The Rise of Boutique Fitness

Boutique Fitness Vaults Ahead

The boutique fitness boom has continued to expand and proven its resilience by meeting consumers’ changing tastes and the at-home workout lifestyle. Virtual work has elevated the need for creating and finding a sense of community outside the seclusion of home. The enhanced wellness services these types of fitness centers provide, nourish the body and psyche equally. The flexibility that subscription-based classes offer appeals to those who value variety and choice and sets them apart from mainstream fitness.

Driven mainly by Millennials and Gen Z, boutique fitness centers fill a niche for those willing to pay a premium price to break a sweat in a curated experience. Demographic and social change is inextricably linked to the sector’s rising success. Aggressive competition from other industry players, emerging technology, market saturation, the economy, and workforce trends will define its staying power.

The Sector Gets Pumped

Even before the pandemic had us spinning on stationary bikes or squatting before fitness mirrors, membership to boutique studios outperformed their large format gym counterparts. Between 2013 and 2017, membership at traditional fitness centers grew by 15%, while membership to boutique studios grew by 121%, according to the International Health, Racquet, and Sportsclub Association. The shift to personalized wellness reflected other consumer-facing industries as people began to value travel, dining out, and events over merchandise. Azoth Analytics placed the global boutique fitness studio market at $49.30 billion in 2021. North America leads the market share, followed by Europe and the APAC region. Studios compete for an even larger share of the $30.8 billion U.S. fitness market. They are expected to grow 0.6% in 2023 and be the sector’s highest performer.

“Jack-ed” Be Nimble

The average leased space for a boutique brand is 1,500-3,500 square feet making them more nimble and less expensive to set up than their big gym cousins. For context, Life Time Athletic fitness centers offer its members a premium “athletic country club” experience, average 100,000 square feet, and offer something for every workout aficionado under one roof. According to its website, the company leases more than 16 million square feet of real estate nationwide. Life Time clubs require a large footprint and expansive parking to accommodate their members. A newly built club can cost between $40-50 million and can be found in regional town centers, luxury malls, and larger shopping centers where space abounds.

Jason Baker, Executive Director of X Team Retail Advisors and Principal of Baker Katz, a Houston-based retail brokerage firm, believes that niche services and the speed of technology-driven transformation will accelerate within the fitness industry and may cull certain brands as a result. “Fitness will continue to evolve and be a highly competitive industry,” Baker shares. “I see a trend toward deepened specialization, and not all boutique operators will strive to fit everyone. We may see some brands, which felt like they were on the cutting edge a few years ago, have a short shelf life.”

F45, a franchised high-intensity fitness studio, generally operates in 1,650-2,400 square feet of retail space within smaller shopping centers, strip malls, or on high streets in the urban core or suburbs. F45 is one of ten brands under its parent company XPonential Fitness, a power player in the boutique sector offering fitness brands in various verticals, e.g., yoga, Pilates, stretch, and cycling. They have expanded to more than 2,350 studios across the U.S., Canada, and internationally. Starting costs to open a franchise are estimated between $50-60,000 with various fees and inventory expenses added, and the franchisee must have net liquidity in the low six figures. Lower barriers to entry have helped this fitness subcategory blossom as many potential operators have joined the fray.

Women have embraced boutique fitness studios for their comfortable, inclusive, and welcoming environment. Tim Miller, Principal of Great Street Realty based in downtown Chicago shares his observations from an urban setting with a large population of single professionals. “Health clubs have been a part of people’s social circles pre- and post-pandemic. I think what has changed are the options available and the size of the clubs. We see a pattern and preference, especially with women, for smaller fitness studios rather than the typical large gym.”

Solidcore is a Pilates-based fitness studio offering a notoriously challenging 50-minute workout on its Pilates machine, Sweatlana. Founded in 2013 by Washington D.C. entrepreneur Anne Mahlum, they currently have more than 80 locations across the U.S. Solidcore offers a virtual platform through Equinox’s app where a user can book a class (or classes), buy a membership, and view the schedule. Baker is working with their corporate leasing team to expand in Houston and praises their real estate strategy and disciplined approach. He asserts, “They are not trying to be all things to all people and are highly selective in the types of space they are willing to lease and improve. They are an example of a good operator with an eye on the ball.”

“The idea of fitness has become more sophisticated,” Baker adds. “This means you do not have to work out in a loud and intimidating environment as your only choice. The boutique model allows people to experience healthy accountability and be seen and known as individuals. These studios provide a personal workout that takes the guesswork out of training.”

Live, Work, Play, Shop, and Shred

Growing urbanization and a young working-age population with increasing disposable incomes have helped drive growth in the fitness industry. These urbanites seek to counterbalance their sedentary work-from-home lives by patronizing downtown retail districts to socialize, shop, eat, drink, and be fit. Workout patterns are changing, with many attending the gym in the evenings. There is less need to hit the gym before heading to the office—when the office is home. And increasingly, the gym is a stone’s throw from the front door. Boutique concepts have recognized this shift and are positioning their locations from super-regional trade areas to community shopping centers, small retail spaces on the ground floor of luxury apartment buildings, or tucked into neighborhood town squares. The benefit to landlords is an increase in general foot traffic. A potential concern is the overuse of parking and whether (or not) customers add shopping to their workout routine. Baker and Miller agree that it is unclear if a center’s retail sales get a bump from a studio, but that healthier food and beverage are most likely to benefit. Baker confirms, “I can think of real-life scenarios where you may have a fitness center two doors down from a good, clean organic juice place.”

Some retailers are introducing fitness spaces in-store, using technology to extend their brand beyond the physical, and forming beneficial alliances with hot studio brands. Lululemon introduced a new fitness platform in late 2022. The retailer has expanded programming and partnerships by blending in-person classes in select ‘experiential’ stores with app-on-demand and live-streamed classes with a subscription to MIRROR—now rebranded Lululemon Studio MIRROR. A studio membership unlocks clothing and equipment savings and class discounts. Content is provided by industry-leading small fitness brands, AARMY, Pure Barre, AKT, Yoga Six, and others.

Going The Distance

The rise of digital fitness, offering convenience and flexibility, has been a sea change in the industry and is not going away. The profitability of smaller studios incorporating technologies will continue to attract operators to invest in their expansion, as long as their members feel their value, and have the means to pay the premium. Complementary offerings like recovery, personal wellness, and dietary consulting can expand audience reach. Larry Conner, the CFO for REGYMEN Fitness and the Covery Wellness Spas, believes in the market’s potential. He shared with CBI Magazine, “It is not necessarily fitness people coming in for recovery. Non-fitness people are getting IVs, cryotherapy, and they might jump to the other side of the tracks and get into fitness.”

Miller observes, “Although boutique brands are chipping away at the revenue of larger gyms, it remains to be seen whether the industry as a whole is sustainable. Most gym members are accustomed to paying $50-100 monthly to join a large club with all its services. When you add boutique classes, that figure can quickly reach $300-$400 monthly for many of these specialized fitness brands.” He asks, “Is that a sustainable expense for most people?” The answer may lie in waiting at the crossroads where our strong desire to deepen health and well-being, and economic forces collide.