A gym or fitness centre investment is, at its heart, a bet on a large, well-located box and the durability of the operator inside it. Unlike a small office suite or a strata shop, a fitness asset is usually a single, purpose-fit tenancy where the building's physical attributes, the lease terms, and the strength of the operator's business model are tightly bound together. The buyer is acquiring not just floor area, but a use that has spent the past decade migrating into formats most investors associate with industrial sheds and large-format retail.
Fitness has become one of the more interesting alternative-use plays in Australian commercial property precisely because it is flexible about where it sits. A 24-hour franchise can occupy a former warehouse, the back of a homemaker centre, a suburban high-street tenancy, or a basement under an office tower. That adaptability is part of the appeal, but it also means the income is only as good as the operator's covenant and the building's ability to be re-let if that operator leaves. This guide sets out what the asset really is, how the tenancies are structured, where the risks sit, and how a buyer should approach due diligence.
The category spans a wide range of business models, from large corporate health clubs to lean, automated 24-hour franchises and small boutique studios. Each carries a different rent profile, a different covenant, and a very different re-leasing story if things go wrong. Understanding which sub-type sits behind the lease is the first task for any buyer.
The building can be re-let to almost any large-format use; the rent rarely can. A fitness investment is priced on the operator's ability to keep paying, and tested on what the box is worth empty.
What you are really buying
A fitness centre is typically a high-clearance, large-floorplate tenancy with significant tenant-installed fit-out: rubberised flooring, mirrored walls, change rooms, showers, sometimes a pool or sauna, and a heavy electrical and HVAC load. Much of that fit-out belongs to the tenant and walks out the door at lease end. What stays with the landlord is the shell, the services capacity, the parking, and the location. The investment case therefore rests on three pillars: the strength of the covenant paying the rent, the quality of the lease, and the alternative-use value of the building if the gym vacates.
Operator types and what they signal
- 24-hour franchises — Anytime Fitness, Jetts, Snap Fitness, Plus Fitness. These are lean, lightly staffed, access-card models occupying roughly 400 to 800 square metres. The franchise brand is strong, but the lease is usually signed by an individual franchisee, so the covenant is a small business, not the franchisor.
- Big-box health clubs — Fitness First, Goodlife Health Clubs, Genesis. These take large floorplates (often well over 1,500 square metres), carry pools and group-class studios, and are frequently leased by a corporate or well-capitalised operator. The covenant is stronger, but the tenancy is harder and more expensive to backfill if it fails.
- Boutique and functional studios — F45, BFT, Club Pilates, F45-style HIIT and reformer-Pilates concepts. Smaller footprints, lower rent quanta, and covenants that range from solid multi-site operators to single-studio owners. Brand churn in this segment has been real.
- Swim schools and aquatic centres — a distinct, capital-heavy sub-type with pools, specialised plant, and a very narrow re-use profile. These can offer long, sticky tenancies but concentrate risk in a single purpose-built improvement.
The headline brand on the door is not the covenant. A buyer must always confirm the exact legal entity on the lease and whether the franchisor stands behind it through a guarantee. This distinction between a corporate covenant and a franchisee covenant is the single most important variable in the category, and it is examined more closely below.
1 Why fitness migrated to large-format and industrial space
The economics of a gym favour cheap floor area with good access and parking over premium retail frontage. That pushed operators towards industrial-zoned sheds, the secondary space behind large-format retail centres, and converted warehouses on arterial roads. For landlords, this created a useful demand source for buildings that might otherwise sit in the thinner end of the leasing market, and it gave industrial and large-format owners an additional tenant category to draw on.
This migration matters for buyers in two ways. First, it means a fitness tenancy often sits inside a building whose underlying value is set by its industrial or large-format alternative use, which can be a source of comfort. Second, it means fitness now competes with, and sometimes occupies, the same stock as warehousing and trade uses, so local supply and planning controls for those uses feed directly into the re-leasing prospects. Investors comparing categories should read this alongside the broader industrial property picture, since the two are increasingly linked.
