Advertising Signage Valuations

Considerations when valuing advertising signage include:

• Income producing potential of the sign - obtaining financials from the operator can assist with the analysis of sales to rent ratios. An advertising sign is a ‘trade related property’, therefore market rent payable is proportional to the profit making potential of the sign.

• Considerations of any incentives need to be taken into account and as an example the landlord may be provided with a certain portion of screentime.

• Volume of passing traffic and planned road works or new arterials that may divert or increase traffic.

• Type of signage - a static advertising sign is inferior to a modern digital advertising sign. A sign with a single side may capture less audience than a sign with two or three sides. The size of the signage is also to be considered.

• Demographic of the area - an advertiser will typically pay more to have an advertisement shown to higher income earners.

• Planning permit conditions - a planning permit may impose restrictions on the size and type of sign permitted. A planning permit may also impose an expiration date, and although it is common for permits to be renewed there is still a risk that a permit will not be renewed upon expiration of the current certain term.

• Terms of the lease - as per any commercial lease it is important to assess lease terms such as rental reviews, duration of term, options, ownership of signage, who is liable for outgoings, and any potential incentives. It is also important to consider whether the lease term falls within any potential expiration date of the planning permit.

• If undertaking a freehold valuation of a building with advertising signage, the permitted duration of the advertising signage use as per the planning permit is a key consideration, as well as the strength of the underlying lease. The applicable discount rate and capitalisation rate can vary depending upon the risk profile of the signage.

• Ownership of the structure - it is important to establish who has ownership of the structure, and whether the lease stipulates a transfer of ownership upon lease expiry. A tenant may be offered a below market rent for the initial term in lieu of constructing the signage.

At Sovereign Valuations we are experienced in valuing advertising signage and we hold key data on several $300,000+ per annum billboard leases including both lease and advertising sales data.