Landlord of Apple's New Flagship Chicago Store Puts it Up for Sale

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The Chicago landlord that owns the building where Apple's new flagship Michigan Avenue Store is located has put it up for sale, according to The Wall Street Journal.

Walton Street Capital purchased the 20,000-square-foot Apple Store, a 35-story office building, and a retail building next door for $370 million in 2017, and is now planning to sell the store and 10,000 square feet of retail space for $175 million while holding on to the office building.


Demand for retail space is declining due to the decreasing value of malls and shopping centers as consumers turn to online shopping, but according to The Wall Street Journal, Apple Stores are the "gold standard in the retail world" because of the high foot traffic they attract to nearby locations.
A report by Green Street Advisors in 2016 found that average sales for 220 malls with Apple Stores came to $710 per square foot, compared with $630 per square foot for malls without Apple Stores. The study was based on a database that covered about 1,400 properties.
When the Apple Store sells to a new buyer, Apple doesn't have to worry about rent. Apple is well aware that its stores attract a high number of customers and it uses that as leverage to get lower rent rates. Apple is paying rent that's "well below" the average $400 to $500 charged per square foot for nearby Michigan Avenue retail space.

Apple's Michigan Avenue store is located right alongside the Chicago River, and its construction was an ambitious project for the company. It includes 32-foot glass facades and an enormous 111-by-98 foot carbon fiber roof. Like most of Apple's modern stores, it includes indoor trees, a dedicated seating area for Today at Apple sessions, a Genius Grove for getting help with products, and an area where customers can view and try Apple devices and related accesories.

Designed by longtime partner Foster + Partners, the store is meant to pay homage to Chicago's iconic Prairie Style homes designed by architect Frank Lloyd Wright.

Article Link: Landlord of Apple's New Flagship Chicago Store Puts it Up for Sale
 

LordCoe13

macrumors regular
Sep 9, 2014
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Chicago, IL
You are asking why Apple does not invest in real estate. Because Apple can get a better return of it's money by investing product development.
But you are missing a key element. Apple wants that empty space surrounding their store. They do not want another store to be on the plaza with them. The same way that they buy kiosk spaces outside their stores in malls (Northbrook Court in Northbrook, IL for example). They like the open layout without obstructions.
 
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grobik

macrumors regular
Mar 4, 2006
112
129
Any reason Apple shouldn't just buy it?
Cost. Why spend $175 million plus taxes, maintenance, fees etc. When someone else can do that and they pay less than half of retail rent per square foot? And when all is said and done and they decide to leave the space they just move out. The owner still has to find someone else to rent a weird shaped building.
 
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csurfr

macrumors 68020
Dec 7, 2016
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Didn’t Apple say when their lease was up in New York that they were taking the glass cube with them? In this case you better believe that MacBook Air roof won’t stay when they go.
 
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bluespark

macrumors 68000
Jul 11, 2009
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But you are missing a key element. Apple wants that empty space surrounding their store. They do not want another store to be on the plaza with them. The same way that they buy kiosk spaces outside their stores in malls (Northbrook Court in Northbrook, IL for example). They like the open layout without obstructions.
You might be right, but it also wouldn’t surprise me if the plaza are were zoned for no development since it is a prime access point to the river. In fact, I would guess that Apple got a special exception since its store design incorporates staircases (both enclosed and non-enclosed); this isn’t something another plaza-based retailer could do.
 

ArtOfWarfare

macrumors G3
Nov 26, 2007
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Any reason Apple shouldn't just buy it?
If Apple's rent is "well below $400 / sq ft", then that means Apple is paying less than $8M per... year?

So if it's being sold for $175M, maybe Apple is paying little enough that they'd rather hold onto that money and invest it elsewhere?
 
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Chupa Chupa

macrumors G5
Jul 16, 2002
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But you are missing a key element. Apple wants that empty space surrounding their store. They do not want another store to be on the plaza with them. The same way that they buy kiosk spaces outside their stores in malls (Northbrook Court in Northbrook, IL for example). They like the open layout without obstructions.
Well I think you might be missing the point because IF Apple wanted it it wouldn't be for sale now. Apple gets sweetheart rent deals like this by using itself as bait. It understand other stores will be coming. And those store locations were known when Apple came to the site because they were marked in the site plan. A developer can't willy nilly put a store anywhere it likes. Also very likely Apple has a clause in it's lease which says it has to approve any site plan changes which could affect the store. Apple is no dummy when they sign leases. It protects itself solidly.
 

mtneer

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Sep 15, 2012
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"Apple is well aware that its stores attract a high number of customers and it uses that as leverage to get lower rent rates."

I can understand this logic in an interior mall location, but for a standalone Apple site - higher foot traffic into Apple stores will mean higher revenue for Apple. What is the landlord getting out of all this foot traffic? If anything, the landlord faces higher wear and usage charges maintaining the landscaping, flooring, restrooms and facilities. So shouldn't the landlord charge higher rents?
 
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chucker23n1

macrumors 68030
Dec 7, 2014
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"Apple is well aware that its stores attract a high number of customers and it uses that as leverage to get lower rent rates."

I can understand this logic in an interior mall location, but for a standalone Apple site - higher foot traffic into Apple stores will mean higher revenue for Apple. What is the landlord getting out of all this foot traffic? If anything, the landlord faces higher wear and usage charges maintaining the landscaping, flooring, restrooms and facilities. So shouldn't the landlord charge higher rents?
This puzzles me as well.
 
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Contact_Feanor

macrumors member
Jun 7, 2017
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Belgium
A report by Green Street Advisors in 2016 found that average sales for 220 malls with Apple Stores came to $710 per square foot, compared with $630 per square foot for malls without Apple Stores. The study was based on a database that covered about 1,400 properties.
710$ and 630$ per square foot; per what time unit? Is that per day? Per hour? Per week? It seems we're missing some info here :)
 
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Superhai

macrumors 6502
Apr 21, 2010
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So shouldn't the landlord charge higher rents?
Usually they own the neighboring locations as well, and are able to attract higher rent as they know there is high activity there. So it is smaller establishments who subsidies Apple in the expectation that they will get higher sales.