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Details on Apple's Grand Central Terminal retail deal

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Apple is soon set to open a huge new store in New York City's Grand Central Terminal, and it's expected to be one of its largest and most profitable venues. The New York Post has obtained some details on the deal Apple got on the space, and let's just say I want someone from Apple in my corner negotiating for me if I ever buy a house.

First, while it's expected that Apple's Grand Central Terminal location will see US$100 million in annual sales, unlike all other retail entities in Grand Central, Apple won't be sharing a percentage of that revenue with the Metropolitan Transportation Authority. Second, Apple is reportedly paying only $60 per square foot for renting the space, far below what most other tenants are paying. The Post cites an upcoming Shake Shack burger restaurant as one example; that outlet will pay $200 per square foot in rent.

MTA has justified the terms of the deal by saying it expects the Apple Store to generate significantly increased traffic and higher sales at nearby stores where it does reap a percentage of revenues. By comparison, Apple's 5th Avenue location reportedly generates $400 million in annual sales, with approximately $15 million of that going to the location's owner.

In order for the MTA to see similar percentages, sales at outlets adjacent to the Grand Central Terminal Apple Store will need to rise by a minimum of 7.5 percent. That's assuming the estimates of $100 million per year in Apple Store sales and MTA's $500,000 revenues per 1 percent increase in sales are both correct. There's no way of knowing whether sales will rise by that much -- the new Apple Store hasn't even opened yet -- but count me among the skeptical.

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