AN INDUSTRY VIEW
INDUSTRY COMMENT
FINDING ITS FEET THE LEISURE PROPERTY MARKET
The leisure property market is emerging from a challenging period following the pandemic and inflation surge. Rents and tenant demand are recovering. Void levels are decreasing and are currently around 5 - 8% in leisure and retail parks – and gyms and health clubs are among those tenants taking void space. Gyms are, however, competing with big-box leisure users such as adventure parks, mini-golf and virtual reality parks, all of which are expanding rapidly, less impacted by the energy price spikes that have been so acute for food and beverage operators, for example. This is strengthening rents and reducing incentives in the best locations for 8,000 – 25,000 sq ft units. The leisure real estate investment market has suffered due to rental payment problems during the pandemic and rising interest rates, which have caused a large fall of some 30% in leisure values. The market is now stabilising, however – and gyms, hotels and health clubs are among the sectors leading the recovery, with investors keen on their operating strengths. Values have improved for these sectors and investor demand is growing strongly, especially where long leases are on offer to real estate investors. Sale and leaseback deals will be more lucrative, but only where strong financial covenants are on offer. The bottom line: the real estate market for leisure and heath is improving at a slow but steady pace. As inflation and interest rates come down, the recovery should accelerate rapidly.
Gyms are competing with big-box leisure users. This is strengthening rents and reducing incentives in the best locations for 8,000 – 25,000 sq ft units. ASHLEY BLAKE CEO, Otium Real Estate Chairman of the Leisure Property Forum
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STATE OF THE UK FITNESS INDUSTRY REPORT 2023
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