Booming retail sales enable Apple to negotiate low rent prices at malls

Posted:
in General Discussion edited March 2015
The popularity of Apple's retail outlets has enabled the company to negotiate extremely low rent rates at malls, which in turn benefit from the additional foot traffic.




According to real-estate researcher Green Street Advisors, Apple is able to leverage the success of its brick-and-mortar retail outlets to ink advantageous rent deals with mall operators, reports The Wall Street Journal.

Apple pays as much as two percent of its sales to malls, as measured by square footage, a fraction of the 15 percent typical tenants pay, the report said. The disparity in rent terms is explained by Apple's ability to draw customers into its stores.

Unlike customers visiting so-called "anchor" tenants, like department stores, those going to an Apple Store may be less likely to stay in the mall to browse, the report said. This has not stopped an upward swing in lease prices for storefronts located next to or near Apple's outlets, however.

An Apple representative told the publication that Apple's retail locations hosted about one million visitors each day and accounted for roughly 12 percent of the company's $183 billion in annual sales for fiscal 2014.

Average Apple Stores generate about $6,000 in sales per square foot, while top performing locations can bring in $10,000 per square foot, the report said. The $6,000 figure remains unchanged from 2012.

Apple's sales numbers are so high that they can distort normal lease fees, which are in part calculated based on a mall's overall performance. When looking for a new spot to set up shop, retailers reportedly ask malls to exclude Apple Store data from overall sales statistics.

In its most recent earnings report covering the quarter ending in December, Apple revealed that it spent $3.5 billion related to leasing retail space. At the end of the period, the company had nearly 450 Apple Stores in operation around the world.
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Comments

  • Reply 1 of 45
    vqrovqro Posts: 66member
    it's time that iPhone users and Apple consumers in general leverage our collective buying power to demand that businesses support things like apple pay. we need to organize.
  • Reply 2 of 45
    I know this is off topic, but has anyone seen a problem with the time since upgrading to 8.2? I just realized my iPhone is 1 hour behind. I checked all settings are as they're supposed to be. Also Apple forum page is not loading.
  • Reply 3 of 45
    dasanman69dasanman69 Posts: 12,972member
    vqro wrote: »
    it's time that iPhone users and Apple consumers in general leverage our collective buying power to demand that businesses support things like apple pay. we need to organize.

    So have at it.
  • Reply 4 of 45
    sflocalsflocal Posts: 4,406member

    I didn't realize mall stores have to pay a percentage of their sales to the mall owner.  I just thought they have a lease for $x/month for x-number of months/years and that was that.  I'm not digging that idea.  I'm obviously not seeing the bigger picture as to why a tenant should have to pay for that, in addition to their monthly rent.

     

    Still, 2% of an Apple store's sales is a really nice chunk of change.

  • Reply 5 of 45
    apple ][apple ][ Posts: 8,360member
    Quote:

    Originally Posted by sflocal View Post

     

    I didn't realize mall stores have to pay a percentage of their sales to the mall owner.  I just thought they have a lease for $x/month for x-number of months/years and that was that.  I'm not digging that idea.  I'm obviously not seeing the bigger picture as to why a tenant should have to pay for that, in addition to their monthly rent.

     

    Still, 2% of an Apple store's sales is a really nice chunk of change.


     

    I don't think that they have to. Perhaps you misunderstood the article.

     

    I think that what the article was saying was that the amount that Apple pays for rent equals 2 percent, not that Apple agrees to fork over a certain percentage of their earnings to the mall. 

  • Reply 6 of 45
    realcool wrote: »
    I know this is off topic, but has anyone seen a problem with the time since upgrading to 8.2? I just realized my iPhone is 1 hour behind. I checked all settings are as they're supposed to be. Also Apple forum page is not loading.

    It's called Daylight Savings Time. It's the other clocks you need to re-set, not your iPhone....
  • Reply 7 of 45
    dasanman69dasanman69 Posts: 12,972member
    It's called Daylight Savings Time. It's the other clocks you need to re-set, not your iPhone....

    The correct time should be coming from the carrier's signal. Didn't the iPhone have a DST problem a few years ago?

    Edit: they've actually had more than one.

    http://forums.appleinsider.com/t/160422/another-daylight-saving-time-bug-strikes-apples-ios-7-affects-calendar-display
  • Reply 8 of 45
    xixoxixo Posts: 417member
    Quote:

    Originally Posted by sflocal View Post

     

    I didn't realize mall stores have to pay a percentage of their sales to the mall owner.  I just thought they have a lease for $x/month for x-number of months/years and that was that.  I'm not digging that idea.  I'm obviously not seeing the bigger picture as to why a tenant should have to pay for that, in addition to their monthly rent.

