Retailers are feeling the impact of weight-loss drugs, with consumer spending habits shifting away from fast food and sweets. According to a recent study, people using GLP-1 medications have reduced their spending at limited-service outlets by 8 percent and on sweets by as much as 10 percent. This shift has already begun to affect major brands. J.M. Smucker, the company behind Hostess snacks, has reported six consecutive quarters of decline. Restaurant chains such as Hooters and TGI Fridays have filed for bankruptcy in the last two years. Others like Wendy’s, Jack in the Box, and Outback Steakhouse have closed numerous locations. Meanwhile, the shift in spending has also impacted the real estate market as landlords seek new strategies to maintain revenue streams. Commercial real estate transactions are increasingly focused on properties that offer experiential value or wellness features to attract a health-conscious demographic.
The Rise of Wellness and Experience
As fast-food sales drop, spending at organic markets has risen steadily since 2022. Gyms are also seeing increased traffic, defying the typical post-holiday slump. “Historically speaking, most gyms can expect to lose 20 to 30 percent of those members,” said R.J. Hottovy, head of analytical research at Placer.ai. “But, according to publicly reported numbers by some of these chains, that’s changed quite a bit.” The attrition curve has flattened, meaning fewer people are leaving once they join.
This trend is becoming visible in commercial real estate. “Wellness and fitness-related concepts are some of the most active in the marketplace right now,” said J.P. Pirraglia of Ripco Real Estate. The focus has moved beyond simple exercise to include recovery concepts, med spas, and large-format gyms like Equinox. Retailers are also looking at experiential spaces to drive foot traffic. Winston Fisher of Fisher Brothers noted that venues like Area 15 in Las Vegas focus on “the consumption of entertainment and the consumption of memories” rather than traditional anchor tenants.
The shift toward health-conscious living has also influenced how brands market themselves. H Mart, for example, has leveraged social media to attract customers. “I went to H Mart because I’ve been seeing so many viral things online and I had to try them for myself,” said Linda Vo, a TikTok user. The grocery chain is expanding into the Sun Belt, capitalizing on its online presence. Luxury retailers are attempting a similar strategy, collaborating with lower-cost brands to appeal to younger demographics who are constantly checking social media trends.
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Big Deals and New Challenges
The real estate market continues to see high-profile transactions. Empire State Realty Trust is seeking to sell 1359 Broadway for around $225 million. BXP has hired Eastdil Secured to market the ground lease at 7 Times Square, with an asking price between $700 million and $750 million. Property & Building Corporation is marketing the 865,000-square-foot 10 Bryant Park for over $800 million. These properties are performing well despite some investors expecting distress in the wake of the pandemic.
Property performance is holding up for major landlords like SL Green Realty. The company reported $264 million in total revenue for the latest quarter, up from $241 million a year ago. Occupancy rates remain high at 94.7 percent. The firm recently signed leases with Ryan Specialty and Legora. Blackstone also reported strong results, with assets under management reaching $1.35 trillion and capital inflows of $70 billion. The firm attributes its growth to investments in artificial intelligence and data centers.
Despite these gains, challenges remain. A group of New York City landlords is suing the Rent Guidelines Board over a recent rent freeze, arguing that the board failed to follow its own data when setting the policy. Meanwhile, the hospitality industry is adjusting to a new labor agreement. The deal between the Hotel Association of New York City and the Hotel and Gaming Trades Council will eventually pay housekeepers and non-tipped staff salaries of over $100,000. Solomon Garber of Erithmitic suggests that lenders must carefully review these contracts, noting that the regulatory environment is changing rapidly. “Lenders should lean into New York hotels and they shouldn’t shy away from union deals, but they have to do a lot more work and have a lot more resources to understand what all the latest changes are,” he said.
