Despite the growth of internet advertising over the last several years, billboards still have an important role to play in marketing and advertising campaigns around the world.
This is especially true now that many outdoor advertising companies are utilizing “smart billboards”, which combine the same technologies used to serve ads on the internet, like aggregate data from telecom carriers which allow advertisers to better target messaging to specific consumers.
This convergence between old and new presents many property owners with opportunities to increase the profitability of their land, as outdoor advertisers scramble to find and sign billboard lease agreements for the development of new and exciting billboard advertising projects.
To understand just how profitable a billboard ground lease can be, this post will cover the process by which a billboard lease is established, the characteristics that make some billboard leases more valuable than others, and how LDC Infrastructure can help turn your long-term billboard lease agreement into an instant, large, lump-sum payment.
Advantages of Billboard Advertising
While some people may be surprised to find that billboards are still relevant in the modern advertising arena, we have to consider the fact that billboards still hold a few distinct advantages over newer forms of digital advertising.
First, billboards, and especially smart billboards, are still seen by some as “art pieces”, giving them some form of street credibility. This is virtually never the case with digital advertising, which most people view as no more than a nuisance.
Second, smart billboards can be entertaining and somewhat interactive, allowing them to generate real engagement from the targeted demographic, which is something that many other forms of advertising struggle to accomplish.
Third, even though online ads have become incredibly intelligent at targeting specific users with defined interests, demographic characteristics, or behavioral triggers, there are so many elements of the web constantly competing for the user’s attention that even very good digital ads often simply get lost in the fray.
The biggest advantage to well-designed billboard advertisements is that they are often the only interesting visual entity that commuters see on their way to work or school, and now that billboards are becoming active members of the “Internet of Things” these billboards will be able to “communicate” in ways they never have before, allowing them to do a much better job of capturing people’s attention.
How are Billboard Lease Rates Determined?
When determining the value of a billboard lease rate, the entire process boils down to one thing: marketing impressions.
This means that the value of billboard lease rates are almost always going to be tied to the total number of views that billboard is capable of generating on a daily basis. The more views the advertisement receives, the more money the billboard owner is likely to be paid.
One factor that will modify this value equation is the billboard’s ability to attract attention from a specific, targeted, in-demand demographic group, like high-net-worth individuals, or some other high-value group of people.
For some property owners with prime real estate, rental payments from billboard developers can reach as high as a hundred thousand dollars a year (or more!); however, because of different qualifying factors and market impressions, some may only receive as much as a few thousand dollars during the same period.
Below are three of the most important factors impacting the overall value of billboard lease rates.
Of the three items listed here, location is perhaps the most important element taken into consideration when determining billboard lease rates.
Billboards, by design, are meant to be viewed by the public, so any location that gets a lot of traffic, be it by car or by foot, is going to be worth more than one that doesn’t.
Thus, if you own property alongside a busy highway or in a tightly congested urban area, you will have a far greater chance of receiving higher rental payments from a developer.
However, this also means that properties located in areas that receive little traffic will ultimately generate less revenue for the property owner.
Liquidation Value of the Billboard Lease
The liquidation value of a billboard land lease agreement is closely related to the location of the property.
Simply put, if a billboard is located in a high-value area, and the billboard developer can charge advertisers top dollar for the advertising space, then the developer will be able to pay the principle property owner a higher amount as well.
Rent Escalation Clauses
Other elements that property owners should be aware of in their billboard lease agreement are rent escalation clauses.
Rent escalation clauses, as the name implies, are a stipulation in the lease agreement that rental fees to the property owner must increase over time, typically every five years.
This clause is important to consider when entering into such an agreement, since the value of a billboard, like other forms of property, typically goes up over time.
And this is especially true for property owners who rent out billboard space in developing areas, where populations are expected to grow.
As the volume of traffic near your billboard increases, so should the rental fee paid to advertise on it.
What LDC Infrastructure Can Do For You
LDC Infrastructure is one of Australia’s leading lease and rental rights acquisition companies, and we’ve helped hundreds of property owners like you achieve greater financial security.
While a billboard lease may provide useful, supplemental monthly income, there is an opportunity cost to take into consideration: does that small monthly rate eclipse the value that you could be generating by investing significant capital in a new business venture, stocks, or additional properties?
Our billboard lease buyouts turn your small monthly payments into a large, one-time lump sum payment, allowing you to receive the full value of your lease right away, instead of over a longer period of time.
Even if you don’t wish to sell your billboard lease, we can still help you evaluate the true value of your billboard lease. As long as your site meets our standard criteria, we will provide you with a no-obligation analysis and professional valuation.
For more information, please call us at 1300 149 449, or submit your information online so that we may contact you to begin the valuation process.