     

    Still, 2% of an Apple store's sales is a really nice chunk of change.


     

    Paying a percentage of gross sales is a fairly common practice in the high-end retail real estate business. This is why many shopping venues don't want laggards under their roof..

  • Reply 9 of 45
    jfc1138jfc1138 Posts: 3,090member
    dasanman69 wrote: »
    The correct time should be coming from the carrier's signal. Didn't the iPhone have a DST problem a few years ago?

    Edit: they've actually had more than one.

    http://forums.appleinsider.com/t/160422/another-daylight-saving-time-bug-strikes-apples-ios-7-affects-calendar-display
    That's two years ago.

    Mine was correct before my Atomic Clock synced G-Shocks caught up.

    Do the easy thing and check "Date and time" and your location? Maybe you've got that set to manual and its on the wrong time zone?
  • Reply 10 of 45
    dickprinterdickprinter Posts: 1,060member
    Quote:

    Originally Posted by sflocal View Post

     

    I didn't realize mall stores have to pay a percentage of their sales to the mall owner.  I just thought they have a lease for $x/month for x-number of months/years and that was that.  I'm not digging that idea.  I'm obviously not seeing the bigger picture as to why a tenant should have to pay for that, in addition to their monthly rent.

     

    Still, 2% of an Apple store's sales is a really nice chunk of change.


     

     

    Quote:

    Originally Posted by Apple ][ View Post

     

     

    I don't think that they have to. Perhaps you misunderstood the article.

     

    I think that what the article was saying was that the amount that Apple pays for rent equals 2 percent, not that Apple agrees to fork over a certain percentage of their earnings to the mall. 


    You both aren't quite right. In my experience, mall rents are based on a ratio of the sum of all store sales to total mall sales-floor square footage. Apple Stores are the small footprint/high gross sales type store that receives the largest amount of requests to be excluded from that calculation. For example, given the same demo/income level cross-section, if mall A and mall B (say 10 miles from each other) both have the same sales-to-square footage ratio, and one mall has an Apple store and one does not, the Apple Store is removed from the calculation. This paint a clearer picture of actual mall traffic and sales potential. Mall A (with the Apple store) raises the overall ratio calculation of that mall by a lot, because of Apple's high sales to sq. footage ratio, which paints an unfair picture of that mall's sales history/potential. Removing the Apple store shows that mall A has less sales than mall B, so, in turn, mall A should be charging less rent, percentage-wise. Although that doesn't mean that mall A can't charge the stores in close proximity to the Apple Store a higher rent because of the local traffic generated. This way, a store in the mall which is far away from the Apple Store, and therefore doesn't see the same increase in traffic compared to those close to the Apple Store, will not be charged unfairly for rent…..just because they share a mall with an Apple Store.

     

    Tried to be short and to the point. Hope it's comprehensive.

  • Reply 11 of 45
    bloggerblogbloggerblog Posts: 1,809member
    sflocal wrote: »
    I didn't realize mall stores have to pay a percentage of their sales to the mall owner.  I just thought they have a lease for $x/month for x-number of months/years and that was that.  I'm not digging that idea.  I'm obviously not seeing the bigger picture as to why a tenant should have to pay for that, in addition to their monthly rent.

    Still, 2% of an Apple store's sales is a really nice chunk of change.

    I actually looked into this. A mall will have you pay for a lease, all your transactions must be uploaded to their server at the end of each day. If your sales are above a certain sales margin, they will take a percentage of the extra sales on top of your monthly lease.
  • Reply 12 of 45
    SpamSandwichSpamSandwich Posts: 30,581member
    I actually looked into this. A mall will have you pay for a lease, all your transactions must be uploaded to their server at the end of each day. If your sales are above a certain sales margin, they will take a percentage of the extra sales on top of your monthly lease.

    There's no way that could be correct. Source?
  • Reply 13 of 45
    muadibemuadibe Posts: 128member
    realcool wrote: »
    I know this is off topic, but has anyone seen a problem with the time since upgrading to 8.2? I just realized my iPhone is 1 hour behind. I checked all settings are as they're supposed to be. Also Apple forum page is not loading.

