In commercial real estate it’s all about location…and connectivity

Wired Scored analysis highlights value of connectivity to leasing decision makers
We’ve all heard the stories–commercial real estate agents checking for five bars on their mobile devices before even agreeing to show a space to a potential lessee, or tenants complaining about wireless service to the point they threaten to break a lease and take their business elsewhere.

But that’s anecdotal. What’s the real cost? Wired Score set out to answer that question in a recent analysis titled “The Value of Connectivity: What’s the cost of poor digital infrastructure for Commercial Real Estate?” The full report is available for download here, but let’s take a look at some of the major findings, based on an online survey of 150 tenants in New York City, Los Angeles, Chicago, Philadelphia, Dallas, the San Francisco Bay Area, Washington D.C., Houston, Boston and Atlanta.
First up, just how important is connectivity in a business that’s all about location? According to survey respondents, 90% said location is still the top priority in leasing a space, but that’s followed very closely by quality of internet, which 87% identified as a key consideration; 77% said quality of mobile network coverage was a major determinant of executing a lease.
Researchers from Radius Global Market Research, the firm that conducted the survey for Wired Score, wrote in the report: “Location is still king, but not by much, and perhaps not for long…That means that, in a business world that is more connected by the day – through communications platforms, cloud-based systems, and smart technologies – internet quality is becoming a greater consideration than factors like price, environmental friendliness, or access to transportation.”
Right now the commercial real estate industry is going through a bit of a transition. Now that in-building connectivity–that includes wired connections like fiber and copper, as well as Wi-Fi and in-building cellular–are imperative, what’s the most cost-effective way to provide that to current and potential tenants in a way that makes business sense?
A variety of communications service providers are spending billions to grow fiber footprints, particularly in metropolitan areas, and the copper plant is pretty well built-out and getting better with advancements in coaxial protocols like the DOCSIS 3.1 and Full-Duplex DOCSIS 3.1 standard, which respectively provide multi-gigabit-per-second download speeds and symmetrical multi-gigabit-per-second download and upload speeds. Those types of deployments require the scale, access and capital of the Verizons, Comcasts and AT&Ts of the world. Wi-Fi is a little different. Many building owners take responsibility for contracting out the design, built and optimization of Wi-Fi networks, while, in other cases, individual tenants, particularly larger enterprises with internal IT departments, will take on that role.
In-building cellular is the real wild card. For years the paradigm was a neutral host provider or carrier would provide the network infrastructure needed to spread cellular around an office building. But, given the limited capex budget of carriers, who are simultaneously faced with declining ARPU and increased competition, that’s changing. DAS and multi-carrier small cell builds paid for by carriers are now reserved for extremely high-value customers and marquee venues like stadia, transport hubs and high-end buildings like One World Trade, for example. That means commercial real estate owners are facing the stark reality that it’s time to pony up for in-building cellular, or prepare to pay a different kind of price.
According to Wired Score, “Quality internet cannot be taken for granted; 80% of tenants report experiencing regular connectivity issues. They survey reveals that roughly the same proportion of tenants (80%) feel that the leasing process would be easier if they had comprehensive information about a building’s technological infrastructure upfront. And, if an owner could prove a building’s reliable connectivity, four out of five tenants (84%) would pay more per square foot.”
So, there you have it. If you don’t invest in connectivity infrastructure, expect complaints from tenants, higher turnover and a more protracted leasing process. If you invest in connectivity infrastructure, give yourself a competitive advantage, attract more and longer-term clientele and charge more per square foot.
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