[+] Picture This: Billboards on the Hunt for Property Partners

After years in a Covid fog, roadside billboard companies are experiencing a renaissance fired by the return of audiences and advertisers, and are once again on the hunt to sign up property owners to partner with. Outdoor advertising companies felt the pain of changing commuter and work patterns, as well as skittish advertisers reluctant to spend on marketing. Companies in the sector disclosed a reliance on rent abatements and concessions, and deferring lease payments to the property owners who host their signs. Reports from the 2021-22 financial year, however, seem to indicate the billboard industry is recovering strongly. In the first half of 2022, spending on outdoor advertising increased to $478.6 million, according to industry group the Outdoor Media Association. That represents a 19.5 per cent year-on-year increase from 2021, and a mammoth 47.3 per cent bump from 2020. Roadside billboards, contributing the lion’s share of activity, have roared back. Revenues have actually grown since 2019, now up to $223 million. For the sector as a whole, revenue still slightly lags pre-pandemic levels, at 3.9 per cent behind the first half of 2019. Some categories continue to suffer from long Covid, with advertising at airports and other transport stations particularly deflated. ▲ Billboard audiences are returning but there are variations between audiences with office and airport slower to pick up. With just $39.9 million spent in the first half of 2022, activity there is less than half its pre-pandemic level. oOh! Media mational commercial director Michael Cali told The Urban Developer “that there were periods where audiences dropped during the pandemic due to stay at home orders”. “But what we’ve found over recent months, and certainly since the lifting of those orders, is that audiences are returning to pre-Covid levels, which is fantastic for the industry. “Particularly in the airport space and the office space, audiences are returning more slowly than other sectors like road and retail sectors, and our street sector. However, we are confident that they are improving; they’ve just been a little bit slower to return.” Site characteristics crucial oOh! claims around 3850 billboards across the country, and in the latest half-yearly reports added another 11 digital billboards to its inventory. The sector is constantly looking for new property owners to partner with, and while there’s no formula to what makes a viable site, Cali says there are characteristics that billboard companies are looking for. “It really does depend on the uniqueness of the location. Sites next to freeways or secondary arterials, you’d be looking for things like long viewing distance, no vegetation,” he says. “But that may be different to say CBD-based sites, which may be more pedestrian-focused and have a longer viewing time. “Like any other property deal, a lot of it is driven by location, location, location. So other factors that we bring into it include the volume and type of audience that might be passing by, the size of the billboard, the dwell time—which is the changeover between advertisements on it on a digital billboard. “They can all factor into what the underlying commercial return might be to landlords.” However, industry player LDC Infrastructure’s head of operations and acquisitions, Harley McKenzie, says that some jurisdictions are more billboard-friendly than others. “It’s still possible to put up a billboard in Queensland and Victoria. In NSW, there probably hasn’t been a new one on a privately owned property for about 10 years.” ▲ Regulations regarding billboards vary from state to state. Some sign permits are only offered on a limited-duration basis, and zoning changes from industrial to residential can also change planning permissions for billboards. Contracts, leases “case-by-case” It’s not uncommon for the tenor of a billboard lease contract to run 10 years or more, with each contract negotiated individually and highly specific to the characteristics of the site. Most leases are a flat rent paid to the landowner and can be tied to CPI. Landowners may be able to negotiate revenue share arrangements, depending on the quality of the site or market conditions. “Typically, it’s like any other commercial lease arrangement,” Cali says. “The nature of our business is that there are a lot of long-term contracts. So that means investing in the right products at the right locations, at the right point in time.” McKenzie says that a site’s value can only be assessed by testing it in the market. “Rates are so hugely varied that it’s impossible to nail down the number. It depends on the quality of the suburb, the quality of viewing at a site—every one is different,” McKenzie says. “It depends if they’re digital or not ... there’s so many variables that there’s no real standard.” Alternative models for landowners For those property owners who want exposure to the rallying outdoor advertising sector, but wary about signing over their facade for a decade, working with a hand-painted advertising company can be an alternative. ▲ Hand-painted billboards are geared more to pedestrian traffic in inner-city areas. Apparition Media co-founder Tristan Minter is one of the pioneers of the industry in Australia. Apparition paints bespoke branded murals and advertising on walls, with leasing contracts campaign and site dependent. “We work differently from other providers,” Minter told The Urban Developer . “We have a range of agreements, from case-by-case, to long-term leases. It really depends on the specifics of the site.” Hand-painted advertising is geared more closely to pedestrian traffic, so not every property will be appropriate. “It’s all about eyeballs, so the more people that will see a space the better. We work a little different from other out-of-home providers so are more focused on the inner city and CBD,” Minter says. “Really, any blank wall with good visibility on a busy street in the inner city is the go for us. “The more valuable a site is to a client the more we can pay the landlord, it really depends on the specifics of the site.” LDC Infrastructure provides another alternative, acquiring the rights to the space from the property owner for an up-front payment, and on-leasing it to an outdoor media company. “The planning risk, any changes in the future, we take on all that risk,” McKenzie says. ▲ oOh! Media’s billboard at the Bourke Street Mall, Melbourne. “But aside from the de-risking side of things, if someone wants capital now to go and do something else, we can provide that.” Multidimensional benefits According to Cali, the revenue stream from leasing billboard space on a property is not the only benefit. An attractive billboard can improve pedestrian experience, and the industry is taking advantage of new technology to evolve billboards in an era of digital advertising. One example is 3D anamorphic billboards, which can create the illusion of depth on a flat surface. “These can create really engaging moments, particularly in highly pedestrianised locations in our CBD,” Cali says. “At the moment, we’ve got a creative running with the House of Dragon for Binge. “There’s a six-story dragon reigning over shoppers and commuters on Bourke Street Mall, which is pretty visually impressive, and really makes brands stand out. But also makes a nice engagement point for people in the precinct. “There are public utility benefits to out of home that go well beyond just a revenue stream.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Picture This: Billboards on the Hunt for Property Partners

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