    I had the same issue where my iPhone was behind, but since my iPad was showing the correct time, I figured it might be a setting. It was. Make sure 'setting time zone' is on in privacy-location services-system services.
  • Reply 14 of 45
    desuserigndesuserign Posts: 1,316member
    Quote:

    Originally Posted by Dickprinter View Post

     

     

     

    You both aren't quite right. In my experience, mall rents are based on a ratio of the sum of all store sales to total mall sales-floor square footage. Apple Stores are the small footprint/high gross sales type store that receives the largest amount of requests to be excluded from that calculation. For example, given the same demo/income level cross-section, if mall A and mall B (say 10 miles from each other) both have the same sales-to-square footage ratio, and one mall has an Apple store and one does not, the Apple Store is removed from the calculation. This paint a clearer picture of actual mall traffic and sales potential. Mall A (with the Apple store) raises the overall ratio calculation of that mall by a lot, because of Apple's high sales to sq. footage ratio, which paints an unfair picture of that mall's sales history/potential. Removing the Apple store shows that mall A has less sales than mall B, so, in turn, mall A should be charging less rent, percentage-wise. Although that doesn't mean that mall A can't charge the stores in close proximity to the Apple Store a higher rent because of the local traffic generated. This way, a store in the mall which is far away from the Apple Store, and therefore doesn't see the same increase in traffic compared to those close to the Apple Store, will not be charged unfairly for rent…..just because they share a mall with an Apple Store.

     

    Tried to be short and to the point. Hope it's comprehensive.




    that's helpful and makes sense. Thanks.

  • Reply 15 of 45
    desuserigndesuserign Posts: 1,316member
    Quote:

    Originally Posted by bloggerblog View Post

    I actually looked into this. A mall will have you pay for a lease, all your transactions must be uploaded to their server at the end of each day. If your sales are above a certain sales margin, they will take a percentage of the extra sales on top of your monthly lease.

    Sounds fishy to me. But of course people can make whatever deal they both are willing to agree to.

    Apple tends to make long term lease deals for their stand alone locations and even in malls they sink a ton of money into the physical facility. I doubt Apple would sign on to a deal that raises their rent depending on sales.

    I wonder what percentage of Apple stores are in malls as opposed to stand alone. It actually surprises me that Apple leases their stand-alone stores rather buying them, but I'm sure they have it figured out to their advantage tax wise, etc.

  • Reply 16 of 45
    xixoxixo Posts: 417member
    Quote:

    Originally Posted by DESuserIGN View Post

     

    It actually surprises me that Apple leases their stand-alone stores rather buying them, but I'm sure they have it figured out to their advantage tax wise, etc.


     

    It surprises me that they would divulge sales details to any 3rd party. I'm sure The Microsoft Store would love to get a look at those figures...

  • Reply 17 of 45
    xixoxixo Posts: 417member

    Quote:
    Originally Posted by bloggerblog View Post





    I actually looked into this. A mall will have you pay for a lease, all your transactions must be uploaded to their server at the end of each day. If your sales are above a certain sales margin, they will take a percentage of the extra sales on top of your monthly lease.


     

     

    Quote:

    Originally Posted by SpamSandwich View Post





    There's no way that could be correct. Source?

     

    Google is your friend... {About 53,600,000 results (0.35 seconds)}

  • Reply 18 of 45
    SpamSandwichSpamSandwich Posts: 30,581member
    xixo wrote: »
    Google is your friend... {<span style="color:rgb(128,128,128);white-space:nowrap;">About 53,600,000 results (0.35 seconds)</span>
    }

    That's absolutely insane. Apple should get into owning more of their own retail properties, including mall spaces.
  • Reply 19 of 45
    Quote:
    Originally Posted by SpamSandwich View Post





    There's no way that could be correct. Source?

     

    Did you also know that waiters and car dealers, and the people at Macy's are paid based on a certain percentage of their sales? And that a McDonald's or Holiday Inn owner has to pay the company a certain percentage of their sales? It might blow your mind!

     

    Quote:
    Originally Posted by SpamSandwich View Post





    That's absolutely insane. Apple should get into owning more of their own retail properties, including mall spaces.

     

    Mall spaces are never sold. Some office building space is. Property turnover in prime spots can be low. It can take years for the opportunity to buy a good location. IKEA is a rare example of a company that insists on owning their stores, take a look at their expansion pace. There's also significant tax and accounting benefits to leasing.

  • Reply 20 of 45
    SpamSandwichSpamSandwich Posts: 30,581member
    konqerror wrote: »
    Did you also know that waiters and car dealers, and the people at Macy's are paid based on a certain percentage of their sales? And that a McDonald's or Holiday Inn owner has to pay the company a certain percentage of their sales? It might blow your mind!


    Mall spaces are never sold. Some office building space is. Property turnover in prime spots can be low. It can take years for the opportunity to buy a good location. IKEA is a rare example of a company that insists on owning their stores, take a look at their expansion pace. There's also significant tax and accounting benefits to leasing.

    I'm not talking about buying the space, I'm talking about buying the whole mall.
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