New Muscle for Old Strip Malls
The demise of the midsize grocery store is making 24 Hour Fitness even stronger.
By Nicole Joseph

(Business 2.0) – When Garland Supermarket vacated Houston's Copperfield Plaza four years ago, it took more than just canned goods and cash registers along with it. By closing its doors, the 55,000-square-foot mall anchor turned Copperfield Plaza into a depressing 134,000-square-foot expanse of bleak storefronts and empty parking lots.

Salvation arrived in the form of weight machines, treadmills, and group exercise classes. Last year 24 Hour Fitness, the world's largest privately owned workout chain, moved into the grocery store's abandoned space. The $1 billion company has been repeating that exercise a lot lately, finding a terrific growth opportunity in another industry's collapse. The relentless expansion of big-box retailers like Wal-Mart has been crushing to medium-size grocers; a recent study by Retail Forward showed that more than 10,000 supermarkets have closed in the past decade.

Yet to 24 Hour Fitness, these "neither small nor large" spaces are just the right size. Indeed, since January 2004, almost 35 percent of the San Ramon, Calif., company's 44 new facilities have been built inside the hollowed-out shells of former grocery stores. "These locations are fantastic," says Eric Kelly, senior vice president for development at 24 Hour Fitness. "It's a really good formula for us."

Aside from being the right size for gyms, the erstwhile grocery stores are typically situated on the corners of highly visible intersections and close to residential neighborhoods. They have large parking lots. And best of all, the retrofits cost nearly 45 percent less per square foot than construction of a new facility, says Doron Valero, president of Equity One, a real estate investment trust that specializes in supermarket-anchored strip malls. No surprise, then, that other workout chains, including L.A. Fitness, are also scouting out strip malls. "Our customers visit more than 100 times a year, making our business one of convenience," says Bill Horner, senior vice president for real estate at L.A. Fitness. "The spaces are a logical fit."

But the biggest winners could be strip mall landlords, whose properties are enjoying renewed traffic. Better yet, gyms often beget a whole ecosystem of shops that thrive alongside fitness centers: juice bars, chiropractors, vitamin stores, and massage therapists. Malls like Copperfield Plaza, which once struggled to attract new tenants, are now 100 percent leased. A good fitness routine, it seems, can do as much for your vacancy rates as it does for those love handles. — NICOLE JOSEPH