The marketing of two former Apple store buildings is providing some insights into the original lay-out of the stores, and also details on how much Apple might have been paying to occupy prime real estate. Both buildings in northern and southern California are owned by investment groups, and are still sitting empty after Apple moved retail operations to larger spaces just blocks away. Commercial real estate agents are shopping the former Palo Alto and Third Street Promenande (TSP) spaces to potential tenants for $489,000 and $1.13 million a year respectively. That figure does not include other building expenses that an owner typically pays, but instead assigns to a lessee, including taxes, insurance and maintenance. Of course, for Apple, the cost of a lease is never an impediment to selecting a retail store building. The company’s philosophy has always been to locate where there is very high traffic, and pay whatever it costs.
The Palo Alto store was the ninth store to open in the chain in 2001, and in October 2012 operations moved to a larger space two blocks away. The TSP store opened in July 2003 along a pedestrian mall in Santa Monica. The store moved to a much larger space in December 2012. Black plastic has covered the windows of both stores since then, and any Apple logos have been covered up.
Meanwhile, real estate agents have been shopping the spaces to other retailers—it’s a slow process. Only recently has the TSP store shown signs of activity. An unpainted wooden construction barricade covers the ground floor, and the Apple store’s steel panels are still in place—although they look dull instead of shiny. Within the last two days a Champs Sports clothing store sign has appeared behind the barricade. In fact, the city’s Architectural Review Board is actively working with the company to approve (pdf) a revised storefront for the new store. The board recently criticized the Champs design of glass, white brick and “brake metal” siding. “The Board concluded that the composition of the materials on the façade did not appear well integrated and the proposed brake metal appears as ‘pasted on,'” the board wrote. In response, the architects have scaled back the white brick.
For now, the Palo Alto store has no signs of tenancy or construction.
According to leasing materials, the former Palo Alto store owner is offering 6,800 square-feet of space (4,800 ground-floor and 2,000 second floor). The annual lease cost is $72 per square-foot. The lease is offered on so-called “triple net” terms, meaning the lessee pays for real estate taxes, building insurance and maintenance. The building owner estimates these annual “NNN” expenses at about $11.16 per square-foot.
The former TSP store has 9,850 square-feet (7,050 ground level and 2,800 mezzanine). The annual lease cost is $155.40 per square-foot on the ground-floor and just $12 for the mezzanine. This property is also offered on triple net terms, which the owner estimates at $6.24 per square-foot a year.
The lease brochure for Palo Alto says an average of 18,859 vehicles pass through the intersection in front of the store. In contrast, the TSP store faces a pedestrian walkway with no vehicle traffic.