Flexing Our Commercial Appraisal Muscles
Appraising a Health Club Means Looking at More Than Just the Physical
A recent study conducted by The International Health, Racquet & Sportsclub Association (IHRSA) showed that more than one out of five Americans belonged to at least one U.S. health club or studio in 2017. So, when the owners of a cutting-edge, multi-story wellness center/health club approached Argianas & Associates for a comprehensive market analysis involving consulting and real estate appraisal services, we jumped at the opportunity to flex our appraisal muscles. We knew right away that the physical attributes of the facility were only the starting point. Our valuation efforts required industry and market-specific research, first, before a real estate valuation could be rendered for the subject property.
Let’s Get Physical
This premier, urban health and fitness club features the latest in exercise trends, including an indoor climbing wall, a full-size basketball court, squash and racquet ball courts, indoor and outdoor swimming pools, running track, spinning studio, aerobics studio, spa, physical therapy facilities, men’s and women’s full-service locker rooms, and even a restaurant and café. Obviously, that is an impressive list that speaks to the quality and size of the physical real estate which, as you’d imagine, positively impacted the value.
Brawn and Brains
But the real intricacies of this assignment appeared when Argianas looked past the property’s physical features and performed a comprehensive market analysis. Special-purpose appraisals almost always require moving beyond the real estate characteristics to analyze the specialty needs and services offered by the company. For this engagement, Argianas reviewed demographic and financial trends within the geographic area, while correlating these markers with the health club industry. As expected, these findings suggested strong demand and growth expectations for the coming years.
Patterns in stable employment, industrial and residential development in the area and positive demographic trends such as education and income levels in the current marketplace were all positive factors. By adhering to the Uniform Standards of Professional Appraisal Practice (USPAP) standards and in following best practices, the appraisal of this property type required a careful analysis of the real estate and its club amenities such as; memberships, fitness, dietary and wellness programs, state of the art exercise equipment and goodwill as indicators of value. Argianas’ approach considered all of these factors in its valuation, which led to an accurate market-supported appraisal of the property’s real estate along with all its components.
A Valuation Workout
Argianas also knew demand needed to be documented to determine the subject property’s value accurately. Research confirmed that the aging population had increasing health concerns requiring wellness, health and fitness services that would, in turn, lead to consistent membership growth over the coming years. In this case, the client understood their market; however, our independent third-party appraisal and consulting services coupled with our formal presentation provided the narrative needed for financing and to make crucial internal business decisions. It was quite the “valuation workout” as the final report was market-based and exceeded all the USPAP requirements positioning the client for additional growth.
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