CUPERTINO (CBS SF) – Apple retail shops are often a big draw at malls across the U.S., drawing long lines of customers waiting for the company’s latest product. But does that additional mall traffic Apple brings in allow the Cupertino-based company to negotiate lower rental prices for its stores?
According to the Wall Street Journal, Apple’s popularity has changed the model for how malls operate in terms of renting space to retailers.
Typically, malls give bargains to department stores that anchor the end of malls, and the majority of rent is paid for by the specialty shops in between. But the Journal reports, Apple is using its bargaining power “to pay no more than 2 percent of its sales a square foot in rent.” That compares to the normal tenant, who can pay as much as 15 percent.
Apple would not comment on the rent the company pays or its sales.
Raymond Cirz, chairman of Integrity Realty Resources, tells the Wall Street Journal that rents paid by mall stores are based on the sales the retailer expects to book in that space, and that Apple is “replacing department stores as the main driver of traffic to malls.” But part of the problem – unlike department stores, which draw shoppers to other retailers, Apple customers often just go to the Apple Store and leave thereafter.
Experts said this is not the first time this phenomenon has happened, as other popular retailers have bumped the price of rent for other shops. But Apple is a bit of an extreme case, drawing much more traffic than a typical, popular store.