Will NYC’s Boutique Fitness Studios Survive Coronavirus?
In mid-March, just as coronavirus was putting America on permanent lockdown, a lease was signed in East Williamsburg for a boutique gym with an unusual, and perhaps unfortunate, name given the circumstances: CrossFit Outbreak.
It was not CrossFit Outbreak’s first location in Brooklyn; it also has locations in Clinton Hill, Bed-Stuy, Bushwick and South Williamsburg.
But it might be the last lease a boutique fitness brand signs for quite a while.
For the past few years, fitness studios have exploded in New York City, from tony Pilates studios in Flatiron to gritty crossfit gyms in East Williamsburg warehouses. Many of these small businesses, facing an unprecedented drop in revenue after shutting their doors because of the coronavirus outbreak, wonder whether they’ll survive the pandemic as they struggle to pay their rent and instructors. To make matters worse, the federal paycheck protection program has failed to help the smallest of these businesses, which are often minority- and women-owned.
The stay-at-home order seems to be doing the most damage to fitness businesses that charged a hefty premium for their classes because they required specialized equipment. That includes cycling studios, boxing gyms, reformer-heavy Pilates studios and many other kinds of high-end fitness concepts that are basically impossible to execute in a New York City apartment.
Tammeca Rochester, who owns a small upper Manhattan cycling studio called Harlem Cycle, said that her revenue is down 90 percent compared to this time last year. All 10 of her instructors are independent contractors, which means that she can’t use funding from the federal Paycheck Protection Program (PPP) to cover their pay. She received $1,800 from the program, which was supposed to account for the cost of what she pays herself for two months. The amount barely makes a dent in the monthly rent for her 1,300-square-foot studio space on Adam Clayton Powell Jr. Boulevard by West 138th Street.
When she realized that other small fitness operations in her neighborhood were in a similar position, she put together an online fundraiser for Harlem Cycle and three other local businesses — Women’s World of Boxing, JTW FIT and 2Legends Athletic Club. The GoFundMe raised about $15,600, which, while helpful, isn’t enough to cover a month of rent for all four studios.
Like many fitness club owners, Rochester had made the transition to livestream classes in order to help generate some revenue during quarantine.
“We’ve pivoted to some mat-based workouts you can do at home, but our clients aren’t very interested in them,” she said. “They want their number one workout, which is cycling.”
Rochester had been able to raise some extra revenue by leasing out all 15 of her studio bikes to her top clients, but that hasn’t been enough. Up to now, 90 percent of her revenue had come from people paying for individual classes or class packs rather than monthly memberships. She has only a handful of members paying full freight to keep the studio afloat.
She said that she had been able to pay her rent for the past two months, but she was negotiating an abatement or deferral with her landlord for the month of June. This summer, she had also been planning to open a new 1,500-square-foot location at the under-construction, 17-story residential building at 62 West 125th Street, between Fifth and Lenox Avenues. Now, she’s at a loss for how she’ll pay rent on the new space.
Meanwhile, at Harlem strength and conditioning studio JTW Fit, co-owner Jahkeen Washington has been able to manage the rent on his 1,500-square-foot spot at 2235 Adam Clayton Powell Jr. Boulevard with revenue from livestream classes. His online classes are cheaper — $10 a class versus $25 a class under normal circumstances — but he’d been able to make up some of the shortfall by adding other types of classes. After expanding his schedule to 21 classes a week and adding yoga and Pilates to his typical strength and bootcamp offerings, he has been able to cover his costs and earn a modest profit. However, his revenue is still down about 50 percent compared to January.
PPP has not exactly come to his rescue either.
“We were too small” to qualify, he said. “We’d just opened [in August 2019] so we didn’t have enough time to pull in enough money to talk about significant payroll. With [the cost of] getting the studio up and running, we wanted to pay that stuff back instead of giving ourselves anything.”
Other fitness operators have struggled with whether to bring back their laid-off employees using PPP funding. Pamela Brown, who co-owns Align Brooklyn in Park Slope with her husband Christopher, hasn’t felt comfortable rehiring her employees because they earn more on unemployment.
“It would be very difficult for me as a human being to say, ‘I insist you get on the train, risk your life and make less money doing it,’” she said. “I have to say you declined to be brought back. And then you may not be eligible for unemployment.”
The federal payroll program also requires that owners spend all of the loan by June 30. But she thinks it’s unlikely that she’ll reopen by that date, based on the governor’s phased reopening plan.
Her business is bringing in less than 20 percent of its typical revenue, and she hasn’t paid rent on her studio at 579 Fifth Avenue for the past two months. To help offset her losses, she has built an on-demand library videos of her Pilates, yoga and high intensity training classes, along with videos on stress relief, nutrition and meditation. She also offers three livestream classes a day.
“The state has closed our business down, and it seems like if we’re on pause, then shouldn’t our landlord also be on pause?” she asked. “It seems unfair frankly that landlords are allowed to collect rent for commercial spaces that are closed.” She added that Cuomo “has put literally no pressure on any of the commercial landlords to be flexible and negotiable in collection of rents. And in doing so he’s shifted all of the burden onto business owners.”
