The Stoler Report with Michael Stoler: Max Talpalar

0:00 Speaker 1 Good morning. This is Mike Stolar for the Stolar Real Estate Report. What’s happening in retail today. It’s an interesting feature taking over all over the country different types. So today I have someone who specializes in unique type of retail, the emergence of fitness and entertainment retail, as an anchor and a traffic driver. My guest is Max Telplar, who’s

0:24 the principal at Capricorn Retail Advisors. Thanks for being here. Thank you.

0:30 Speaker 1 Mike, explain what entertainment retail is.

0:35 Speaker 2 Absolutely so within the world of real estate, you’ve got a bunch of different categories. Starting a big picture here, there’s office, there’s industrial, there’s retail, there’s residential. Within retail real estate, you can break that up into several different segments.

0:54 Some of the most well known retail uses will be apparel, cosmetics, right your clothing stores. If you walk down Fifth Avenue, there’s luxury brands. There’s plenty of places to buy watches and shirts. That’s one part of retail. Another part of retail is food and beverage, very well known as well.

1:14 And then the piece that we might talk a little bit about today is the experiential entertainment and fitness world.

1:20 Speaker 1 So let’s talk about those areas which one first.

1:24 Speaker 2 So as a group, I think it’s important to start with the over time how it’s changed. I think for a long time, those uses were not considered as exciting or as premiere as apparel uses were. And you see this in the site selection. Right. When you think of a typical gym, you think of something local, something nearby homes.

1:52 It’s in the suburbs, it’s in a strip mall right. And over the years there have been more and more upgrades to that model. You look at a brand like Equinox, for example, right, they turn that model into a premium place.

2:08 Now it’s not just somewhere to lift weights, but you want to go there, you want to be there, you want to be seen there, and you’re willing to pay a premium price. And with that you have better locations.

2:19 So what once would have been in New York City, you know a brand like you know Blink or Crunch, which are very good brands, but they’re less expensive. Now people are willing to pay. Instead of fifty dollars a month, they’re paying three hundred dollars a month. And I think that’s a good example of the growth of this category

2:37 where it’s not just simple everyday run of the mill, but now you can get some higher revenue from it.

2:44 Speaker 1 I mean ten years ago, I don’t think people would be talking about gyms that climbing, So let’s talk about climbing gyms absolutely.

2:54 Speaker 2 So in there’s within that fitness entertainment sector, there’s a lot of niche activity, right, and so you have your big full service gyms like the Equinoxes and the Lifetimes and so on and so forth. Those la fitness, right, they kind of do a little bit of everything. But now you also have the growth of these niche brands

3:15 as their own respective retail locations. So instead of just having you know, everything kind of in one box, you have, for example, climbing gyms. These climbing gyms are growing all over the country. It is not just the sport of climbing and the act of climbing, but it’s a place.

3:37 It’s a third place, as we say, not home, not work, a third place where people can gather. Climbing gyms are one of those.

3:45 Speaker 1 Okay, and at climbing gyms they’re utilizing yoga and other opportunities.

3:52 Speaker 2 Depends on the brand. So one brand that I that I work with that’s a great client of mine is movement, climbing, yoga, fitness the corporate more than just climbing. They also have a yoga they also have weightlifting, they have group fitness classes.

4:07 Not every gym does that. They do it and it’s been great for them because it creates a universe that someone paying a membership can now go to this location for all of their needs, not just the.

4:19 Speaker 1 Climbing, including padel and pickleball. So another I mean two areas that have really shot up over the last ten years, Over the last three years, I’d say as ten years ago, you wouldn’t have even heard what is this.

4:34 Speaker 2 It’s a great point, you know, that sector, similar to climbing, is another you know, third place for people where are they square? People spending their time outside of home and work with padel and pickleball two very different sports. And for those who are listening, you know, pickleball is more common in the US. Padell is more common all over

4:57 the rest of the world. Be it that, you know, I think it’s just timing. You know, paddle started in Mexico and in the late sixties early seventies it spread to Europe and became very popular, and you know, in the United States, we’d like doing our own thing. So sometimes you know, people have to feel something as homegrown

5:22 in this country for you know, to jump on it.

5:24 Speaker 1 Which are the areas are growing faster paddle or pickleball.

5:29 Speaker 2 So the comparison that I like to make in terms of those two is the super Bowl in the World Cup because here in the US, you know, you hear about all the Super Bowl, it’s the biggest event, and then you see the numbers that the World Cup does and you realize, Okay, the whole rest of the world

5:44 is so big, and that’s pickleball VERUS. Paddle. Pickleball is the American super Bowl, and here it’s super popular, but in other countries it’s not as big. Paddle worldwide is you know, so much bigger.

5:58 Speaker 1 How many how many locations are there of paddle and pickle ball in New York City, So.

