Just over 50% of retail square footage leased in 2025 went to service businesses — the first year on record that service tenants have exceeded goods-selling retailers in leasing activity. This is up from approximately 40% fifteen years ago. Within the service category, fitness, wellness, and medical tenants account for roughly 30% of service leases — up from about 20% in 2016. The shift is not a crisis. It is a structural change in how commercial corridors are tenanted, and merchants who understand what the change means for their foot traffic patterns can adapt more effectively than those who are surprised by it.

Storefront Lease Activity by Tenant Type
Source: CoStar Group retail leasing data · JLL Retail Outlook 2026

A gym that opens next to your shop is not simply a new neighbor. It is a foot traffic generator with a specific schedule, a specific customer demographic, and a specific relationship to the products and services that its members want before and after their workouts. Understanding that relationship — and adapting your merchandise, hours, or programming to serve it — is the practical response to the service tenant transition.

What Service Tenants Do to Foot Traffic Patterns

Traditional merchandise retailers generate relatively continuous foot traffic during operating hours — a steady flow of customers browsing, shopping, and purchasing across the day. The pattern varies by category (lunch-hour concentration for office-adjacent retail, weekend concentration for destination shopping), but merchandise retail generally produces daytime traffic that is accessible to adjacent businesses throughout operating hours.

Service tenants generate more concentrated, schedule-dependent traffic. A fitness facility's peak hours are early morning (6 to 8 a.m.) and post-work (5 to 8 p.m.), with lower midday activity. A yoga or Pilates studio has a similar pattern with morning classes as the primary peak. A medical or urgent care tenant generates appointment-driven traffic that may concentrate in certain windows depending on scheduling patterns — often late morning and early afternoon.

For adjacent merchants, this means that the foot traffic pattern changes when a service tenant moves in, even if the total volume of foot traffic is comparable to what the prior merchandise tenant generated. A coffee shop adjacent to a gym is positioned very differently than a coffee shop adjacent to a clothing boutique: the gym drives early-morning customers who want caffeine before or after their workout, creating a natural cross-visit pattern. The clothing boutique may drive more browse-and-buy customers who don't have a specific destination in mind and might wander into the coffee shop during a shopping trip.

The Lease Structure Difference

Service tenants behave differently in the leasing market in ways that affect corridor stability. They tend to sign longer leases than merchandise retailers — fitness operators typically seek 10-year terms and invest heavily in buildout, creating a long-term commitment to the space. They are less susceptible to e-commerce displacement (a gym class cannot be delivered digitally). They receive significant landlord tenant improvement allowances because the buildout of a fitness facility or medical office is more expensive than a merchandise retail buildout.

The combination of long leases and heavy TI investment means that service tenants, once established, are more stable corridor anchors than many merchandise retailers. A gym that opens in a corridor is likely to be operating there in ten years; a clothing boutique faces a significantly more uncertain tenure in the current retail environment.

For corridor stability, the service tenant trend is arguably positive. For adjacent merchant traffic pattern consistency, it requires adaptation.

What Merchants Should Do

Document your current customer hour patterns before the service tenant opens. A baseline measurement — what share of your customers arrive in each two-hour window throughout the operating day — allows you to detect changes in traffic pattern when the neighboring service tenant opens. Without the baseline, you won't know whether your morning business improved because the gym brought more early customers or stayed the same despite the gym's arrival.

Consider co-tenancy clause language at lease signing. A co-tenancy clause specifying the types of permitted and excluded adjacent uses is difficult to negotiate after your lease is signed. At lease signing, it is a legitimate negotiating point. If the type of adjacent tenant matters to your business model — either because a gym neighbor would help you or because a medical tenant's hours would create parking conflicts — make your position part of the lease negotiation.

Adapt your programming to serve the service tenant's customer. The gym customer in your corridor wants certain things: protein bars and supplements near the gym entrance, activewear accessories and gear, high-quality healthy food options for post-workout meals. The medical patient wants certain things: easy parking, clear wayfinding, a pharmacy nearby for prescriptions, comfort food for recovery days. Understanding the service tenant's customer profile and programming your merchandise and offerings to serve that customer is the adaptation that generates revenue from the transition rather than suffering from it.

The Landlord TI Investment Signal

When a service tenant moves into a space adjacent to yours and the landlord is providing significant tenant improvement allowances — which is the norm for fitness, medical, and wellness tenants — it signals that the landlord has made a long-term bet on that tenant. A landlord who has invested $500,000 in a gym buildout expects a 10-year tenancy. For adjacent merchants, that is actually a positive signal: the foot traffic the gym generates is going to be there for a decade, not two years.

The practical implication is that the adaptation investment — learning the gym customer's preferences, adjusting merchandise and hours to serve morning and evening peaks, building relationships with gym staff and members — has a longer payback window than the adaptation to a merchandise retail neighbor. The gym neighbor is going to be there. Optimizing for that relationship is worth the investment.

Key Takeaways

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