More Landlords Offer
Building Naming Rights

The signs, they are a-changin' -- on office buildings, that is.

With office-vacancy rates climbing in many areas because of the business slowdown, building owners across the nation are trying harder to attract or retain large tenants. Their latest perk: granting companies that lease space the naming rights or external signage rights -- or both -- for minimal, if any, additional cost.

For companies that have slashed marketing budgets or others that have grown more image-conscious, naming or signage rights may be just the bonus that entices them to relocate or take up more space in a building. Even the fear among some companies that putting their name on a building would make it more visible -- and more of a target to terrorists -- has failed to halt the trend.

And as the economy continues to struggle, there will be even more building naming and renaming, says George Bouris, director of corporate real-estate services at accounting giant Andersen LLP. In a strong real-estate market, "it's too valuable a concession [for landlords] to give up" unless a significant price was offered, he says. But in today's market, "a lot of landlords that would have otherwise not have given this will acquiesce, rather than having an empty building with uncertain cash flow."

Name in Lights

As a part of a lease deal signed last month, the Arco Tower in downtown Los Angeles by July will be crowned the Paul Hastings Tower, named after law firm Paul, Hastings, Janofsky & Walker LLP. The firm is leasing about eight and a half floors in the 52-story building, the former headquarters of Atlantic Richfield Co., which was acquired by BP PLC. The law firm's 15-year lease totals more than $80 million.

Pat Ramsey, who is responsible for Paul Hastings's facilities, estimates it will cost "in the mid six figures" to create and put up the sign. Tenants typically pay for the cost of the signs, their installation, maintenance and removal once the deal ends.

"Like many other organizations of similar size, we're building a brand identity," says Mr. Ramsey, noting that many of the major accounting firms have put their names on buildings in recent years.

Also last month, Ernst & Young LLP put its name in red along the side of its new headquarters on Times Square in New York. And the accounting firm has plans to put its logo atop the 37-story building. About 10 blocks away, the corporate logo of financial-services firm Citigroup, which recently renewed its lease at a 41-story office tower on Fifth Avenue, will replace the "666" that designated the building's address.

Kinko's Inc., which is relocating its headquarters from Ventura, Calif., obtained the signage rights to the 26-story office building in Dallas visible from two major freeways where it leased four floors a few months ago.

And in downtown Chicago, where corporate names and logos on the skyline are rare, aerospace company Boeing Co. was granted signage rights when it leased more than one-third of a 770,000-square-foot office building, making it its new corporate headquarters. The Boeing symbol is prominently displayed on the north and south sides of the building's clock tower. The company name and symbol are slated to go up on the west side of the building shortly.

For many landlords, offering naming rights is the best way to guarantee large, lucrative tenants. Equity Office Properties Trust Inc. may have to take that route at its BP Tower in Cleveland, says Alex Jelepis of Grubb & Ellis Co., who handles leasing at the 1.3-million-square-foot property. The building's namesake has moved most of its operation out of the property, and another major tenant is in the process of liquidating. Mr. Jelepis says the property itself is a draw given its status as a trophy building in downtown Cleveland, which has about a 12% vacancy rate. "Naming rights is an attractive add-on," he says.

The owner of an 832,000-square-foot, three-tower office complex in Dallas is offering signage rights "to entice large users that are interested in branding their corporate identity," says Sandie Matejek of Jones Lang LaSalle Inc., who is in charge of leasing the property. Currently about one-third of the property is vacant, and Ms. Matejek expects additional space to be available this year, adding to the 21% vacancy rate among office buildings in the area. Signage rights would be given to a tenant in each tower that leased a complete floor -- about 26,000 square feet -- or more, she says.

Limiting the Takers

But landlords that offer up these rights do run the risk of hampering their ability to draw tenants to their buildings. Take the new 50-story high-rise office building in downtown Chicago, which was recently named the UBS Tower, after Swiss financial-services firm UBS AG. Citadel Investment Group LLC, a Chicago-based hedge fund that signed a lease with the landlord a few years ago, has decided not to move into the UBS Tower. While the decision was due, in large part, to Citadel needing more space the company also wasn't thrilled about moving into a building named after a competitor, says J. Paul Beitler, chief executive of Beitler Co., which is building an office tower in downtown Chicago where Citadel has leased space.

A Citadel spokeswoman says, "Expansion and suitability have always been the critical factors in our real-estate decisions. And naming has never been a concern."

Limiting the tenant pool "was a consideration," admits Thomas Kibler, president of Shuwa Leasing, a unit of Shuwa Investments Corp., which owns the newly christened Paul Hastings Tower. The building, which is one of two office towers that make up the 2.2-million-square-foot property, is currently about 40% vacant. Mr. Kibler says he spoke with the bigger of the two law firms already in the building about the new name. In the end, he says, "we felt it wouldn't jeopardize leasing."

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