6:05 Speaker 2 For paddle there’s really only a handful. Another one of my great clients, Paddle House, has three locations in Brooklyn, in Greenpoint, in Williamsburg, and in Dumbo, with more to come. There are some outdoor brands that are kind of scattered throughout but when it comes to indoor paddle in New York City and that kind of prime area, it’s really Paddlehouse.

6:32 Speaker 1 How do you get the landlord happy to take a startup company like that?

6:37 Speaker 2 Well, the cool thing about having worked with paddle House from the beginning until now is they went from that startup company to now a company that has some credit, which is great to be there for that.

6:48 Speaker 1 Right right, But the landlord has to make a commitment to provide take a lot of space, especially if it’s climbing the higher ceilings they need and other things.

6:57 Speaker 2 Absolutely, you know, I have a really unique perspective on this because you know my background. You know, prior to being a partner Capricorn, I was at Westfield, the big shopping center company, and so I was acting as a landlord there, you know, doing these deals, and I saw everything from the landlord’s perspective. What did what did we

7:19 need as ownership to get these deals over the line, and credits a huge part of that. You have to you don’t want to sign a brand up if they can just disappear in the middle of the night after all the effort you spent and not just doing the deal, but if you gave them ten at allowance, if you

7:35 gave them free rent, if you did landlord work for them. You can’t just have these brands disappear. So for me, having that perspective has been invaluable it and that’s kind of how I tailor our deals. I guess to answer go back to your question, It depends on the on the landlord. Is it a local mom and pop, is

7:55 it a big developer. Is this a one off location or or is this part of a big development. It really just depends, And I think as a representative for these brands, it’s important to know all the options that you have at your disposal.

8:11 Speaker 1 So what are the major difficulties it is for this type of retail getting a location.

8:18 Speaker 2 The biggest difficulty is just finding.

8:21 Speaker 1 A site and a willing landlord a site.

8:25 Speaker 2 And first we got to start with the site. Then we got to hope the landlord’s willing to make a deal. But the physical requirements of the site are incredibly difficult. So for for excuse me, for climbing gyms like movement, for paddle operators like paddle house or pickleball operators, or you know, there’s a trend for trampoline brands. There’s all

8:48 these different brands. You need ceiling heights, and typically you’re looking at, you know, a minimum eighteen to twenty feet in climbing’s case, up to fifty feet. And what you find, I mean, the more you look at the world of existing retail spaces, is that they’re typically not built to that specification. Having been in the mall world, you see

9:14 all this talk about, oh, there’s these vacant anchor boxes, these old department stores, why don’t you just go in there. Well, the unfortunate truth of that matter is a lot of these were built in the seventies and eighties and the specifications were different. You were building them these department stores for clothes, so the column spacing wasn’t that important. Column

9:35 spacing at most of these is twenty four feet between columns, and you can’t use that In a lot of these entertainment uses. Ceiling heights are sixteen feet. Often it’s too low for any of these brands. So if you want to repurpose one of these boxes, it’s so much landlord work that it almost doesn’t make it worth it anymore.

9:55 Speaker 1 So what’s the ideal location.

9:58 Speaker 2 The ideal location is going to be with heavy population density because you want lots of shoppers, you want a wealthy demographic that’s willing to spend some money, and you want to be in somewhere that has an active resident that wants to do things, wants to get out, wants to find new activities. And theoretically there are a lot

10:26 of places like that, but it’s finding those physical requirements within those neighborhoods that’s very difficult.

10:34 Speaker 1 And a landlord who’s willing to take the risk.

10:37 Speaker 2 A landlord who’s willing to take the risk, And because there’s a lot of capital requirements involved, at some point, someone has to pay it right to redo these buildings to build it out. We try to negotiate for our tenants for as much tenant allowance, as much free rent, as much concessions as possible, but then that goes into rent.

10:58 Speaker 1 What’s the future industry besides the paddle ball, pickle ball, climbing? Yeah? What do you what do you see?

11:07 Speaker 2 I see more and more niches popping up as people, as a general trend, look for more things to do now that they’re not spending as much time shopping. Maybe right, there’s online shopping now, So what used to be an activity. Hey, let’s go to the mall, let’s shop. People still do that and they still love that, but there’s maybe less

11:33 of it, and people are drinking less in some cases, so they’re they’re focused more on their fitness. So everyone’s looking for what speaks to them. I just so me personally, I just see a lot of growth in this category.

11:48 There’s a lot of there’s a lot more people that are incorporating the fitness and the entertainment and the activities into their daily routine than there has ever been before.

11:59 Speaker 1 I’d like to thank you for being here, and I think people are very interested in the topic that really hasn’t been discussed. So I wish you the best of luck in the future.

12:10 Speaker 2 Mike, appreciate you having me. This is great.