Thursday, 12 March 2015

Apple and Malls

From the Wall St Journal:

Apple draws so many shoppers that its stores single-handedly lift sales by 10% at the malls in which they operate, according to Green Street Advisors, a real-estate research firm. That gives Apple the clout to negotiate extremely low rents for itself relative to its sales, while creating upward pressure on prices paid by mall neighbors who might not benefit from the traffic.

In the past, malls typically operated according to a straightforward bargain. Department stores that anchored the ends of the malls either owned their own stores or paid almost nothing aside from fees to maintain common spaces in exchange for drawing much of the traffic, while specialty retailers in the smaller spaces between the anchors typically paid the bulk of a mall’s rent.

Apple has upended that model by using its bargaining power to pay no more than 2% of its sales a square foot in rent. That compares with a typical in-line tenant, which pays as much as 15%, according to industry executives.

Nothing new exactly, but just part of the Eiffel Tower/cafĂ© near the Eiffel Tower thing of how rents work…


Ian B said...

The question is, has he broken the mould?

Ian B said...

Darn, wrong thread somehow :(

Dinero said...

thats a new twist on the location value discussion.
Here the tennant is
creating location value - but for the adjacent loactions.

The Stigler said...


As the article says - this is what department stores already do. A John Lewis store will bring a lot of customers in to the whole mall.

Mark Wadsworth said...

Yes, this is the long established concept of the "flagship tenant" who can always negotiate a very low initial rent if they are the first to move into a new shopping centre.

It applies in particular to Apple as already noted here six years ago.