Landmark Links December 1st – Pump You Up


Lead Story…. Over the past few months, I’ve written several times about how restaurants have come to be viewed as a savior of American retail.  I’ve also pointed out why I think this will end poorly as restaurants are getting overbuilt and facing labor and rental cost pressures in addition to pressures from delivery apps that impact their ability to sell their most profitable item: booze.  Today, I want to take a look at another tenant category that has historically been viewed as undesirable to have as a mall tenant but is now getting priority treatment: gyms.

Mall owners have never really liked gyms.  They were historically viewed as bringing in a lower end clientele that was unlikely to stay around and shop before or after workouts.  In addition, they typically require a lot more parking than other users which can hinder the ability to attract other tenants.  However that aversion to gym tenants was back when malls were still popular and not having issues with occupancy.  How times have changed.  Rachel Bachman of the Wall Street Journal took a look at how malls have gone from shunning to courting gyms (emphasis mine):

Mall owners long treated gyms like pool halls, unwanted tenants that attracted lower-rent visitors who were unlikely to shop. Now they’re giving health clubs some of their best real estate.

The reason is twofold. Retailers have closed hundreds of stores across the country amid increasing competition from online shopping, leaving mall owners to grapple with declining foot traffic and rising vacancies. At the same time, fitness centers have boomed and diversified, and a proliferation of smaller, boutique gyms that draw higher-end customers have created more attractive tenants that are easier to accommodate.

The result is that health clubs that were once pariahs at malls are helping transform them into hubs of living, working and playing.

To be sure, this isn’t your old school Gold’s Gym style fitness center.  Many of these gyms are new concepts that look quite different from that old school model.  More from the Wall Street Journal (emphasis mine):

Equinox, the New York-based luxury health club chain, will be an anchor tenant in a $125 million expansion of The Shops at Willow Bend, a 1.3-million-square-foot complex in the Dallas suburb of Plano, Texas.

The two-story, 35,000-square-foot Equinox, slated to open in late 2018 next to Neiman Marcus, will feature a roof deck for classes and events, says John Albright, vice president of development for Starwood Retail Partners, the mall’s developer and operator.

The proliferation of boutique fitness studios, which specialize in things like cycling or boot camp and often command $30 or more a class, has made fitness more attractive and easier to fit into retail centers. Nationwide, membership in fitness boutiques grew 74% from 2012 to 2015, compared with 5% for traditional commercial gyms, according to IHRSA.

“We’re like the nice-looking girl at the dance. Everybody wants to dance with us these days,” says Dan Adelstein, vice president of international development for Orangetheory Fitness.

The Boca Raton, Fla.-based chain has opened more than 700 U.S. locations since its 2009 founding. Orangetheory’s classes lead people through a circuit of treadmills, rowing machines and free weights. Classes typically run an hour, eliminating gym-floor wandering and keeping parking-lot traffic moving, Mr. Adelstein says.

In my opinion, the ultimate issue that will limit how much of a savior gyms are for malls is that so much of the attraction is at the high end.  High end malls have been performing relatively well, by and large and I highly doubt that you are going to see many Equinox, Orange Theory or Soul Cycle locations – all of which cater to an upscale client – going into malls in the struggling middle income communities where the major vacancy issues are most prevalent.  Some of this is also cyclical. It’s far easier for someone to justify shelling out $30 a class for a luxury workout when the economy is good.  It’s more difficult to see that sort of spending behavior in large scale when unemployment is high or a recession hits.  In addition, success begets competition and the growth in fitness boutique membership is likely to result in more competition for those valued $30 per class workout clients.  Much like restaurants, I absolutely see a role for gyms in re-purposing mall retail.  However, this impact is most likely to be felt in high end markets.


Solid: Here are five charts that show just how deceptively strong this long recovery has been.

Put it on Mute: Holiday sales forecast are complete trash.  Follow them at their own peril.

Confidence Game: Consumer confidence is in the middle of an epic boom.

Long Way Down: The natural rate of interest has been in decline since the beginning of the Great Recession, meaning that Federal Reserve policy has likely been a lot less accommodative in recent years than generally believed.


Reborn: Believe it or not, there used to be a Sears in swanky Santa Monica.  Not surprisingly, it went under and the vacant space is now being re-purposed for upscale offices and shops as well as restaurants by a holding company owned by none other than Eddie Lampert, the billionaire hedge fund manager who ran Sears into the ground in the first place.


Now for Some Good News: The FHFA has decided to increase conforming loan limits for the second straight year.

In the Money: It’s a really good time to own a less expensive house as scarcity at the low end due to a lack of new construction and investors buying up properties for use as rentals drives price appreciation at a rate that now significantly outpaces higher end homes.

The Tax Man Cometh: Why economists love property taxes but taxpayers generally hate them.


Bubble Watch: Bitcoin’s theoretical valuation makes the dot-com bubble look like a rational financial episode.  See Also: Important to remember – supply, not price is what ultimately pops bubbles and Bitcoin is theoretically limited in supply.  Here’s why that may not be entirely true.  And: At it’s core, Bitcoin is a new financial instrument that many of the people investing in it do not fully understand and:

“each (previous bubble) collapse has been fueled by a new, poorly understood financial contraption that introduces leverage into a system that is already unstable.” – Scott Nations

I suppose that the one interesting positive to this is that previous bubbles have been built on leverage but up until now, Bitcoin investment or speculation is being done without leverage.  However, the CME futures launch in two weeks could change this…..

A Sucker Born Every Minute: This startup raised millions to sell something called ‘brain hacking’ pills but their own study found that coffee works better.

Difficult Road: Amazon’s last mile delivery service is highly reliant on independent contractors with their own cars and looks an awful lot like Uber.

Chart of the Day

New home sales are still terrible when adjusted for population.


‘Tis the Season: A Minnesota woman was arrested for murdering her Thanksgiving guest during a dispute over a crack pipe.

Deep Cover: The world’s first “smart condom” which records and grades mens’ performance is now officially a thing.

Sign of the Apocalypse:MTV is bringing Jersey Shore back for some inexplicable reason.  Apparently 2018 is going to be off to a wonderful start.

Please Make it Stop: America’s flat earth movement seems to be growing.

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