Insider wanted to share feedback we received from readers on our lease increase article from yesterday.

An out of home real estate manager agrees that you need to be careful about overpaying for a lease.

A reader suggests that if the lease is going up three times faster than inflation then the billboard company should push ad rates up faster than the lease increase.

Am I reading this correctly? You said the lease had increases that were 3 times the rate of inflation. And that was “bad for margins.” I think that’s good for margins. I’ve never seen an industry that charges what the highway will bear (pun intended) like billboards. Some operators fail to increase 2-3% per year. They should be increasing 2-3% per year rather than staying below 2% per year. And if they started at a below market rate, they need to be doing some catching up in the next few years.

Insider’s response:  Would be nice to have the ad clients pay the increased cost of the lease but the billboard is in an overbuilt area where annual rate increases aren’t possible.  The profitability of this billboard is going down each year.  It may be taken down.

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