Fitness centers like 24 Hour Fitness are filling vacant spaces in shopping centers

No longer the 90-pound weakling of the commercial real-estate market, fitness centers are muscling into prime shopping space ceded by traditional retailers.

"We have a joke in our industry that the way you know a shopping center is in trouble is if it has a wig store and a nail salon," said Jeff Green, a San Francisco Bay Area retail consultant. "Fitness centers are somewhere between that and traditional retail."

Now though, amid a widespread pullback in consumer spending, shopping centers are turning to fitness centers as retailers close stores or stop expanding.

The vacancy rate for retail properties in the Puget Sound region topped 6 percent in 2009, up from 4 percent in 2007, according to Pacific Real Estate Partners. In the past two years, the region's average annual asking rent has dropped 18 percent to $19.31 a square foot.

Last week, 507 Northgate and 24 Hour Fitness signed a deal that paves the way for a new, 45,000-square-foot gym below 160-plus apartments near Northgate Mall.

"A lot of retailers don't like the co-tenancy of fitness centers because they can be parking hogs," Green said. "But now, retailers don't mind the co-tenancy because they need the traffic. They'd rather see a full box than an empty box, and there aren't many retailers to fill boxes these days."

A year ago, L.A. Fitness, a privately owned chain based in Irvine, Calif., opened a 55,000-square-foot gym in Seattle's Ballard neighborhood.

David Barton Gym, a New York-based operator with the motto "Look Better Naked," opened a 38,000-square-foot fitness center at The Bravern in Bellevue, filling about 12 percent of the new development's retail space.

And in downtown Seattle, Gold's Gym is due to open this month at Rainier Square, taking 13,000 square feet formerly occupied by a home-décor store and art gallery. Rainier Square marks the sixth location for Gold's Gym franchisees Mike Williams and Paul Spears, who plan a seventh location elsewhere in Seattle soon.

"Our parking consumption used to be a negative," Williams said. "But now we're a positive."

For some gym-goers, bad economic times can be a reason to keep up their membership.

"It's certainly a way to manage stress," said Tom Thoreson, real-estate director at 24 Hour Fitness. "Business is good, and our membership base is stable."

Still, some fitness-center operators have been hit hard by the recession, even if as a whole they're not the hardest-hit retail tenants.

Chicago-based Bally Total Fitness emerged from bankruptcy last year after seeking protection from lenders in late 2008, its second Chapter 11 filing in less than two years. New York-based health-club operator Crunch Fitness also went through bankruptcy last year.

Meanwhile, competitors such as Anytime Fitness and Snap Fitness have expanded with smaller gyms in strip shopping centers.

Anytime Fitness, of Hastings, Minn., has 37 Washington state locations and plans eight more this year. A membership typically costs $35 to $40 a month, though dues vary depending on the site. Snap Fitness, of Chanhassen, Minn., has 17 locations statewide and plans nine more within a year.

"Gym memberships have been some of the last things to go" in the recession, said Green, the retail consultant.

"That's partly because the dues that older members pay probably are less than what they would pay if they were to cancel and rejoin when the economy is better," he said. "Also, it's still a pretty cheap form of entertainment."

Privately owned 24 Hour Fitness, of San Ramon, Calif., opened its 17th Seattle-area location last month in Issaquah, taking about 46,000 square feet at the new Overlake Center.

Its 507 Northgate location is scheduled to open in late 2010, joining a Jimmy John's sandwich shop and Sprint store at Fifth Avenue Northeast and Northeast Northgate Way. (No word yet on what 24 Hour Fitness will do with a smaller, nearby location.)

Originally, Circuit City and OfficeMax were supposed to divvy up the space at 507 Northgate, but Circuit City went under, and Office Max wanted out after the economic free-fall of 2008, said Kevin Wallace, president of development firm Wallace Properties.

"Suddenly, we were left with a big empty space in the worst recession since the Great Depression," he recalled. Although Wallace did not disclose the deal's financial terms, he described it as mutually beneficial.

"We end up with a world-class fitness center under our apartments," he said. "And they end up on one of the most visible intersections in Seattle."

— Amy Martinez

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Retail Report appears Fridays. Amy Martinez covers goods, services and online retail. She can be reached at 206-464-2923 or amartinez@seattletimes.com. Melissa Allison covers the food and beverage industry. She can be reached at 206-464-3312 or mallison@seattletimes.com.

Seattle Times business reporter Eric Pryne contributed to this story.