Third Space Health Clubs Prepares for Major Sale Worth £700 Million
Premium London Gym Chain Attracts Investor Interest
Third Space, one of London’s most prestigious health club operators, is gearing up for a potential sale that could see the business valued at an impressive £700 million. The company, which has become synonymous with luxury fitness in the British capital, is now at the center of strategic discussions that could reshape ownership of one of the UK’s premium wellness brands. According to information obtained by Sky News, KSL Capital Partners, the American private equity firm that currently holds a controlling stake in the business, has been engaging in preliminary conversations with potential financial advisers about launching a comprehensive auction process. This sale could take place either later this year or sometime in 2024, depending on market conditions and the completion of preparatory work. Industry insiders and City sources have indicated that several major investment banks are being considered to manage what promises to be a closely watched transaction in the fitness and leisure sector, with Goldman Sachs among the prominent financial institutions reportedly in contention to oversee the sale process.
The Third Space Story: Luxury Fitness Across London
Third Space has established itself as a dominant player in London’s competitive premium fitness market, operating an impressive network of 15 exclusive clubs strategically positioned throughout the capital. These aren’t your average gyms—Third Space locations can be found in some of London’s most prestigious neighborhoods and business districts, including prominent sites in the financial hub of the City and the trendy entertainment quarter of Soho. The brand has carefully cultivated a reputation for offering far more than basic workout facilities, instead positioning itself squarely at the luxury end of the fitness spectrum. Members enjoy access to cutting-edge fitness programs including HYROX (a functional fitness competition format that has exploded in popularity), hot yoga sessions conducted in specially designed studios, and literally dozens of other specialized classes covering everything from high-intensity interval training to mindfulness and recovery sessions. This comprehensive approach to wellness, combined with high-end amenities, exceptional customer service, and meticulously designed spaces, has allowed Third Space to command premium membership fees while building a loyal following among London’s health-conscious professionals and affluent residents.
Ownership Changes and Strategic Investment
The potential upcoming sale represents the latest chapter in Third Space’s evolving ownership structure. KSL Capital Partners, a US-based private equity firm with significant expertise in the travel, leisure, and hospitality sectors, acquired its majority stake in Third Space back in 2021. That transaction saw KSL purchase the controlling interest from Encore Capital, another investment firm that had previously backed the company’s growth trajectory. This type of ownership transition is typical in the private equity world, where firms typically hold investments for three to seven years before seeking an exit that delivers returns to their fund investors. KSL’s decision to explore a sale now, roughly three years after acquiring the business, suggests the firm believes market conditions may be favorable and that Third Space has reached a value maximization point. The potential £700 million valuation represents a significant premium for a chain of fitness clubs, reflecting both the strength of the Third Space brand and the growing recognition among investors that premium wellness businesses can command substantial valuations when they demonstrate strong unit economics, brand loyalty, and expansion potential.
Recent Financial Backing and Expansion Plans
Demonstrating continued confidence in the business and its growth prospects, Third Space secured substantial additional financing just last October. The company arranged £75 million in debt financing from Oaknorth, a prominent challenger bank that has made a name for itself providing lending to ambitious UK businesses, alongside Searchlight Capital, which had already established itself as an existing lender to the company. This significant injection of capital was specifically earmarked to support Third Space’s ongoing expansion plans, suggesting the company sees considerable opportunity to grow its footprint further across London and potentially beyond. The timing of this financing round—coming just months before the exploration of a potential sale—is strategically interesting. It indicates that Third Space has been simultaneously pursuing growth while preparing for a potential ownership transition, a dual-track approach that allows the business to maximize value regardless of whether it remains with current ownership or moves to new investors. The debt financing also demonstrates that traditional lenders see the Third Space business model as sufficiently robust and cash-generative to support significant leverage, which can be an attractive feature for potential buyers.
Strong Demand Signals Healthy Business Performance
The business appears to be performing exceptionally well commercially, with strong indicators of healthy underlying demand for its premium offerings. Colin Waggett, who serves as chief executive of Third Space, painted a picture of robust performance when discussing the debt financing last autumn. “We are seeing exceptionally strong demand for Third Space memberships, with most of our clubs operating with waiting lists,” Waggett noted, highlighting what is perhaps the most enviable position for any membership-based business—having more people wanting to join than can be immediately accommodated. This waiting list dynamic not only demonstrates the strength of the brand but also provides pricing power and revenue visibility that investors find highly attractive. Waggett went on to articulate the company’s strategic positioning, explaining: “Our business sits at the heart of Londoners’ desire for health and fitness, authentic experiences and luxury service, and Third Space is uniquely positioned to meet these demands.” This statement captures the essence of what makes Third Space valuable—it has successfully positioned itself at the intersection of several powerful consumer trends, including the growing wellness movement, the experience economy where consumers increasingly prioritize experiences over material goods, and the continued demand for luxury services among affluent urban populations.
Market Context and Future Outlook
The potential sale of Third Space comes at an interesting moment for the fitness industry and private equity more broadly. The sector has seen considerable evolution in recent years, weathering the significant disruption of pandemic lockdowns, adapting to changing consumer preferences, and differentiating between budget operators, mid-market chains, and luxury offerings like Third Space. The premium end of the market, where Third Space operates, has generally shown resilience and growth, supported by demographic trends including urbanization, increasing health consciousness, and the willingness of affluent consumers to invest significantly in their wellness. For potential buyers, Third Space represents an opportunity to acquire a well-established brand with proven demand, strategic locations in one of the world’s most prosperous cities, and apparent runway for further expansion. The reported interest from major investment banks like Goldman Sachs suggests this will be a professionally run, competitive process that could attract interest from other private equity firms, strategic buyers from the leisure industry, or even sovereign wealth funds looking for exposure to consumer and wellness trends in developed markets. Both KSL and Goldman Sachs declined to comment on the potential transaction when approached, maintaining the confidentiality typical of early-stage sale processes. As the fitness landscape continues to evolve and premium wellness remains a priority for urban professionals, Third Space appears well-positioned to deliver value to whatever ownership group ultimately prevails in the anticipated auction process.
