From The New York Times May 12 2009

As Storefronts Become Vacant, Ads Arrive

By STEPHANIE CLIFFORD

Almost every category of advertising is declining precipitously in this economy, but there is one that is thriving.

Taking advantage of all the abandoned retail spaces in urban areas, marketers are leasing them at cut-rate prices and filling them with their ads.

At first, advertisers saw storefront advertising as a poor man’s billboard — that is, a bad thing. Now, they see it as a poor man’s billboard — that is, brilliantly frugal.

Ads for Intel that went up on Monday capitalized on the bankruptcies of stores like the Disney Store, Domain Home and Comp- USA, filling their former shops with digital billboards. 

Elsewhere, barren-looking store windows have been plastered over by ads for Nestea, Snickers, Delta Air Lines and Conservation International.

“All you have to do is walk out the door for lunch and notice the number of vacant storefronts — and they tend to be in prime areas, in major thoroughfares, and they’re unused space — so why not get in there and put a message in there?” said Peter Sherman, the managing director of BBDO West, San Francisco, part of the Omnicom Group.

BBDO West is running ads for Conservation International in storefronts in New York, San Francisco and Berkeley. Advertisers can rent the storefronts for a fraction of what landlords charge retailers. 

Mr. Sherman is paying an average of $500 for three-month stints in prime locations. (An outdoor billboard in comparable spots would cost $50,000, he said.) 

In some cases, he said, the landlords even donated space, both because they liked Conservation International’s environmental message, and because it is more appealing to have something in their windows other than dust and grime.

“It looks better for something to be going on in the storefront,” Mr. Sherman said. “If that something is a positive message regarding the environment, that’s a win for both sides.”

The retail vacancy rate rose to 11.2 percent in the first quarter, the highest it has been since the early 1990s, according to CBRE Econometric Advisors, a unit of the CB Richard Ellis Group. And some real estate owners say an ad helps, literally, cover up the problem.

“The way I look at it, when somebody moves out of a space it looks terrible,” said William Walther, the president of Granite Companies Asset Management, which owns several buildings in Manhattan. “Retail use is animated, because you see all the things that are in the space and people are in the space, and coming and going. When people move out, it’s just a big, vacant room and not very attractive,” he said.

Though advertisers pay only 10 to 15 percent of what a retailer would, Mr. Walther says he will take that. “We still have taxes, we have insurance, we have electricity that we have to pay on the property,” he said. “The market started to change, so now we look at it as, ‘When’s the next campaign, fellas?’ ” 

Storefront advertisers say that since the downturn, real estate owners have become eager to lease their space, making ads in prominent spots more common.

Ray Lee, the managing director of real estate at Inwindow Outdoor, a company that creates storefront advertisements, used to have to court real estate owners, but now they are calling him, he said.

“In the last year and a half, it’s been much easier to acquire locations,” Mr. Lee said. “They’re realizing the money’s important, of course, and they’re realizing they don’t want to be sitting on vacant spaces anymore — they want to be more ambitious in terms of covering their windows.”

Inwindow Outdoor executives said the company had had record revenue in the last two quarters. And Inwindow’s ads are running in highly trafficked places. A former high-end furniture store in Greenwich Village in Manhattan is now an ad for Snickers. A Delta ad covers the windows of a former restaurant in Midtown Manhattan. 

A group of Intel ads that began running Monday has gotten particularly good placement because of other companies’ misfortune: ads are running at several sites where the former tenant declared bankruptcy. 

These include the Disney Store in San Francisco (its operator, Hoop Holdings, filed for bankruptcy last year), a CompUSA in Chicago (the company filed for bankruptcy in 2007 and is operating under a new owner), and a former Domain Home store in the Flatiron district of Manhattan (Domain filed for bankruptcy in 2008).

“We were able to time the market well to find a couple even better locations than what we originally anticipated,” said Jamie Eaton, group strategy director at OMD, the media-buying unit of the Omnicom Group, which advised Intel on its strategy. “As the companies make a transition, the great thing for the landscape is you’re able to cover up something that may have been a visual sore point.”

Inwindow has also changed the storefront ads so they are more than just posters hanging inside a store. It now designs custom vinyl coverings that adhere to a store’s brick and glass, and are cut to fit over doors, ledges and other architectural elements.

The Snickers ad is composed of several panels that fit over the building’s panes of glass, while an ad for Nestea is plastered over both the windows and the doors of a former shop in Midtown Manhattan, making it look more like a street-level billboard than abandoned retail space.

The potential is even bigger when marketers incorporate technology, said Steve Birnhak, the chief executive of Inwindow Outdoor. “If you look at vacant real estate as a shell, it’s the perfect environment to safehouse any technology you want that lives within the confines of that building,” he said. 

The Intel ads house screens displaying slightly time-delayed text messages from passers-by about their hopes for the future. And for “Coraline,” a fantasy movie, Inwindow created holograms in dark retail spaces. “Children would appear out of thin air in an environment that looked to be 20 feet deep, and float up to the window,” he said. 

For Mr. Sherman, the storefronts he used for Conservation International did double duty. They were cheap, centrally located and perfectly matched his message, which compared destruction of the environment to the destruction of the economy. The windows carried messages like “Our shopping districts are starting to look as barren as our rain forests” and “Ignore climate change and a lot more than our shops will be going under.”