Thu. May 19th, 2022

UK leisure and fitness businesses are capitalizing on attractive rents to drive expansion plans, as gym operators snap up prime locations in retail parks and hollowed-out high streets and shopping centers.

Anytime Fitness, the UK’s third-largest private operator, announced a 20-site expansion in 2022 last week, while sector leader PureGym has said it is seeing many more attractive sites at lower rents than before the pandemic.

Anytime said the expansion showed landlords’ desire for a broader mix of businesses on UK high streets, while there is also a need to fill vacancies as retailers prioritize ecommerce over bricks-and-mortar expansion.

The operator has acquired a city center rental site for £ 125,000 per year, along with a significant rent-free period, compared to a marketed value of £ 225,000 per year in 2019.

Commenting on landlords’ interest in the £ 5bn UK gym sector, Neil Randall, chief executive of Anytime Fitness, said: “Gyms are venues that drive footfall. Face-to-face retail alone does not get people into central areas but leisure businesses and gyms are encouraging more people to come in. ”

The operator, which will have more than 200 sites in the UK after its expansion, is also targeting empty office spaces and high street locations, using “small box” sites as small as 3,000 sq ft to enter central locations.

Attendance rates for low-cost gyms are largely returning to pre-pandemic levels and gyms are also benefiting from more favorable planning permission conditions, Randall and PureGym chief executive Humphrey Cobbold said.

PureGym, the UK’s largest operator, plans to open 30 to 40 sites in 2022, while London-listed operator The Gym Group said last month it would open 28 sites in 2022.

Budget gyms have few staff and rental costs are among their biggest expenditure. Making savings on rent could boost profits by as much as 2 to 3 percentage points, Harry Barnick, an analyst at Third Bridge, said. “One of the key drivers of expansion and the push towards more sites is the potential reduction in rental rates versus pre-Covid.”

PureGym and The Gym Group have focused on expansion in retail parks, due to the larger sites available. “We are getting access to decent spaces in high quality retail parks where we would not really have got a look in before because there would have been too many retailers bidding for space,” said Cobbold.

These sites are not necessarily cheaper than before Covid but bring additional revenue due to their locations, he added.

Vacancy rates remain high across the UK, with the Local Data Company forecasting that 14 per cent of retail and leisure venues will remain empty in the first half of 2022, compared with 12 per cent before the pandemic.

Landlords have long used leisure facilities like rock climbing centers or cinemas to increase “dwell time” in shopping centers. Landsec, a leading commercial landlord, said it prioritized a mix of properties.

“Anything that makes someone stay in a shopping center or physical retail environment is gold dust for a landlord,” said Adam Caplan, a director at Anytime’s real estate adviser, CBRE.

Jonathan Pritchard, a retail analyst at Peel Hunt, said fewer retail businesses were seeking to expand their bricks-and-mortar offer and were instead focused on ecommerce, which is also benefiting fitness and leisure.

Randall predicted further expansion for the sector. “The demand for health and wellbeing is high after Covid; people are placing a high price on their own health, ”he said.

Clients use equipment at an Anytime Fitness gym in Worthing, UK
Clients use equipment at an Anytime Fitness gym in Worthing, UK. Further expansion is being predicted for the sector © Julie Edwards / Alamy

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