Apple is a retail behemoth in this country, and it’s exerting its power in the lease for its newest flagship New York City store. According to the New York Post, for the Apple Store set to open next week in Grand Central Terminal, the company has secured one of the lowest rents of all other retailers in the building, and will not pay its landlord the Metropolitan Transportation Authority any percentage of its sales, resulting in a situation that’s being called “unique.”
Apple will pay $60 per square foot for the 23,000 square-foot space. It’s apparently the best lease held among all other retail stores open for business in the transportation center. According to the Post:
Critics likewise note that Apple’s $60-a-square-foot lease is well below what many other tenants are paying — including a future Shake Shack burger joint that will be shelling out more than $200 a square foot, according to the leases, copies of which have been obtained by The Post.
That’s a sign that Apple drove a hard bargain with the MTA — despite the fact that the public agency’s budget squeezes are pushing up fares for subway straphangers and suburban commuters across the region.
Apple will also not be required to share any of its profits with the MTA, which differs with the lease agreements of every other Grand Central tenant with the exception of a Chase bank ATM, according to the report.
To give an idea of how much extra Apple will be able to keep under this arrangement, consider that Apple does about $400 million in sales in its other flagship NYC store on 5th Avenue, which is 10,000 square feet and open 24 hours a day. With the standard arrangement in place to pay a certain amount in proceeds to its landlord for that store, Apple has paid $15 million on that $400 million. The Grand Central store will have more than twice the square footage of the 5th Avenue location.
This is sort of like how wealthy celebrities are the ones constantly being given a bunch of free stuff: Even though they can afford to buy what’s being given away, brands want to give them stuff because the allure of a famous person using your product can bring other benefits to the brand. The MTA is saying it’s happy with the deal, because it will “generate significant new traffic” for other retailers when shoppers wander in to find the Apple Store.
But it’s also yet another way to gauge the kind of power and influence Apple wields in retail. In 10 years Apple stores have gone from being predicted to fail to bringing in more revenue per square foot than any other major retailer, and being the must-have store for major retail complexes.