As with many industries in 2023, commercial real estate is adapting to new influences and certain industries are seeing a surprising resurgence. One sector that is especially poised for a solid year in commercial real estate is the Fitness and Wellness sector.
Between a natural recovery from lockdowns due to the coronavirus pandemic, a demand for tenants that require a lot of space, and the growing demands of consumers, the coming years seem to point towards major positivity for fitness-focused businesses. To understand why there’s a sudden optimism for fitness CRE, let’s look at each factor independently.
Recovery from the Pandemic
COVID impacted businesses in many unique ways, but some of the businesses affected most severely were part of the fitness and wellness sector. According to statistics compiled by the Global Health and Fitness Association, the fitness industry’s revenue plummeted by 58% in the U.S. in 2020, and 17% of all fitness facilities permanently closed.
While the industry was viewed as trending in the right direction prior to 2020, the ensuing lockdowns caught business owners completely off guard. As an industry with very little transitionary potential into virtual services, sizable closures were inevitable. As a result, the speculation quickly turned to, “When are things opening back up?” and “How long will recovery take?”
For businesses that were able to survive, they met a consumer base that was more concerned with their overall health than ever. Per career counselors and industry trackers at Zippia, the fitness industry is projected to grow by over 170% by 2028. Whether this trend is due to a reversion to pre-pandemic currents or to consumer’s new priorities post-lockdown, fitness business owners are primed to benefit.
Capitalizing on Free Space
Another trend caused by the pandemic is the widespread struggles seen with brick-and-mortar retail (although there have been some indications that these struggles are coming to an end!). Primarily, many malls have lost their “anchor tenants,” the large tenants that are relied upon to drive foot traffic (usually retailers such as Nordstrom, Scheels, or JCPenny).
As larger anchor tenants have closed throughout the pandemic, malls have large commercial spaces that need to be filled. In many cases, gyms have been great options to fill these needs. Also drawing upon a recognition of new consumers searching for lifestyle and experience purchases over material expenditures, gyms and fitness centers have started driving up foot traffic across the country.
The Rise of the Wellness Generation
In 2015, Millennials surpassed the number of Baby Boomers in the workforce, and they are projected to make up 75% of the U.S. workforce by 2026. The effectiveness of businesses to transition their marketing towards these key consumers will be crucial for sustained success moving forward.
Luckily for the fitness industry, some have come to nickname Millennials “the wellness generation” due to their concern for personal physical and mental health in comparison to previous generations. Millennials are broadly eating healthier, exercising more, and smoking less. Even some offices are seeing the benefits of adding office gyms in order to draw in and retain their best workers (see this article from job recruiters at Indeed).
Fitness CRE is poised for a great return these next few years! We’ll be tracking all of the latest news and trends in commercial real estate right here.
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