New York's Grand Central Terminal is about to become a whole lot busier, and branded.
In a final vote today, New York City's Metropolitan Transportation Authority gave the go-ahead to Apple to a 23,000 square feet store in Grand Central. The retail deal will create of the largest stores to ever be built in the iconic station’s main concourse, and the largest in the Apple brand’s retail footprint, bumping its current largest retail location, in London's Convent Garden, to second spot.
The MTA board meeting approved Apple's lease for the first ten years is $800,000 annually (low by Apple's NYC standards, Fortune notes), and $1.1 million per year thereafter, with construction expected to take just four months.
The current tenant occupying the space, Charlie Palmer's Metrazur restaurant, pays $263,997 annually. Apple has agreed to pay Metrazur $5 million to vacate the its perch on the concourse's east balcony location immediately – and plans include occupying a vacant adjacent balcony as well.
As with all real estate in Manhattan, it's all about location, location, location. With foot traffic of 750,000 people daily and 1,000,000 during holidays trekking through Grand Central, the new store is projected to generate half-a-billion in sales annually.
On average, Apple stores generate $4,406 per square foot, according to investment bank Needham & Co., but the sheer number of commuters in the Terminal, 50% of whom make $100,000 or more, and 20% over $200,000, plus a store that never closes, 24/7/365, will spike sales to new heights…not to mention the tourists who are drawn to and through Grand Central.
And in a move sure to please the First Lady, there's also a new outpost of New York's hip hamburger haven, Danny Meyer's Shake Shack, coming to Grand Central, and as Metro-North Railroad President Howard Permut said, "I can't imagine why any kid in Westchester would want to do anything other than go into Grand Central and shop at Apple and eat at Shake Shack."
Meanwhile, Apple’s NYC Soho store will be underoing renovations shortly, with a pop-up store on nearby Greene Street taking up the slack, at a cost to Apple of $1.4 million.
Money is no object to the brand that is now the #1 foreign business in China, where it's been battling copycat Apple stores. A flagship 16,000-square-foot store that opened last year is already too small to hold the crowds of young people who come to sample the products.
"I have many Apple products, like Touch, iPod, iPad 2 and MacBook," said 17 year-old Wang Shangyan. "I don't have an iPhone but I'm waiting for the fifth generation. I will come to the Apple Store to buy it; it doesn't matter how much it costs."
Apple operates two stores in Beijing and two in Shanghai – and the four are the most heavily trafficked in the world, generating more revenue than the Fifth Avenue Apple Store in New York, which never closes.
"Apple has done what Google and Facebook cannot do: become No.1 in China. Scarcity sells, and this is the same strategy Apple has used in the US," said John Quelch, former senior associate dean of Harvard Business School and head of the China Europe International Business School in Shanghai, to the India Times.
That scarcity, coupled with increasing demand, led to the discovery by an American woman living in China of three fake Apple Stores in the southwestern city of Kunming. Last week, she got worldwide attention after she blogged about the jaw-dropping counterfeit retail experience from the blue t-shirts with Apple's logo to employees' hanging white I.D. tags. She went back and shot a video that she uploaded on YouTube, below; yesterday, she reported that not only the three she and her husband found, but five fake Apple stores in the city have been shut down by local officials.
"It appears the middle class in China is growing faster than Apple's presence… China has taken rip-offs to a new level, pirating Apple Stores themselves. It speaks to the demand for Apple products throughout China," said Charles Wolf, a Needham & Co. securities analyst.
At least the counterfeiters on NYC's Canal Street lack such audacity!