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Thursday, Mar 28, 2024
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Stores’ Pain Is Gain for Health Club Chains

Vacated big-box retail spots have recently become venues for exercise club chains, such as 24 Hour Fitness USA Inc. and Crunch Fitness, to flex their growth muscles in San Diego County.

In early 2010, San Ramon-based 24 Hour Fitness opened a new 42,000-square-foot club in a former Albertsons supermarket location in El Cajon, and it has plans to do the same next year with a vacated Albertsons in San Diego.

New York-based Crunch on Aug. 17 opened a 20,000-square-foot gym on the top floor of a former Mervyn’s store in El Cajon, where Dick’s Sporting Goods will debut this fall on the lower floor. Earlier this year, Crunch opened in a vacated furniture store site in San Marcos.

Hot Properties

Company representatives say the former retail spots provide good locations with ample parking, in a local market where available high-profile locations convenient to their customer base remain few and far between.

Jim McPhail, executive vice president of real estate and development for 24 Hour Fitness, said the company has been working since 2007 to acquire approximately six Southern California sites vacated by Albertsons. Among those is a former Albertsons at the Vista Balboa Center in Kearny Mesa, where one of its existing gyms will relocate late next year from a site across the street.

“It has to be a match in size for it to work for us,” McPhail said, noting that the approximately 40,000 to 45,000 square feet available in a supermarket site allows the company to offer all of its equipment, training and related facilities without crowding. The grocery sites tend to be strategically located, with sufficient parking to serve customers throughout the day and at any time during the week.

McPhail said the local supermarket conversions are part of an estimated $20 million to $25 million that 24 Hour Fitness, which currently operates 33 gyms locally, plans to invest in the San Diego region. In addition to the new centers, it is working with mall operator Westfield Group to relocate two existing gyms to be at or near that company’s centers in University Towne Center and Oceanside.

Westfield also owns the Parkway mall in El Cajon where Crunch Fitness has set up operations. Tom Tierney, a San Diego regional senior vice president with Westfield Group, said the company has recently been adding nontraditional elements, including fitness centers, to its mall retail mixes in order to serve the lifestyle needs of busy consumers.

John Romeo, the local franchisee for the El Cajon Crunch, said the former Mervyn’s provides his business with a high-profile location with 1,200 parking spaces right outside the building. Such arrangements at prime shopping centers are difficult to find in San Diego County, where empty big-box spaces get snapped up quickly and vacancy rates for regional malls remain low.

“The real estate market in San Diego County is tighter than people think,” said Romeo, adding that he and his business partners are in talks to open “a couple of other locations” elsewhere in the region.

Representatives of both gym chains said each location employs approximately 30 to 35 people.

The quest for new spaces comes as the health club industry has experienced significant growth in membership numbers during the past decade. According to the Los Angeles-based industry research firm IBISWorld Inc., U.S. memberships rose from 36.3 million in 2002 to a high of 42.8 million in 2011.

‘Sweat Equity’

While those memberships dipped when the economy went south in 2007, the industry was able to maintain annual revenue growth of 1.7 percent during the past five years, which is projected to grow to 3.2 percent annually over the next five years. IBISWorld estimates U.S. revenue will reach $24.8 billion this year, with profits totaling $2 billion.

In a recent report, the research firm noted that the industry is extremely fragmented, with leader 24 Hour Fitness holding an estimated 4.5 percent of the U.S. market and generating approximately $1.25 billion in annual revenue.

IBISWorld noted that there is a growing preference among consumers for smaller gyms “with easy access and fewer amenities” catering to local markets, which has aided the growth of franchised gyms.

The privately held 24 Hour Fitness operates more than 400 gyms nationwide. McPhail said the company considers San Diego a core market and is scouting other local sites, including potential places to expand on a family-based concept that it recently debuted in Irvine.

That would likely require larger sites to accommodate elements such as an outdoor pool, water slide, “splash zone” and other activities geared toward children and teens. “We want to encourage a more family-oriented approach to wellness and fitness,” McPhail said.

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