In the current fitness market the boutique model is king. This category now makes up at least 21% of the $22.4 billion American fitness industry. In London, the myriad of high-end studios, like Heartcore, 1Rebel, and Psycle all point to a growing market. But for new studio owners looking to open or existing owners expanding, the challenges presented by the London property market are substantial. And even if you’re SoulCycle, you’re in the same boat.
It is no secret that in the British capital the demand for property exceeds supply. Aside from the restrictive price tag in appealing areas, fitness studio owners are hard-pressed competing against retailers and other commercial occupiers, and fall under the same planning use classification as casinos and concert halls – which doesn’t bode well with prospective landlords, let alone residents.
For new UK brands and overseas entrants alike, the struggles associated with landing real estate in prime locations can stop growth dead in its tracks.
According to Sandy Macaskill, co-owner of Barry’s Bootcamp in London, the brand has faced plenty of challenges since it first started looking for locations, back in 2011.
“In major US cities like New York, landlords woke up ages ago to the benefits of having a boutique fitness concept in their buildings, but here in London many estates and landlords (and council planners) still think of gyms as musty, dark, unattractive uses for a space.”
“With our retail offering and Fuel Bar, and the fact that we sell spaces in class rather than relying on a membership model, it means our ability to attract passing foot traffic is far, far greater than a traditional ‘gym’. We’re more like a shop, but unlike shops that are always protected by councils, our D2 category is very hard to get permission for.”
This, he adds, is despite the government supposedly encouraging us to do more exercise.
Macaskill isn’t alone in his frustration surrounding the fitness studio’s D2 classification which, aside from drastically reducing a brand’s options, is widely regarded as being completely outdated. Placing gyms and fitness boutiques in the same category as nightclubs, cinemas and other music venues means that companies like Barry’s are subject to regulation of noise, vibration and smell – a string of issues that many landlords would rather avoid.
Robert Lepone, Director of American brand Studio Lagree, which opened in London in October, told Welltodo that while searching for property in the capital he found these types of UK laws to be very prescriptive and narrowly focused.
“Ultimately, there needs to be a balance between the community and enterprise and the reduction in business bureaucracy to enable the growth of small businesses like ours should be encouraged.”
Like many of their peers in the industry, Studio Lagree has settled for a basement space in order to at least open their first studio. A basement or lower ground option means that noise requirements can be more easily adhered to and there are far more spaces available, but it’s possible that other US brands, like SoulCycle, have had their search efforts thwarted – especially if their sights are set on the ground floor.
Edward Moody, a London city Landlord who brokered two major property deals with high-end gym LAX in the St Botolphs building and Virgin Active in the Walbrook, agrees that many of the major players in the fitness industry are now looking for ground and first floor occupancy.
“These spaces are relatively expensive in London compared to the usual basement and lower ground spaces occupied by gyms,” Moody said, estimating rents of up to £70 per square foot for anything the light touches. And whilst basement space is less appealing, it is much more affordable at an average of £15-£20 per square foot in the same buildings. Even given an adequate budget, ultimately the decision lies with the landlord, which brings a whole new set of problems into the equation.
“If a landlord is deciding between an English company that is ultimately governed by English law and a US company that can, for example, file for protection under US law during a dispute, and both are paying the same amount of rent to offer the same kind of service, it is much easier and safer to agree terms with the English company,” Moody said.
In other words, if SoulCycle and Barrecore, a British-owned boutique fitness company, were going head to head in a bid for the same property in London, a landlord is much more likely to offer the space to the homegrown brand – made even more favourable because of its wider portfolio of existing studios in London.
Whilst SoulCycle were unable to comment on any challenges it has faced in finding property in London, because of ‘quiet period’ restrictions during its IPO, market sources indicated that the brand has been actively bidding on central and west London locations. Speaking for a fellow American-born brand entering the market, Macaskill admits that Barry’s had to put in a lot of effort to convince British landlords that their brand could add value to the existing landscape.
“I don’t think our first landlords even knew who or what the Barry’s brand was to be honest, so it didn’t have much of an impact beyond demonstrating that the concept worked, albeit in America, so we had to fight hard to get our initial space. However, the brand has grown so much since we opened in 2013 and landlords are beginning to open their minds to the value of having a brand like ours in their building,” he said.
Generating this rapport in the market allowed Macaskill to secure a second space on the ground floor (with a basement studio) in London’s East, a stone’s throw from Old Street station. This was a property suggested to Macaskill by Resolution Property, who happened to be both the building developer and a Barry’s Bootcamp regular.
Culturally, landlords need to consider whether it suits the overall image of the building to have a visible training facility, especially on the ground floor. In certain areas of London, Moody suggests, residents don’t appreciate the sight of a sweaty gym class and similarly, those inside the facility don’t want to be observed by passers by.
In fact, LAX had originally intended to use the ground floor in St Botolphs as a dance studio for aerobic and HIIT classes, which would have been visible from the street. At detailed design stage, it was decided that ground floor space would be better utilised as an office. Market intelligence, Moody says, may well have influenced that final decision.
Cate Miller, co-owner of Xtend Barre London, soon to open its flagship studio on Marylebone High Street, acknowledges that the vision of the landlord and local community plays a massive part in securing property, which can be extremely challenging.
Speaking to Welltodo, Miller explained: “The whole process can take several weeks or even months, as was the case for us. We actively searched for a year before finding our space and then it took a further year to secure it. Such a scenario is commonplace and will often deter American brands setting up in London.”
“The whole process can take several weeks or even months, as was the case for us. We actively searched for a year before finding our space and then it took a further year to secure it. Such a scenario is commonplace and will often deter American brands from setting up in London.”
But there are ways to overcome said challenges – having counterparts on the ground to fully understand the local marketplace and what the community needs being one of them, or in the case of Basefit, an outdoor fitness training venue, sidestepping the classification complexities entirely.
Launched at the beginning of 2015, Basefit’s outdoor space acts as a much cheaper alternative than an indoor studio and is subject to different regulations.
“I began operating at less than £30k because of the low overheads, which means the business model was profitable from a very early stage. And although it isn’t without challenges (namely British weather conditions) it appeals to a ready made market like the OCR and running communities,” said Andy Milne, Director.
But as new and very serious market entrants face the challenges of an already competitive landscape, classification red-tape and getting their heads around fundamental cultural differences – existing players are upping the ante and leveraging existing relationships with landlords to expand quickly.
And despite its loyal following; whether or not SoulCycle can (and will) break into the market, remains to be seen.