High-end gyms are no longer just places to sweat it out.
The most exclusive ones offer not only state-of-the-art equipment, exercise classes, and spacious locker rooms with cool eucalyptus-scented towels and fancy soaps, but also “Third Placeplaces outside of home and work where people can meet and socialize. This means gyms are now also entertainment centers and event venues. They are salons and spas. They are hotels and workplaces. And they childcare facilities,
At Chelsea Piers, the sports and entertainment complex along the Hudson River in New York, members can work out before, between, or after a workout in the gym's lounge and co-working space, which opens to a 44-foot ceiling and waterfront view. The gym also hosts events like author talks and creative classes and workshops for members. Nearby, high-end gym Equinox opened a hotel at Hudson Yards in 2019, and has plans to open more hotels in North America, Europe, and the Middle East.
At Life Time, a gym that calls itself the “country club” version of a health club, members can drop off their kid for a fee before a workout and, at some locations, get a private office or a dedicated Herman Miller desk at its co-working space called Life Time Work. A Life Time Work membership includes access to the gym and will cost you anywhere from a few hundred dollars to thousands of dollars a month, depending on what kind of workspace you want and the location.
Gyms, many of which used to be an amenity attached to a hotel or office building, have transformed and become star attractions, offering hotel rooms and workspaces as part of their appeal. Such facilities require a lot of space—and it’s an ideal time for projects that need large retail space: A volatile commercial real estate sector with high vacancies has opened up opportunities for large gyms, as property owners are in desperate need of anchor tenants that can drive foot traffic to help make their residential and office properties more attractive.
“There's more square footage opening up now than there ever was before — office space on the second or third floor, which you would never build before because it was a tax firm or a bank,” said Sam Bernstein, chief operating officer of Chelsea Piers. “But they're not coming back. Space is getting tighter in our world.”
In New York, a city known for its space shortages, the loss of department stores and offices has created huge spaces for luxury gyms. They have often been able to take over large retail spaces, ranging from about 30,000 to 175,000 square feet, by entering into long-term lease agreements before the space is even built.
Equinox has 41 locations in New York that average about 43,000 square feet, while lower-end gyms like Planet Fitness average about 15,000 square feet, and New York Sports Club is about 25,000 square feet, according to commercial real estate data firm Trepp, which compared the size of gyms in New York with securitized loans.
Gym facilities have a history of taking over unused properties and spaces. They can expand into locations not traditionally desirable in the real estate world, using windowless rooms below street level as locker rooms or venues for group exercise classes. Chelsea Piers took advantage of unused piers on the western side of Manhattan to build its 150,000-square-foot flagship complex in 1995, featuring a six-lane, 75-foot pool; a rock wall; and three basketball courts.
Life Time started in Minnesota in 1992 and now has 1.4 million paying members and more than 200 locations nationwide, mostly in the suburbs. It occupies more than 54,000 square feet at its Penn 1 location in midtown Manhattan, enough for its seven pickleball courts and cafe-like seating and bar, where members can grab beer and other beverages and watch each other play. Its other New York locations average about 41,000 square feet. Its first Life Time Work in New York is scheduled to open next year at Brooklyn Tower, which will also offer 110,000 square feet of space to sweat it out.
Pricing for the upcoming New York space has not yet been set, but the Life Time Work Lounge in Ardmore, Pennsylvania, charges $588 for a membership, $776 for a desk and $1,958 for a private office. Memberships at Chelsea Piers in New York start at $220 a month; the company declined to share its membership numbers. Equinox did not respond to interview requests for this article.
Life Time and Chelsea Piers can get these large spaces largely because they sign leases that run for 20 to 25 years, with an option to extend at the end of their agreement term. Most commercial leases in New York are five to 15 years, and Office lease can be up to 10 years,
“When you see really long lease terms or there being extension options involved, it's because the developer pays some of the larger fixed costs upfront,” said Cameron LaPoint, assistant professor of finance at the Yale School of Management. “They're trying to tailor the property to the tenant.”
This can be seen, for example, at the Chelsea Piers location in Downtown Brooklyn, where the first thing a visitor sees is a three-lane, 75-foot swimming pool. Mr. Bernstein said the company’s in-house design and architecture team worked with developer TF Cornerstone to reinforce the pool with steel beams that are visible through the ceiling of a group exercise room directly below.
Bahram Akradi, Life Time's chief executive, said the company's strategy is to “try to keep control for 40, 50 years” of its existing locations. After its current leases are up, the company has an option to extend them for another 25 years. Chelsea Piers also has an option to extend its agreements at six of its locations around the city, Mr. Bernstein said.
Mr. Akradi said designing a Life Time gym was “not like an Aritzia store that you can convert into an Alo store.”
“It’s a more complex structure, so you need to take a long-term view,” he said, referring to the type of space that’s needed for all the amenities at luxury gyms, such as basketball courts, cold-water pools and group exercise rooms designed for everything from hot yoga to spin classes.
To implement this vision, Life Time reduced its corporate office staff during the pandemic and eliminated sales positions and member promotions, allowing the clubs’ amenities to speak for themselves, Mr. Akradi said.
Life Time and other highly rated gyms have rebounded after a tough time during the pandemic, when membership rates fell sharply and 25 percent of all health clubs and studios closed in 2021, according to the National Health & Fitness Alliance, an industry group.
However, it's difficult to predict whether developers will continue to spend big on gyms, Mr. LaPoint said, especially when leases extend decades into the future. One area of concern that could put the current resurgence at risk is stubborn inflation, said Chris Hudgins, a research analyst at S&P Global Market Intelligence. He said higher membership fees could be potential pain points for customers if inflation continues.
But to Mr. Accardi, business was going so well that “when you look at our 2024 and 2025 numbers,” referring to membership rates and sales from gym purchases, it will be like the pandemic “never happened.”
“We reinvented the business during that time, and it's much better than it was before,” he said.