Vacant Retail Spaces Backfilled by Fitness Occupants

Landlords who once leased space to Big Box mainstays like Toys "R" Us or now-defunct stores such as Hastings Entertainment are turning to tenants like gyms and fitness centers to fill retail vacancies.

They're opening at an impressive clip in both large-format and small-format retail spaces across the Albuquerque area. And, market observers say, it's part of a national, health-driven trend that commercial property owners are embracing as former retail staples such as J.C. Penney, Macy's and Toys R Us shutter locations or deal with a declining customer base at their brick-and-mortar stores.

The old Toys "R" Us store at Winrock Town Center, 7400 Indian School NE, is a prime example of this reality. It will soon be the home of new-to-market Chuze Fitness - a stark departure from its glory days as one of Winrock's most successful retailers.

With extensive tenant improvements now underway at the former toy store - a 42,000-square-foot facility - San Diego-based Chuze Fitness should do well there, said Anthony Johnson, president of Pegasus Retail, whose commercial brokerage firm represented Winrock owner Goodman Realty Group in the transaction. "It leased within two weeks of being available."

Chuze was a "strong candidate" to not only attract its own unique clientele but also to boost visitation to other Winrock tenants such as Nordstrom Rack, Dillard's, PetSmart, Dave and Buster's, Red Robin and the Regal 16-screen movie theater complex, he said.

With monthly memberships beginning at $10, Johnson said, Chuze's "competitive price point, its shiny new layout and amenities" might siphon off clientele from established and more expensive gyms in town. "I'm sure there'll be some attrition," Johnson said. Johnson also represents Defined Fitness, which he said is also looking to expand from four to seven stores in the next few years. For property owners, "I think it (the fitness category) has become much more of an accepted alternative to traditional retail," Johnson said. "It's a use that, in the right location, can bring a lot of traffic into a shopping center, for sure."

And the trend doesn't look like it's ending anytime soon, according to a company that charts leasing activity.

The amount of space leased by fitness centers and gyms in malls and retail centers grew about 69 percent nationwide over the past five years, according to data firm CoStar Group, but it didn't have a breakdown for the Albuquerque market.

The trend can also be seen at Manzano Shopping Center, a high-traffic corner at Juan Tabo and Lomas NE, which welcomed a 20,000-squarefoot Crunch Fitness over the summer. The new tenant filled a hole when Hastings Entertainment departed the market. The now-closed U.S. retail chain sold books, movies, music, and video games and functioned as a video rental shop.

The new Crunch facility, where memberships also begin at less than $10 a month, is owned by Harman Fitness Group's David and Curtis Harman, who run 40 other Crunch locations, including one in Las Cruces that opened in early 2017. Michael Butler, a Lockehouse Retail Group broker, said the gym operators will continue to eye acquisitions and have a couple of sites in mind for their Albuquerque expansion.

But it's not just big fitness-oriented players with sizable business footprints looking for commercial space.

Smaller-format concepts like Orangetheory Fitness also have been popping up in Albuquerque and Santa Fe. Former commercial real estate broker Lorraine Higgins, who is now one of the owners of the New Mexico franchise, said the company scooped up prime space - some of it vacant for years - in strategically placed retail centers near high-income residential neighborhoods and heavily trafficked business corridors. A national chain focused on heart-rate training, the studios usually comprise less than 3,000 square feet. Higgins leased space at Albuquerque locations once occupied by a homebuilder's showroom, a day care center and a coffee shop.

"Now landlords are chasing us," said Higgins of the recently opened studio in Santa Fe and another site slated for El Paso.

Among the four studios, Orangetheory New Mexico has more than 2,700 members, said Higgins, who lost 40 pounds, lowered her cholesterol and reversed her Type 2 diabetes, thanks to the full-body workout. She said the Orangetheory approach - structured classes that run for an hour and 15 minutes - gets clients in and out. Unlike a large gym, "Nobody shows up aimlessly and does what they want," Higgins said of the results-oriented fitness regimen.

Also taking advantage of vacant retail space to grow her fitness business is Julia Bowen, the owner of two yoga studios in Albuquerque. Bowen's journey into entrepreneurship mirrored her discovery of yoga: she wasn't looking for it, but once she found it, she fell in love. Since opening her first Yoga by Julia location at Academy and Tramway NE six years ago, she has developed an expansive vision for her studios, which now includes a West Side store at Paradise and Universe NW.

"People have been asking me for years to open on the West Side," Bowen said of The Shops at Ventana Square, where the anchor tenants are a Walgreens, O'Reilly's auto parts, a KFC restaurant and Dollar Tree store. "We're a nice addition to the center."

"Lots of moms" from nearby Ventana Ranch have discovered the studio, which offers a full schedule of hatha yoga classes, along with Pilates mat classes and other options for beginners, she said.

Another Albuquerque-area commercial real estate player said fitness is a natural for property owners looking to lease vacant commercial storefronts, malls and retail centers.

"Landlords are wise to attract 'internet-resistant' concepts," according to Steve Maestas, a local developer of retail centers, includingLas Estancias. At the South Valley open-air shopping complex, tenant Planet Fitness is one of the chain's better-performing stores, Maestas said.

Indeed, health and wellness and fitness purveyors, along with restaurants and movie theaters, "are becoming increasingly important anchors" to our properties, Maestas said. While brick-and-mortar discount retailers are still strong attractors, Maestas said the future of retail means a lot less in-person shopping, a lot more eating and a lot more sweating.

One of Maestas' properties at 141 Osuna NW recently lured a new tenant - Functional Fury gym owner Dwayne Davis - to a small neighborhood commercial center his company owns. While the square footage of the business at Osuna Plaza is modest, the landlord offered a "generous" incentive - funding tenant improvements - which made the move a no-brainer, Davis said. He said the new space at Second and Osuna NW not only is more functional for the Russian kettlebell classes that are popular at the gym, but it's also much more visible than his previous business address on Edith.

Like Orangetheory, Davis and his personal trainers are a highly focused team helping clients achieve their fitness goals through structured group classes and one-on-one sessions.

"It's been a good fit," he said of the current business space.

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