With advertisers paying as much as $2 million a year for just a place to hang their signs, the same landlords who once decried outdoor advertising as a scourge have embraced it as a major moneymaker.
So lucrative have the big signs become that they now exert a significant influence on the price, and even the design, of buildings in Times Square.
But while landlords reap windfalls from renting out their walls, concerns are growing in some circles. Office workers lament lost views, and some of the area's trademark tenants-the theater owners-claim they are being priced out of the market.
`CAN'T AFFORD IT'
"We were paying $25,000 a month for one sign, and the landlord told us it would be going up to $125,000," said Matthew Serino, president of Serino/Coyne, a theatrical ad agency. "I said, `Thank you, I appreciate the offer, but I can't afford it.' "
For the landlords, some of whom do offer discounts to the theaters, the outdoor boards have almost become the tail wagging the dog.
"One of the reasons we bought 1500 Broadway in 1995 was its potential for signage," admitted Orna Shulman, exec VP at Intertech Corp. Until the sale, the building had never carried any permanent advertising, but the new owners saw the potential.
"What we did not anticipate was just how huge that potential is," she said.
The space for a highly visible "spectacular," as the glitziest signs are called, can run to $2 million or more a year. That doesn't even include fabrication and lighting costs.
"When you look at the square footage involved, it's more expensive to lease the signage space than the office space," said Jonathan Mechanic, chairman of the real estate department at Manhattan law firm Fried Frank Harris Shriver & Jacobson.
Mr. Mechanic noted that prime signage sites now go for $100,000 to $175,000 a month in Times Square, vs. a mere $20,000 to $30,000 elsewhere in midtown Manhattan.
Property owners' love affair with outdoor advertising marks a sharp turnabout from 1987. Then, they bitterly opposed a city plan aimed at preserving Times Square's character that required new buildings to have multiple electric signs.
"Most of the developers were apoplectic," recalled George Stonbely, president of Spectacolor Communications, an outdoor ad company that has more than 20 signs in Times Square, including the new one for Nabisco Foods' Planters Co. "They thought signs would be a deterrent to getting corporate tenants."
Outdoor advertising has become so lucrative that Sherwood Equities, which owns two Times Square buildings and is a development partner in another, recently spun off a company called Sherwood Outdoor just to manage the signage on the three buildings.
As the signs multiply, though, so do the complaints from tenants.
Tara Stacom, senior director at Cushman & Wakefield, said blocked windows can make leasing more difficult.
"A sign in front of your window overlooking Broadway is destructive," she said. "The sign does impact the value of the office space, but the dollars you're getting for the sign more than offset that."
NEW BUILDINGS PLAN SIGNAGE
With newer buildings, signage has become an end in itself. The Planet Hollywood Hotel will have a 32-story signage "tower" offering up to two dozen advertising opportunities. Conde Nast Publications' new building, which Durst Organization is building, will have seven signs, including a 122-by-135-foot behemoth wrapping around a cylindrical form.
Signage is hardly an afterthought to Durst.
Tom Bow, VP-director of leasing, said he expects the seven signs to generate more than $10 million a year, comparable to the income from the building's 120,000 square feet of retail space.
Mr. Levin is a writer for Crain's New York Business.