By Becky Yerak
WWR Article Summary (tl;dr) In 2015 there were 55.3 million health club memberships nationally, according to the International Health, Racquet and Sportsclub Association. That marks the third straight year of growth as well as the highest level of memberships in at least a decade.
Less is becoming more when deciding where to make good on that 2017 New Year’s resolution to hit the gym regularly.
In an industry once associated mostly with big-box gyms, some workout enthusiasts and dieters are gravitating to “boutique” fitness centers or studios.
The growing segment is winning consumers over partly because of a greater willingness to provide access on more flexible terms. Some fitness center operators also are seeing success by offering group workouts that take the guesswork out of exercising and provide a greater sense of community — so much so that technology makes it possible to compare one’s performance against others in the class.
Meanwhile, the popularity of what were once considered niche activities like yoga and rock climbing is helping to fill empty retail spaces as that industry consolidates.
“Fitness continues to be one of the most active categories in the retail landscape” — and highly specialized, too, said Adam Foret, associate for real estate firm CBRE Retail Services. Niche workout clubs offering classes for about 20 people for an hour or less in spaces ranging from 1,500 to 3,000 square feet are “as active as they’ve ever been” on the retail scene, he said.
Take Studio Lagree, which offers 50-minute full-body workout classes. It opened last month in a 2,200-square-foot space in Chicago’s Near North neighborhood. The Toronto-based business entered the Chicago area about three years ago and also has Highland Park and Lincoln Park gyms. It has signed a lease for a facility in Chicago’s Old Town neighborhood that will open by early 2018.
“People are tired of big-box gyms where they pay monthly dues and don’t use them,” Chief Executive Pino Gagliardi said.
The Near North studio includes instructor-led classes on exercise equipment that help “take all of the guessing out of it,” Gagliardi said. The 14-person classes are “boutiquish,” he said. “It’s not the big gyms with hundreds of people.”
Some bigger gym operators aren’t arguing with Gagliardi.
In November, publicly traded Town Sports International, whose gyms average about 27,000 square feet, acknowledged some consumers “prefer a boutique gym experience.” As a result, the operator of about 150 East Coast gyms said it would introduce a small group-training program with specialized workouts that will be available to both members and nonmembers for an additional price.
The group training market that Town Sports is trying to tap into is the world’s sixth-hottest fitness trend, according to an annual American College of Sports Medicine survey. “Group exercise training programs have been around for a long time” but only now have they cracked the top 20 in hot fitness trends, the organization’s 2017 survey said. “None of the respondents could explain why group training has become popular.”
But Jared Dowdakin has an theory. The Chicago resident works out at Studio Three, a year-old River North club with one floor each devoted to interval training, cycling and yoga. Dowdakin, who moved to the neighborhood more than a year ago, takes all three classes.
Previously, “I would go to normal gyms and be weightlifting,” he said. “The group fitness routine is the special sauce. People get into a rut, they’re going to their normal gym and working out by themselves.”
At Studio Three, “you have other people’s scores up on the bike next to you, so if you see someone next to you, there’s that competitive edge,” he said. “If your neighbor on the treadmill is going half a mile an hour faster than you, you might up your score a little.”
Orangetheory Fitness, known for its heart-rate monitored, high-intensity workouts with groups of up to 25 people, has nearly 600 studios, including 34 in Illinois. It recently opened in Chicago’s Lincoln Park neighborhood.
Orangetheory expects to have 900 studios by year-end, Chief Executive David Long said.
Other exercise programs considered among the 20 hottest in the sports medicine survey included high-intensity interval training and yoga.
CorePower Yoga, which started in 2002, has 165 studios nationally, including 27 in Illinois. The Denver-based company, which offers group classes, plans to open at least 15 new studios in 2017, including in Winnetka and New York City. CorePower owners include private equity firm Catterton, whose other investments include Peloton, which provides access to cycling classes from home, and studio operator Pure Barre.
Yoga’s growing popularity is one reason for the expansion, said Tess Roering, CorePower Yoga chief marketing officer.
But even niche operators say there is only so much business to go around.
North Carolina-based Burn Boot Camp, which has 51 locations nationally and caters to women, plans to open six franchised Chicago-area locations by early 2018 in Naperville, Geneva, Schaumburg, Northbrook, Evanston and Glen Ellyn. Most locations, which offer 45-minute sessions, range in size from 3,500 to 7,500 square feet.
“Gyms used to try to be an expert to everyone and offer everything, but now they’ve become much more intimate,” said Devan Kline, Burn Boot Camp co-founder. But “there’s only so much room for niche segmentation.”
Besides growing competition from other stand-alone fitness centers, pressure could come from apartment and office buildings that are upping their games when it comes to offering gyms to tenants.
Earlier this month Chicago-based LifeStart, which provides corporate fitness services to the commercial real estate industry, said it would manage a new 7,500-square-foot fitness center at 401 N. Michigan Ave. in Chicago. It will include equipment as well as a group exercise studio. In recent months it also has announced deals to manage new corporate fitness centers at 125 S. Clark St. and 203 N. LaSalle St.
LifeStart spokesman Mike Flanagan says upgraded fitness centers that have become mandatory for apartment buildings is a business model that has also bled over into the marketing of office buildings.
“Millennials and an increased focus on health and well-being has had a large impact on this,” Flanagan said. LifeStart has been designing more than two dozen centers nationwide a year. Flanagan said the centers are getting bigger and the equipment is getting better, with budgets increasing by about 25 percent as clients want to stand out among competitors with a “wow factor.”
“There’s also more of a focus on a social environment, like small group training, studios and classes,” Flanagan said.
In 2015 there were 55.3 million health club memberships nationally, according to the International Health, Racquet and Sportsclub Association. That marks the third straight year of growth as well as the highest level of memberships in at least a decade, according to data from the association.
Nearly 36,200 health clubs and fitness centers were operating in the U.S. in 2015, the highest level in at least 10 years, according to the sports club association.
Some fitness outfits have burned out, though. David Barton Gym recently closed in River North, citing “severe competitive pressures.” Club Ventures Investments, which owns and runs David Barton Gym facilities, also closed locations in New York; Boston; Miami; and Bellevue, Wash. Club Ventures III LLC, the Chicago gym, filed for Chapter 7 bankruptcy in U.S. Bankruptcy Court in the Southern District of New York.
Clubs that have been closing tend to be older clubs or ones that “have experienced a loss of business due to the opening of boutique or niche studios like cycling, barre, CrossFit or circuit workouts,” said Pete McCall, spokesman for the American Council on Exercise. “In 2017 the main growth will come from franchise clubs and boutique studios.”
Still, some of the growth is occurring in more mainstream clubs.
Fitness Formula Clubs just opened a new location in Park Ridge, and LA Fitness recently came to Arlington Heights.
“People understand the value of being healthier, and this trend is great for everyone in the industry,” said Brian Belmont, executive vice president of franchise operations for publicly traded Planet Fitness, whose 1,200 locations cater to first-time gym members and casual users.
Planet Fitness will add about 200 locations in 2017. The company, which offers gym access for as little as $10 a month, has 45 Illinois locations, and “our franchisees plan to more than double our presence over the next five years and beyond” in the state, Belmont said. Many locations, which average about 20,000 square feet, are open around the clock.