Planet Fitness is joining entertainment and food services businesses in taking on leases left unsigned by legacy retailers. The company in the second quarter opened 44 new franchise locations, making for 1,608 stores across its portfolio, executives told analysts earlier this month.
To help lead its continued growth, the fitness chain in June tapped Ray Miolla as Chief Development Officer. He has more than 20 years of real estate development experience in domestic and international franchising from global brands, including Gap Inc., Burger King and Jamba Juice, executives said, according to a transcript from Seeking Alpha.
Many of its new locations will be in shopping centers, Chief Financial Officer Dorvin Lively said, and that could be a welcome boon to struggling malls. The retail sector recently suffered its worst quarter in nine years, with net absorption of 3.8 million square feet in the second quarter, according to a report from commercial real estate research firm Reis Inc. emailed to Retail Dive. The regional mall vacancy rate in the quarter rose 0.2% to 8.6%, though the average mall rent rose 0.3%.
As malls lose traditional department store flagships and other retailers, the path forward is in re-imagining them as "consumer engagement spaces" catering to consumers "less interested in owning things than in having experiences and accessing functionalities," according to a report earlier this year from global management consulting firm A.T. Kearney.
It's a question of following the money. By 2023, consumers will be redirecting an additional $78 billion in spending to discretionary services at the expense of discretionary goods, on top of the $139 billion that has already gone that way, according to a Coresight Research report.
Department stores, which have traditionally served as mall anchors, aren't the only ones to blame for a declining market. In addition to department store consolidation, a shift to services, growing online apparel sales, the aging of millennials and growth in nontraditional channels like rental and subscriptions are the five major forces reshaping malls, according Coresight.
The notion of a "shopping center" is being re-calibrated as bowling alleys, movie theaters and other recreational and entertainment enterprises fill the void. And many are top-name attractions. Cirque du Soleil Entertainment Group, for example, in June announced it had developed indoor family entertainment experiences specially designed for retail locations.
In some areas, malls are developing amusement park-like shopping experiences that take cues from the Mall of America. Earlier this year, plans were approved for a $4 billion retail and entertainment center in Miami, which would make it the largest American mall in size and scope.