Reopening also presents a huge challenge for large gyms and small fitness studios alike. It’s unclear when exercise facilities will be allowed to reopen in New York City, but many owners are preparing to be closed at least through the end of June, if not longer. They are all working on plans to make customers feel comfortable returning to the studio after the stay-at-home order is lifted, both by enforcing social distancing and conducting additional cleanings. Many small studios plan to admit half the number of customers that they would have before coronavirus. But that presents a big problem for their revenue. And continuing discounted classes over Zoom may not generate enough cash to keep these businesses afloat.
Large gym chains and fitness franchises are not facing the same kinds of financial hardships yet. However, many have developed reopening plans to help entice customers back to spaces where the equipment is touched by dozens or hundreds of gym rats a day. Equinox, for example, recently announced that it would disinfect equipment and surfaces three times a day and once overnight, require members to book 90-minute appointments in advance to use the gym, and ask members to wear face masks, use hand sanitizer and disinfect their phones under UV sanitizing lights. Showers, steam rooms and pools will remain closed for the initial reopening. Crunch Fitness has spaced its equipment six feet apart and put up signs telling its members to clean pre- and post-workout. SoulCycle, which is owned by Equinox, has also said its showers and steam rooms would be closed for the foreseeable future, and class capacities would be reduced.
Group fitness, much like restaurants, is a business that’s mostly built on the number of customers that come in the door on any given day. And if new legal requirements, along with common sense, force studios to allow only ten people into a class that would normally have been 20 or 30, many businesses will struggle to pay their rent.
“As a studio owner you’re asking me to reduce my capacity requirements and my business is based on capacity,” explained Julian Barnes, who organizes conferences and webinars for the boutique fitness industry through his company, Boutique Fitness Solutions. “The way you maximize revenue is with volume. Now you can’t have the same volume, but you have the same lease.”
On top of paying their rent, gym and studio owners will be facing higher cleaning costs.
“It’s a tremendous amount of pressure on studio owners until there is a widespread amount of testing and tracing,” he said. “We need testing and tracing to get people to come back into [workout] facilities.”
The crisis is going to push many owners to revamp their businesses in a significant way, which may not be a bad thing in the long run, he said.
“Some people are going to come back from this more well-run, with more resources and business models,” said Barnes. “Eighteen to 24 months out they are going to say that this made them a better business, but it’s going to be challenging to get to that point.”
It’s unclear whether landlords will be willing to renegote leases or offer abatements to fitness studios that have to serve fewer customers. Veteran retail broker James Famularo, who runs Meridian Capital’s retail leasing team, felt that landlords would be flexible because they don’t have much of a choice.
“The city could say, ‘You can only be 25 percent full, you can only be 50 percent full,’” Famularo explained. “More than likely [studio owners] will go to the landlord and say they are going to only pay half rent. But most landlords are going to work with tenants because no landlord wants a vacant space right now. I think they’re going to work with tenants and cut rent in half, defer rent, abate rents.”
Of course, some businesses are navigating the pandemic better than others. Amy Glosser, the owner of Park Slope cycling studio Byklyn, said she’d managed to retain about 70 of her monthly members. She has also leased out all of her bikes to them. The revenue has allowed her to continue paying rent for her Flatbush Avenue studio and to offer about 10 free fitness classes a week that don’t require a bike, including yoga, Pilates and HIIT.
Even so, she has a hard time imagining when New Yorkers will feel comfortable working out in group settings again.
“People are scared and they don’t yet see the path to reopening,” she said. “People still view going out to the grocery store as preparing for battle. Until that changes with this phased reopening — and people start going to restaurants outside, start going to the bank, socializing in the park in groups — gyms cant open until that happens.”
And Kelvin Gary, the owner of Body Space Fitness on 14th Street in Chelsea, is one of the few small studio owners in New York City who had a plan for the virus.
While taking a business course at Goldman Sachs a few years ago, he developed a backup plan that would keep his strength training studio operating in the event of a fire, global pandemic or some other catastrophic event. In 2015, he had been approached by tech developers who were assembling an app for remote fitness training, and he decided to put the app, called Lift Sessions, to good use. He set it up so his trainers would be able to train clients remotely via a video chat feature and post exercises directly to the app.
In early March, he heard that the state might shut down fitness studios in response to coronavirus. He taught all ten of his trainers how to use Lift Sessions. Then he began asking clients if they wanted to switch over to using the app rather than training in person. 200 of his 270 personal training customers opted to make the switch to online personal training once Gov. Cuomo issued the stay-at-home order in late March. By the time April rolled around, he had gotten his group fitness classes up and running over Zoom, at a discounted rate. His revenue has only declined by about a third compared to this time last year.
Gary has made $12,000 worth of improvements to his third-floor space at 47 West 14th Street, including upgraded air-conditioning units with ultraviolet light sanitizers, and splitting his studio into separate personal training stations so clients can train with dedicated equipment at least six feet apart. He is confident that people will return for personal training, but he doesn’t have plans to bring back group classes any time soon.
“The vast majority of people may say, ‘I don’t want to come back,’ ” he said. “But there will be a market for people who want to get back to a gym and people who want to get back to doing personal training. Even with the people moving out of New York City and with the people who don’t want to come to a big box gym, I think there will still be a market for people who want to do things face-to-face.”