesses have closed their traditional brick-and-mortar stores or have significantly increased focus toward online shopping.
This industry shift will leave a lot of large spaces needing tenants, and gyms are perfectly positioned to advocate their importance to landlords.
However, with the market not cooling off and an approximate 30% increase in the cost of buildout, Midgley said negotiating the right deal has become a bit more challenging.
“Make sure if you are going to do a site, it’s the right site,” said Midgley. “If the rent is a little higher but the location is an ‘A,’ figure out how to get the better site as build expense is much higher right now,” explained Midgley. “You need that extra investment to have the best chance of succeeding.”
As gyms and the real estate market recover from the impact of the COVID-19 pandemic, it’s important to stay up-to-date on the changing markets as you search for new locations. While there are empty spaces waiting to be filled, Midgley recommended being patient while looking for the right deal; then be aggressive when you know you have it.
“It’s the same industry it used to be pre-COVID, it’s just more expensive,” said Midgley. “The market however will grow larger than it was pre-COVID. More consumers are health conscious now and there are less health clubs than before, so it’s a risk worth taking.”
