21 Jul Electronic Signage
This post is a bit unusual as, while there are economic implications associated with the subject matter, the topic is not real estate finance centric. Before I started working in the business of financing commercial real estate, I spent time consulting. My specialty was turning around troubled or underperforming companies. One of my engagements involved an electronic sign company. The firm made signs for Times Square as well as movie theaters, billboards, car dealerships, sports arenas, etc. For the uninitiated, electronic signs are displays comprised of red, green, and blue Light Emitting Diodes. If you have driven a freeway lately or been to Las Vegas you have seen an electronic sign. The reason this subject may be worth your consideration is electronic signage has some potential advantages that may be worth the additional investment over static signage.
The first and simplest advantage of an electronic sign is that it is a blank canvas and can display, instantly, any image desired. So, for a hotel, if the brand makes a modification to their logo, the process involves downloading the new image to a computer, formatting the image, and sending to the sign. Static signage involves fabricating a new sign and having a truck with a crane or lift install the new assembly. For retail or other classes of commercial real estate, as occupants change or other important information needs to be updated, the same process applies.
The second, and largest advantage of electronic signage is, the images tell the story of what is happening inside the real estate. Retail centers can promote specific tenants, sales, special events, promotions, or even sports scores of local schools, colleges, or major sports franchises. The signs are relatively high resolution and can show high quality images of merchandise, food, beverages, people, or physical spaces. Pricing adjustments for goods and services can be changed instantly, and as frequently as desired with very little cost. Instead of simply informing the public about the identity of the property, this medium provides a reason why the public should visit the property.
Finally, in some cases an electronic sign can be a significant profit center. I have a client who owns a hotel in a strategic downtown location. The revenue from his electronic sign is over $1M annually, after the cost of selling the ads and maintenance.
The initial cost of an electronic sign will likely be significantly higher than static. While there are maintenance costs, the large expense is a one-time investment. Static signs must be replaced over time. A good sign company can provide you with information regarding costs, and a good CFO or accountant should be able to help you model whether the investment is worthwhile.