Landlords make a killing as the 'billboard jungle' takes root

PUBLISHED : Monday, 05 October, 2009, 12:00am
UPDATED : Monday, 05 October, 2009, 12:00am

Hong Kong landlords are famous for squeezing revenue out of every last square inch of their buildings. For some, that means renting not just the horizontal surfaces, but the vertical ones as well.

The rights to hang neon signs and billboards from Hong Kong's high-rises increasingly equates to big money for landlords.

'Some buildings are generating higher income from advertising than the rental from their office or retail space,' Mak Siu-tong, chairman of Convey Advertising Company, said.

An 11-storey building at the junction of Canton Road and Peking Road near Harbour City in Tsim Sha Tsui is one example. Owned by local investment company Wai Woo, only the shop on the ground floor has been leased. For the rest of the building, the landlord is looking for a single tenant willing to pay a monthly rent of HK$780,000, including the billboard that wraps around two walls. Property agents calculate that the office space could rent for HK$330,000, while the advertising hoarding rights could go for HK$450,000.

The billboard advertising is worth considerably more than the floor area due to the high pedestrian flow in the area and the fact that the building has a total floor area of only 13,000 sq ft.

Daniel Wong, business development director of advertising agency JM Network, said while that situation was rare, many landlords were trying to maximise profits by offering building exteriors to advertisers. Location and size are the main factors determining advertising rates.

Mak of Convey said the higher pedestrian flow, the more a landlord could charge for billboard advertising. Prime locations are Causeway Bay, Tsim Sha Tsui, Mong Kok and Central.

The Calvin Klein Jeans sign at the lower level of Ying Kong Mansion, opposite the Sogo department store in Causeway Bay, is one of the biggest billboards in the city at 28 metres high and 75 metres wide. Convey says the rental for that billboard is between HK$700,000 and HK$800,000 a month, depending on the time of year.

Despite the costs, the space is fully booked and has a long waiting list. Only a few months next year are vacant.

It is not only the exterior walls that are attracting high-flying billboards. Increasingly rooftops are profitable spaces.

The most expensive outdoor advertising is the Prudential Insurance LED billboard on top of Star House in Tsim Sha Tsui. This sign, which rents for about HK$1.12 million a month, is on the market for HK$153 million.

Most of the prime spaces in the city have been reserved by advertising firms.

JM Network's Wong leased a 300 sq ft shop in Yee Woo Street, near Sogo, for HK$400,000 a month in 2006. He installed a LED screen on top of the shop and sub-lets it to advertisers for an undisclosed amount. The shop is rented for between HK$25,000 and HK$50,000 a day for special short-term promotions. The occupancy rate is 70 per cent, enough for him to pay the rent and generate an attractive profit.

'It faces three streets and is located in the centre of the district, similar to the billboards in New York's Times Square,' he said.

The Winland Group owns four billboards as well as a shopping arcade in Elizabeth House near the entrance to the Cross-Harbour Tunnel. Monthly rents range from HK$300,000 to HK$500,000.

Director Edwin Lun said: 'We also have billboards in North Point, Sai Kung and Tuen Mun. It is one of the major sources of income.'

Thomas Hung Ka-hang, president of advertising company Easy Groups, said renting out the outside of buildings was attractive for landlords as there were no costs. Advertising companies paid for signage and electricity, and found advertisers.

The global financial crisis has had relatively little impact on outdoor advertising, with spending in Hong Kong reaching HK$1.15 billion in the first half of the year, 15 per cent higher than a year ago, according to the research company adamGo.

'Companies did cut budgets for advertising expenses,' said Convey's Mak. 'However, they have increased spending on outdoor advertising.'