On the Money

Sticking gyms in ailing malls won't work, and here's why: Jan Kniffen

Key Points
  • Sickly malls are experimenting with a new anchor tenant: Gymnasiums.
  • The expectation is that fitness-conscious members will cross-shop at other locations.
  • Yet retail expert Jan Kniffen explained to CNBC why that's a hard sell.
Mall makeover

With retailers closing a record number of stores last year, malls have been experimenting with new types of businesses to drive traffic: Everything from restaurants and movie theaters to mini golf courses.

Now, there's a new strategy that's heating up – the gym. Over the last five years, gym leases in malls across the country have nearly doubled, according to commercial real estate information firm CoStar. They now account for 1 percent of all mall space in the U.S.

Meanwhile, gym memberships are also on the rise. Since 2009, 26 percent more people have joined a gym. That's 19.3 percent of the U.S. population, or 57 million people, data from the International Health, Racquet & Sportsclub Association said.

Mall operators are hoping gyms will not only bring people in to work out, but that they'll stick around and shop.

However, some experts say that's not really happening.

"Putting things in to get somebody to come to the mall is a good idea. The bad news is when it's something like a gym you don't get very much cross shopping," Jan Kniffen, CEO of J. Kniffen Worldwide Enterprises CEO, told CNBC's "On the Money" in an interview.

The retail consultant says people may go to a juice bar, or something that's related to their work out —but that's about it. As for malls that are putting in grocery stores, Kniffen says while that may drive foot traffic, it's only to that particular store.

"When you put in a grocery store, people do not go in the mall. They go into the grocery store, they shop, and they go home."

New Dave & Buster's location in Wayne, New Jersey takes over the second story of a Sears location at Willowbrook Mall
Sarah Whitten | CNBC

'We have over-malled'

So is there solution to saving the mall? Kniffen said yes: Bankruptcy.

"A lot of these malls will go through Chapter 11, and after the debt is gone they can be something else, and they can be gyms, doctor's offices…and you can do things that don't have to generate as much dollars per square foot, as much rents as things have to now, to carry the debt loads," Kniffen told CNBC.

Currently there are nearly 1,100 enclosed malls in the U.S., but Kniffen stated that's 400 too many as more shoppers flock to Web shopping. As a result, suburban malls have destroyed downtowns across America, Kniffen contended, as businesses go belly up and customers dry up.

"We have 'over-malled,' we have over stored, we have over shopped America, and we're just getting worse every day as more moves online," he stated, adding that it's not all Amazon's fault.

"When Walmart was 20 years old in 1982 they were 3 percent of sales and they got 50 cents out of every new dollar of sales. Amazon is 20 years old, it gets 3 percent of sales and it's getting 35 cents out of every new dollar of sales," Kniffen said.

He added: "Walmart destroyed traditional retailing over its rise and Amazon's destroying its traditional retailing over its rise." Ultimately, Kniffen predicted the online giant will buy Kohl's, in order to gain a foothold in brick-and-mortar retail.

But if not Kohl's, the retail expert says it will be a retailer with a large physical presence across the country.

"They're going to buy somebody or they're going to build a system because they're going to have to get next to the consumer," Kniffen added.

On the Money airs on CNBC Saturdays at 5:30 am ET, or check listings for air times in local markets.