2 Lease structures, fit-out and incentives
Fitness leases tend to be longer than standard retail or small-office leases, often with initial terms of five to ten years plus options, reflecting the heavy fit-out the tenant must amortise. That length is genuinely valuable, but it should be read together with the review mechanism and the incentive that was given to secure the tenant.
Rent reviews and term
Most fitness leases use fixed-percentage or CPI rent reviews, with market reviews sometimes appearing at option. The longer the lease, the more the review structure drives total return, so a buyer should model the income profile across the full term rather than relying on the passing rent at settlement. A long lease on a flat or sub-inflation review is a different asset to a long lease with firm annual increases. The way these reviews interact with the weighted average lease expiry determines how secure the income looks to a valuer and a financier.
Outgoings and the net position
Whether the lease is gross, net, or semi-gross changes the real yield materially. Fitness tenancies carry high water, power, and HVAC running costs, and a buyer needs to know who bears them. The lease type governs the answer, and the detail of recoverable versus non-recoverable items is where headline yields quietly erode. Reviewing the lease against the principles in any guide to commercial lease types is essential before relying on a stated net figure.
The fit-out and incentive question
- Who paid for the fit-out. A landlord contribution amortised into the rent inflates the headline yield and creates a reinstatement and re-fit liability later. A tenant-funded fit-out is a stronger sign of commitment.
- Incentive levels. Large rent-free periods or fit-out contributions raise the face rent above the effective rent. Buyers should always test the effective rent, not the face rent.
- Make-good. Heavy gym fit-out can create a significant reinstatement obligation, but make-good is only as good as the tenant's ability to pay it at the end of a lease they may have already defaulted on.
3 Covenant strength: franchisee versus corporate
The most common mistake in this category is assuming the brand is the tenant. For most 24-hour franchises, the lease is held by an individual franchisee operating one or two locations. If that franchisee fails, the franchisor is generally under no obligation to step in, take over the lease, or keep paying rent, unless a specific guarantee says so. The covenant is therefore a small business, and should be assessed as one.
| Covenant type | Typical tenant | Income security | Re-leasing exposure |
|---|---|---|---|
| Corporate / listed operator | Big-box health club run by the brand owner | Stronger; backed by group balance sheet | High backfill cost, but motivated to negotiate |
| Multi-site franchisee | Operator of several franchised gyms | Moderate; diversified across sites | Brand may assist re-franchising the site |
| Single-site franchisee | Owner-operator of one location | Weaker; concentrated business risk | Vacancy risk falls entirely on the landlord |
The work here is conventional but unskippable. A buyer should obtain the tenant's financials where the lease entitles them, search the entity, identify any personal or franchisor guarantees, and assess the membership base that ultimately funds the rent. Proper tenant due diligence separates a long lease that will be honoured from a long lease that merely looks secure on paper.
4 Membership economics and tenant durability
Rent is paid out of membership cash flow, so the operator's unit economics are part of the investment. The 24-hour model relies on a high ratio of members to floor area, low staffing, and direct-debit recurring revenue. It is resilient when memberships are sticky and the catchment is dense, but vulnerable to a saturated local market, a new competitor opening nearby, or a downturn in discretionary spending.
Buyers cannot audit the tenant's business, but they can read the signals. A site that has traded for several years under the same operator, in a catchment without obvious oversupply, with a fit-out the tenant clearly paid for, presents a more durable income than a brand-new franchise in a corridor where three competing gyms have opened in eighteen months. Membership models also concentrate risk in discretionary spending, which is a useful counterpoint to the defensive, non-discretionary tenancies covered in profiles such as the medical centre category.
5 Site requirements that drive value
The physical building is what protects the downside, because it is the thing that can be re-let. The features that make a site work for a gym overlap heavily with what makes it lettable to other large-format uses.
- Parking and access. Fitness is car-dependent in most suburban catchments; insufficient parking caps both the operator's membership and the re-leasing pool.
- Ceiling height and clear span. High clearance suits functional-training rigs and group classes and keeps the building useful for industrial or large-format backfill.
- Services capacity. Power, water, drainage, and ventilation for change rooms, showers, and pools are expensive to install and a real point of difference.
- Exposure and signage. Arterial-road frontage and prominent signage support both membership and value.
