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Gym growth represents an opportunity for commercial landlords

April 1, 2019

There were more than 2.3 million actively trading businesses in Australia in June 2018, an increase of 3.4% from June 2017 according to the latest figures released by the Australian Bureau of Statistics (ABS). This increase represents the fifth consecutive year of growth of businesses in the Australian economy.

Nationwide the construction industry continues to have the highest number of active businesses. There were some increases in other sectors reflecting the changing business landscape. For example, the number of health centres and gyms has increased by 50% since 2013/14 from 3,163 to 4,723 businesses.

Simon Winter, Principal of Raine & Horne Business Sales, who has sold many gyms, advises that owning a gym isn’t a licence to print money. “If you own a gym, you must regularly turnover equipment to satisfy member demands,” he says. “Technology moves fast in the gym industry, and before you know it, your whizbang new rowing machine needs replacing. Members expect the latest and greatest equipment; otherwise, they’ll look elsewhere.”

Gym ownership is not just about the initial investment either, adds Simon. “It’s about the ongoing equipment costs, and then owners expect to sell the gym for the earth because of the expensive equipment. It doesn’t happen.”

Simon’s best tip for those considering buying a gym is to ensure the vendor can hand over some of the annual or monthly gym memberships on a pro rata basis. “Many owners when they receive memberships 12 months in advance tend to spend this money,” he warns. “This leaves the buyer with no cash flow to cover the running expenses of the gym. Unless the outgoing owner passes on this income, walk away from the deal.”

That said, more gym memberships are paid on a weekly or monthly basis. “Pay as you go memberships solve the cash flow problem for the new owner,” said Simon. “Although, around 25% of the memberships are paid in advance to the gym’s we look at.”

If you’re interested in finding space for a gym, contact your local Raine & Horne Commercial office. If you’re interested in buying or selling a gym or health centre contact Raine & Horne Business Sales on 08 8361 3074.