New York Not Happy with Apple’s Grand Central Store Lease

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Following a report that Apple’s lease terms for its soon to open Grand Central store don’t include revenue sharing, New York’s State Comptroller is planning to launch an investigation into why the Mac and iPad maker received much better terms than the Metropolitan Transportation Authority’s other tenants.

New York officials want to know why Apple's Grand Central lease is so sweetNew York officials want to know why Apple’s Grand Central lease is so sweet

The New York Post broke the story on Apple’s Grand Central Terminal lease on Wednesday. State Comptroller Thomas DiNapoli responded by saying, “The article in the New York Post about the MTA’s contract with Apple in Grand Central Terminal is a cause for concern. This is a prime property, and I intend to make sure that the MTA hasn’t given away the store.”

Officials are also questioning why Apple’s US$60 per square foot lease is so much lower than the $200 other tenants are paying.

Apple struck a deal for the Grand Central Terminal location in July, landing 23,000 square feet of space for its new store. That makes the Grand Central location one of Apple’s largest stores in the world once it opens, behind London’s Regent Street location at 25,000 square feet, and Covent Garden at 24,000 square feet.

Apple had previously been rumored to be opening the Grand Central store in time for Black Friday, but Thanksgiving came and went without any announcement. Assuming Apple does open the store next weekend, it’ll still have two weeks to sell iPads, iPhones and Macs ahead of the Christmas holiday.

MTA spokesperson Aaron Donovan said it was proactively working to increase revenue, and managed to quadruple the rent for the space Apple is using. “[Apple is] effectively paying $180 per square foot over the 10 years of the lease, almost ten times the previous tenant,” he said.

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Comments

jfbiii

At their current sales per sq. foot, that $180 average amounts to 3.2% of sales, which sounds like an awesome deal for Apple. Although to be fair their out-performing retail operation is a large part of why that number is so very low.

Ben

Can they be serious???? I mean think of how many people that Apple store will bring the other merchants???? Look at any given Apple store on any given day, Packed!! Really they are doing New York a favor!

Roadster

Ben,

I was waiting for someone to use that argument.  They don’t need Apple.  It is Grand Central Station.  Do you know how many people go through there a day?  Let’s get real.

Constable Odo

I have a feeling that any time some transaction is done with Apple, people look at how much money Apple has and they figure that Apple is trying to squeeze someone dry.  The MTA signed the lease and I’m sure there must have been a lot of thought about it.  Apple stores are crowd generators and that should generate an awful lot of foot traffic in that area of the terminal.  I don’t see what DiNapoli is making a stink about.  If you ask me, that Apple store is like the highly-paid free agent that you can build the team around.  I’m sure none of those other stores leasing property have the crowd-drawing prowess that Apple stores have.  I thought property owners were always fighting to get Apple stores in an area.

Lee Dronick

It is Grand Central Station.? Do you know how many people go through there a day?? Let?s get real.

Yes, but are those commuters stopping to shop? Maybe Grand Central Terminal is trying to encourage people to come in just to shop. I don’t know, just ruminating, it has been 50 years since I was last in Manhattan.

iJack

Do you know how many people go through there a day?  Let?s get real.

I do!  Please, sir.. I do!
Some quick stats for ya.

- 750,000 people pass through Grand Central daily and over 1,000,000 people during the holidays.

- 93% of Grand Central Terminal commuters are college graduates.

- Mean household income for Grand Central Terminal commuters is $95,800; 50% of household incomes are over $100,000, and 20% are over $200,000.

- The captive shopping population of more than 326,000 neighborhood office workers earn a combined $11.3 billion a year.

Seems like a bunch of iPad buyers to me.

Hagen

It sounds like the Apple Store has an agreement for a graduated price over the course of their 10-year lease.  So the rent on it starts very cheap and gets progressively higher as time marches on.

Either that, or the MTA is adding in the infrastructure improvement costs (more elevators).

AdamC

@roadstar
Passing through us one thing but stopping to shop is another.
So let’s get real here not many succeed because people are merely passing through to another destination but the Apple store will make/may make them stop to check mail or the next gadget to buy etc.

Mwray

People feel good after going to an Apple store, whether they buy or not.  They will leave the store and go to another store and buy something - in terms of the other merchants, just buy anything, Apple has done them a synergistic favor.  And don’t think the halo effect is simply techie.  Everyone buys when they feel good - especially if they don’t have to buy.  That’s just the way it is.  Apple = Dreams until of course Apple starts marching to the drumbeat of others who can’t figure Apple out but can comment on what Apple needs to do.  That’s the attraction, the dream we all have - to disturb the status quo and be successful at it.

zewazir

Sounds to me like one more government agency whining that they aren’t out there punishing success.

Hagen

More like one more government agency seriously wondering if there’s a bit too much corporate welfare being applied.  They’re at least right to ask if there’s a sweet deal going on, whether or not it’s true.

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