- Floorplate and divisibility. A box that can be split into two tenancies is easier to re-let than one that only suits a single large occupier.
6 Yields, pricing and re-leasing risk
Fitness assets generally trade at yields wider than blue-chip net-lease investments such as service stations or major-tenant fast food, reflecting the franchisee covenant risk, the discretionary nature of the income, and the specialised fit-out. Where the covenant is a corporate operator on a long lease, pricing tightens towards the stronger end of the commercial spectrum; where it is a single-site franchisee, the market demands a meaningful risk premium. As always, these relationships move with the cycle and with interest rates, and any indicative figure should be benchmarked against current published broker series rather than treated as fixed.
The central pricing tension is the gap between the passing rent and the building's value vacant. If the gym is paying a rent that only a fitness operator would pay, and the building's alternative use would command less, the investor carries reversion risk on any re-let. A buyer should always ask what the box is worth as a plain industrial or large-format tenancy, because that is the floor the income rests on. Understanding how these dynamics feed into commercial property yields is core to pricing the asset correctly.
Alternative use as the real safety net
Because much fitness stock sits in industrial or large-format buildings, the re-leasing pool is often broader than the gym use alone suggests. That optionality is the genuine defensive feature of the category, but it depends on zoning, the building's specification, and the local supply of competing space. A buyer who has confirmed the building can revert to a conventional use, at a rent that still services the debt, holds a far more comfortable position than one relying on the next gym to appear.
7 Due diligence and buyer-side checklist
Fitness investments reward a disciplined, adversarial review. The lease and the covenant carry the income; the building carries the downside. A buyer's due diligence should cover, at minimum:
- The exact tenant entity and any franchisor or personal guarantees, not the brand on the signage.
- Lease term, options, review structure and incentives, modelled across the full term to find the effective rent.
- Outgoings recovery and the true net position, including the high services costs typical of fitness.
- Fit-out ownership and make-good, and the reinstatement liability that sits behind the income.
- The alternative-use value of the building, including zoning, services, parking and divisibility.
- Local competition and catchment, since membership saturation directly threatens the tenant.
- Building condition and services, with proper inspections of plant, pools and structure.
For buyers considering this asset inside superannuation, the same checklist applies with additional structuring care. The interaction between a specialised single-tenant asset and the borrowing rules makes professional advice essential before committing through an SMSF. As with all property decisions in this category, the figures and regulations move over time, and this article is general information rather than personal financial advice.
Frequently Asked Questions
Are gym and fitness centre properties a good commercial investment?
They can be, but they sit at the higher-yield, higher-risk end of the commercial spectrum because the income often rests on a franchisee covenant and discretionary membership spending. The strongest cases combine a corporate or proven multi-site operator, a long lease with firm reviews, and a building that can be re-let to industrial or large-format uses if the gym vacates. Each of those factors should be tested independently rather than assumed.
Is the franchise brand or the franchisee the actual tenant on the lease?
For most 24-hour franchises such as Anytime Fitness, Jetts or Snap Fitness, the lease is signed by an individual franchisee, not the franchisor, so the covenant is a small business rather than the national brand. The franchisor is generally under no obligation to keep paying rent if that franchisee fails, unless a specific guarantee is in place. Confirming the exact legal entity and any guarantees is the most important step in due diligence.
What happens to a gym property if the tenant leaves?
The building's value then rests on its alternative use, which is why fitness stock in industrial or large-format buildings is generally safer than purpose-built aquatic centres. A buyer should establish what the box is worth as a plain warehouse or large-format tenancy, because that vacant-possession value is the real floor under the income. Heavy gym fit-out usually belongs to the tenant and may need to be removed under make-good obligations.
Can I buy a gym or fitness centre property through an SMSF?
It is possible, as commercial property can be held in a self-managed super fund and, where borrowing is involved, acquired under a limited recourse borrowing arrangement. However, a specialised single-tenant asset with franchisee covenant risk demands careful structuring and a clear view of liquidity and re-leasing risk. This is general information only, and specific advice from a licensed financial and tax adviser should be obtained before proceeding.