How much should you get for your billboard lease? This is one question that every landowner asks themselves.
The revenue that your tenant (the sign company) generates from advertising displays is the number one factor in determining a fair market lease rate. The major dilemma for most landowners is that they have no idea how much revenue the sign company generates from the advertising displays on their property. A sign’s revenue potential depends on the number of displays, the size of the displays, visibility, traffic count, and market saturation. Signs with digital displays generate the most revenue (4 times more than traditional static signs). A higher revenue for the sign equals a higher lease rate for you, the landowner.
Keep in mind that sign companies have additional expenses related to the operation of the sign. These expenses include utilities, maintenance, sales, and posting. These expenses cut into the margins the sign company must maintain to ensure the sign is profitable.
Sign companies are more likely to achieve profitable margins in top media markets. For example landowners in areas like New York City can collect as much as 75% of a sign’s revenue, whereas landowners in Louisville get around 15-20%.
Some additional considerations, when was the last time you received an increase in the base rate? If your lease is older than five years and your base rate has not escalated, it is probably time for an increase. SignValue provides lease negotiation expertise to landowners nationwide to ensure that you are receiving a fair lease rate from your sign company tenant.
It would be helpful to pull out a copy of your billboard lease to compare how much your tenant is paying you. Check out the graphic below to see what the average site lease expense was for the three public companies in 2021. Site lease expense refers to the percentage of the billboard owner’s advertising revenue paid to the landowner for the billboard on your property.