Apple Stores are so effective at bringing shoppers into malls that the company has been able to negotiate much lower rent deals than most shops, the Wall Street Journal said in a report today. While most tenants have worked out deals to pay about 15% of their sales in rent, Apple’s ability drive traffic has enabled the company to keep its rent as low as a meager 2%.
The only way things could get better for Apple, it seems, is if the Cupertino tech maker was able to secure the same agreement as large department stores, which pay nothing in rent and simply pay fees to help manage the up-keep of the mall’s common areas.
However, because Apple’s customers are more likely to stop by the electronics retailer without checking out other stores in the same mall, it’s unlikely the company will get that type of offer. Department stores are still bringing shoppers into the rest of the mall more reliably. Some malls in New England have reportedly seen Apple make up a full one-third of the mall’s sales.
Though Apple’s presence is said to frequently boost a mall’s sales by about 10%, the other stores may not quite appreciate Apple’s contribution to the activity. The Journal notes that outlets near the Apple Store often allows malls to try to raise the rent of other shopkeepers. In fact, many stores have asked malls to exclude Apple’s earnings when calculating mall-wide sales (as is done for large department stores) to keep their rent at a reasonable level.
With the Apple Watch expected to bring in an entirely new target market, Apple is planning to make some changes to its retail stores and sales process that could provide the company with even more leverage to drive its rent down.
Of course, this doesn’t mean that Apple is operating nearly rent-free. Because rent is determined as a percentage of a store’s sales, Apple’s status as one of the highest earners per square foot means the company is still paying plenty in rent.