Visiting a climbing gym has typically involved driving to an industrial area on the far side of town. And in many cities, this is still the case. Just finding a building suitable for a climbing gym typically forces operators into warehouses with high ceilings and amenable zoning. Add in the high cost of new construction and real estate, prime retail locations are a no-go for the average climbing gym operator.
More recently, however, there’s a trend for large, multi-facility operators looking to place their business not where there’s cheap real estate, but in convenient and high traffic locations that are more typical for retail establishments.
At the same time, malls and shopping centers are looking to replace their traditional big-box and mall anchor tenants with what modern shoppers want: experience over stuff.
Movie theaters and malls have been pairing up for years. But shopping center operators have been increasingly open to recreational options like climbing gyms, trampoline parks and other experiential activities.
Nationwide, there has been about a 6 percent increase in the amount of large shopping center space filled by tenants in the recreation business in the last four years, Suzanne Mulvee, research director and senior real estate strategist at the CoStar Group told the Chicago Tribune.
But Americans’ shopping habits are changing as they shift spending to experiences, not stuff, and online buying options grow easier than ever.
One such gym operator is Salt Lake-based Momentum Climbing. Momentum has served as the anchor for a neighborhood strip mall since opening their Millcreek location in 2014. The 24,000-square-foot location filled a spot left empty by Smith’s, a grocery store that was acquired by Kroger Co.
CEO, Jeff Pederson was quoted in a recent Bloomberg article as saying, “Until Amazon invents a way to go rock climbing online, we are not going to be at risk of becoming a short-lived tenant for these landlords.”
That doesn’t mean a recreational tenant is a landlord’s first choice, since such companies often can’t afford typical retail rents, but there just aren’t many retailers looking to add more big-box and anchor spaces, Lynne Brackett, first vice president with real estate firm CBRE told the Tribune.
“If they’re doing a deal with an alternative user, they’ve probably exhausted the possibility of getting a retailer in there. But this is a good alternative,” Brackett said.
Another gym operator that is moving into downtown and prime shopping center locations is California-based Planet Granite which is opening two Chicago locations in 2018. “Climbing has become more mainstream, so now we’re an acceptable use,” Planet Granite founder Micky Lloyd told the Tribune. “Landlords who 10 years ago would never have talked to us are actively courting us at this point.”
Climbing is Good For Business
In the past two years, the mall property manager where Momentum is located has seen increased foot traffic and sales are up at the nearby Five Guys Burgers & Fries, Savers Thrift Store and Menchie’s Frozen Yogurt businesses. The gym also has a symbiotic relationship with the REI just down the sidewalk.
The move toward experience activities in malls is bringing in more customers, but it comes at a cost. Because of climbing gym’s unique building requirements, many have to invest more in construction than the typical big-box store. Pedersen said his company put $2 million into tenant improvements to raise the roof, allowing for a taller building that could accomodate the climbing walls.
When gyms are approached by developers and property owners, they are encouraged to sign longer-term leases. John Dahlstrom, property manager at Wasatch Commercial Management told Bloomberg:
Momentum has a 20-year lease because they have an “unusual use.” An average lease for retail stores is five years, he said.
“That’s part of the dilemma with this,” Dahlstrom said. “At the end of the lease term, it’s their cost and not the landlord’s cost to remove all those things and then make the building back into something that we can use.”
As interest in climbing spreads and the business of selling climbing is seen as a good bet, Pedersen expects gyms to move into centers run by larger mall operators. “This is the evolution of gyms located in busier and busier retail-type locations,” Pedersen told Bloomberg.
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