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Bracha Group
December 2007

Gyms muscle into fringe neighborhoods

By Catherine Curan

Couch potatoes, brace yourselves -- gyms are muscling into underserved areas all over New York City, from the Lower East Side to Bay Ridge to Jamaica to the Bronx.

Powerhouse chain New York Sports Clubs will open a roughly 20,000-square-foot location on 86th Street in Bay Ridge in the first quarter of next year. This follows fast on its Bronx debut on Bronxdale Avenue last month, and an October opening on 145th Street, billed as the first big health club above 125th Street.

After saturating much of Manhattan with approximately 40 clubs, the company is now aggressively going after more Bronx spaces, as well as sites in Washington Heights and Williamsburg. NYSC is also pursuing space on Third and Fourth avenues in Park Slope. Plans call for six to 10 more sites in the New York region annually.

"There is plenty of room for growth in the boroughs," said Gerard Buckley, director of development for New York Sports Clubs' parent company, Town Sports International Holdings Inc.

Even as NYSC beefs up its presence, smaller operators such as Ludlow Fitness and budget-priced chain Planet Fitness are bulking up in these neighborhoods, too. Steady growth in health club membership and revenue over the last decade is fueling the boom.

As tenants, gyms are tapping into demand from fitness-conscious residents of gentrifying areas, and banking on the bottom-line benefit of lower-than-Midtown rents. Landlords, meanwhile, like the foot traffic of a business that serves early birds, a lunch crowd and those who burn off the day's stress after work.

"It brings in additional shoppers," said Laurence Roberts, partner at Arch Brokerage, which represents the ownership of the River Plaza shopping center on West 225th Street in the Bronx, where a 15,000-square-foot Planet Fitness opened in October.

All the activity, however, means newly steep competition in these neighborhoods that is likely to drive up rents. Also, smaller operators hoping to build a few clubs and cash out to a mega-chain like NYSC -- and landlords who sign them on with an eye to this kind of future -- may find it tougher to realize than a new year's resolution to start working out.

According to Buckley, the chain does consider acquisitions, but is now focused on upscale amenities like the four-lane lap pool, juice bar and special family changing room for parents and children offered at the new Morris Park location in the Bronx.

"Unless it's of that quality, we are really not looking to acquire clubs," Buckley said. "Similar quality to what we're building new, that's what our members are expecting."

Yet some customers prefer independent gyms with low monthly fees. That's the case at Ludlow Fitness, which signed up more than 1,000 members since its December 2006 opening by charging just $400 for an annual membership.
Landlord Isaac Escava, whose family has owned property on the Lower East Side for 40 years, did not seek out a gym for the 5,000-square-foot space at 100 Delancey Street. But he realized that an independent gym would serve the gentrifying population while maintaining some Lower East Side charm.

"I don't think that a chain would give the same feel to the street," Escava said, adding that Ludlow Fitness has been a good addition to Delancey.

Mason Goldberg, owner of Ludlow Fitness, is now negotiating for a sublease of an additional 4,000 square feet of basement space at 102 Delancey next door, and seeking a second club in another up-and-coming area. Asking rent for the basement space is $23 to $24 a square foot, a rate he can support with the $400 membership fee. Goldberg is also scouting in Williamsburg, Ditmas Park, Dumbo, Greenpoint and Third and Fourth avenues in Park Slope.

A Bronx native, Goldberg admitted that his knowledge of gentrifying Brooklyn neighborhoods is limited.

"It's a challenge to go through the process again, [finding out] where there is new development but not six gyms in a two-block radius," he said.

He may run into scouts for competitor Planet Fitness during his search. The national chain of budget clubs is looking for additions to its dozen metro-area clubs, including a unit in Staten Island's West Shore Plaza Shopping Center, and the 15,000-square-foot club in the Bronx.

Planet Fitness' local broker, Raymond Villanova, is scouring Queens, Staten Island and Brooklyn. He recently inked a Staten Island lease on Forest Avenue with an asking rent of $20 per square foot for 6,000 square feet on the ground and 6,000 square feet on the second floor. Planet Fitness has letters of intent for locations in downtown Brooklyn and Jamaica, Queens. Villanova aims to complete five deals by year's end for Planet Fitness, which caters to people who are not hard-core workout buffs.

"I'm actively pursuing Brooklyn every day," said Villanova, president of Franchise Realty.


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