What’s in a name
Total Property - Issue 2 2020
The costs of building naming rights are seen by some tenants as a marketing investment rather than a rental consideration as they offer the chance of direct advertising and prominence over their competitors.
It’s hard to put an exact price on naming rights. They are subjective and often negotiated as part of a package leasing deal, but can range from $10,000 annually for a small city-fringe or suburban property to hundreds of thousands for a prominent CBD building.
Considerations include the property's location, prominence, profile and evidence of what has been paid for similar buildings.
Chris Menzies, Bayleys’ head of corporate and occupier services, says naming rights can offer a valuable additional income stream for building owners. “The larger and more prestigious the building, the more expensive the naming rights generally are,” he says.
Naming rights rent is an annual calculation throughout the term of a lease. For some big tenants naming rights are a key consideration when choosing premises, though not necessarily on every location.
One Bayleys client is a retail operator with a presence across over 300 locations. While their logo will be displayed at every site, there are only a small number of corporate buildings where they will be charged for exclusive naming rights.
This is a good example of where tenants are able to display their logo by way of signage, as opposed to more prominent office buildings where naming rights apply.
Menzies’ team works with tenants on lease management contracts for large and small buildings.
He says in smaller properties naming rights costs vary, but many are negotiated at between $10,000 and $20,000 a year.
“For naming rights to be of benefit to a tenant, the building has to have a profile, be in a prominent location and have room for the company's logo,” Menzies says.
A good example is ANZ's new offices and naming rights on a striking building at Auckland’s Sylvia Park shopping centre, visible from the southern motorway. Every day thousands of people see the bank's logo.
In the CBD, PwC is moving into the new office tower at Commercial Bay and taking its naming rights from the existing PwC Tower across the road in Quay Street. The new building will then be known as the PwC Tower.
HSBC will put its logo on the empty space left by PwC on Quay Street when it becomes a tenant and takes the naming rights.
Menzies says an advantage to naming rights on less prominent buildings is that they often become known by their branded building name for decades, even if the tenant has gone, leaving a lasting impression.
At 36 Kitchener Street in Auckland's CBD, the 15-storey building is still known as Lufthansa House, long after the airline stopped their naming rights payments.
Generally, the anchor tenant has first right of refusal to naming rights, but it’s not unheard of for an anchor tenant to pay for naming rights yet not signal it publicly, or even to give them up to another company.
In 2007, BNZ gave up the chance to splash its name across its new $240 million national headquarters on Queen Street in favour of Deloitte, which leased the top 10 floors.
The bank said it released the naming rights because it wanted to find a co-tenant that shared its commitment to sustainability.
Naming rights are usually only offered to tenants willing to take a sizable amount of space, but some companies found to their cost during Christchurch’s post-quake rebuild that there is a big difference between naming rights and signage.
Naming rights do not guarantee their logo will be at the top of the property without signage rights.
“The lease should set out where and what signs the tenant can put up, and whether other tenants can also erect signs,” Menzies says.
Even sole tenants can be required to lease space for signage, as landlords can lease the space to anyone.
During the rebuild, many tenants wanted increased identity and for the first time they had the chance to get their name on a building, particularly smaller premium properties that reflected their brand and would appeal to existing and future staff.
Signage rents alone were selling for $45,000 to $50,000 a year in the CBD, and $5,000 to $25,000 on the city fringe.
Menzies says the lines between naming rights and signage can get blurred but, generally speaking, signage is a pure advertising medium encompassing billboards and other types of signs.
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