Wireless providers need for cell sites is piquing again as the industry prepares for the advent of 5G and the Internet of Things. The next generation of wireless services are still a few years away but the carriers are busy increasing their network density by adding cell sites and that bodes well for those that have real estate available for lease.
Some municipalities are already preparing for the surge of new site applications that are being submitted and have already received zoning and permit applications at a rate some say they have not seen in 20 years.
If you are lucky enough to have been approached by a carrier in the past and have leased space for a cell site location, you know what to expect and how to move forward. If you are a landlord that has not been as fortunate and are looking to create some ancillary income, then perhaps some understanding on the process will help you if a carrier representative comes knocking at your door.
Telecommunications leases exist between the telecom provider (wireless carrier) and a landlord. These agreements are put in place in order for the carrier to lease space on the landlord’s property, rooftop or tower, to place their equipment for a specified length of time. The carrier normally enters into a lease with a standard timeframe of 20 -25 years that is broken into 5 year intervals or terms as they are called. In exchange for lease of this space over the course of these terms the landlord receives monthly or annual payment.
There are basically two types of leases. There are rooftop leases and ground leases. Rooftop leases are generally for many communication purposes and can include many different types of antennas. Panel antennas are normally installed and can range anywhere from 1’to 10’ in length and weigh up to 100 lbs. or more. These antennas have the ability to service multiple technologies including cellular, PCS, specialize mobile radio, fixed wireless services and paging. Rooftops take advantage of the height of the existing structure whether it be a building, water tank, billboard or smokestack and sometimes even church steeples. The equipment consists of antennas, amplifiers, base station equipment and coaxial cable to connect it all together.
Ground leases generally are used to address antenna cell towers. Heights on these towers range from 50’ to 300’ or more depending on the carriers need on the area they need to cover. These tower lease area is anywhere from 2500 square feet and 10,000 square feet and normally only larger parcels of land are considered for setback and municipal requirement.
The carriers need these locations or cell sites to provide service to their wireless customers. The infrastructure that they design needs to supply a seamless network that requires many locations. This network of sites is constantly growing and changing as technology advances, customer capacity increases and the geographical landscape changes.
Carriers have teams of site acquisition personnel that are given search areas or search rings that have been provided by radio frequency (RF) engineers who design the wireless network. The wireless real estate agents known as site acquisition managers (sit ac) might have a search area that encompasses anywhere from .5 miles up to a mile in circumference. As networks densify the search areas are shrinking and becoming more specific. Any location found within this area, if it meets the height requirement on the search area request, should be a viable candidate for the RF Engineer to evaluate. The site ac will oftentimes be required to submit multiple candidates for the RF engineers to review. Once a site or sites are approved by RF as a site that will work in the network, the site acquisition person attempts to enter into a lease with the owner of the property chosen.
Time to market is key to the carriers in building out their networks. Site acquisition companies say they are dealing with landlords who are more knowledgeable whether from first-hand experience or word of mouth. This can be a negative because the carriers are looking to get their new sites up quickly and long lease negotiations are going to have them looking at alternative locations. If there are multiple sites that will work for a carrier in a particular area it behooves the prospective landlord to move quickly since getting sites on air sooner than later is the key to the carrier’s success.
Paging companies were some of the original wireless companies that leased space for their antennas. However, they did not need as many sites as the cell phone carriers did and when cellular licenses were awarded in the 1980’s the lease of space for wireless carriers took off. The 1980’s and 1990’s were big years for wireless leasing as the carriers had to build out their networks to sell their wireless services. Eventually, it tailed off as the carriers finished the majority of their build outs. Networks and mergers within the industry happened that also contributed to slowing down the wireless need for additional sites at the fast pace of the 80’s and 90’s. The industry however once again is needing to add sites at a brisk clip. There is again a major demand for cell networks to increase their coverage. The 5G technology requires a denser number of sites for all carriers and all the carriers are in full steam ahead mode in adding extra cell site capacity to their current infrastructure.
Carriers leases have been modified and refined over the years but the fact remains the carrier is taking all the risk, and investing all the money to build the site. They look for the right to terminate at will but usually will agree to a 30- to 90- day notice period to terminate for economic reasons or technological reasons. The landlord can add protection clauses to make sure the lease area is returned to the same condition as it was prior to the installation with normal wear and tear excepted. The Landlord that gets too greedy and tries to make many changes to the carrier lease will oftentimes find themselves with no lease. Carriers are willing to indemnify LL’s and sign no interference language and most of the leases have protections for both parties. In cases of rooftops the LL should be cognizant that they are leasing space on a portion of their property that is not normally a revenue generating portion of their building. In urban area’s the availability of alternate candidates is greater so it is important not to let the carrier walk from your property if the location works for them otherwise you may find yourself looking at those same antennas across the street.
Once the carrier has entered into a lease than of course the carrier needs to seek the approvals and permits from the local jurisdiction to build the site. Carriers will take on these expenses and secure the electrical and building permit necessary to install their cell sites. This includes getting regulatory approvals such as environmental and historical impact permissions.
There are multiple types of sites that site acquisition folks look for when choosing a candidate. Existing structures are the first candidates site acquisition agents target when they are choosing sites to submit to RF Engineers for approval. It is easier and cheaper for the carrier in most cases to install antennas on a facility that already exists as opposed to building a new one. If a site acquisition rep can find an existing structure whether in an urban or suburban environment, then that is the best candidate for them. It is easier to attain a zoning or municipal approval and the permitting necessary on existing structures. The carrier also stand a better chance of not attracting the NIMBY (Not in My Back Yard) folks that often turn out to fight new tower builds.
If you live in the suburban areas and own a large parcel of land, there is the possibility of being approached by not only a carrier but perhaps a tower company. Tower company’s primary focus is to own towers and lease space to the carriers. Carriers are basically phone companies that sell service and basically all of them have sold their portfolios of towers to the different tower building companies that are out there. Based on the demand for wireless facilities the tower companies have made their mark in vertical real estate. The three big tower companies are Crown Castle, American Tower and SBA. Tower development has stalled in recent years but there is a definite uptick as carriers build out and prepare for the next generation of wireless.
One of the biggest detriments to getting towers built on raw lands are the zoning and municipal board hearings. These hearings are open to the public and they even welcome the participants to share and provide input on the applications. By law all residents that abut the property that the tower is being proposed are sent notices of the application before the hearing, and it is the carriers responsibility to see that this is done. There is no guarantee of approvals on these applications and they can take years before for the final outcome is known. Leasing space on your property can be the most lucrative of all the lease opportunities you may receive from the carriers.
Carriers are now starting to build out their networks with small cells. These cell site solutions are not as intrusive as full blown cell sites and they are much smaller equipment-wise. Most of these are simple one antenna solutions with a backpack sized supporting base station. The carriers need more of these sites to cover the same area that a full site would cover and are utilized more in an urban setting. These small cell site solutions are being placed on light poles, utility poles and sides of buildings. They provide capacity coverage in areas that towers would be impossible to build. There is a definite opportunity to create ancillary revenue on buildings in downtown areas as the carriers need many of these sites since their signal propagation is limited by height, and the simple fact they are designed to only cover a small area. Distributed Antenna Systems (DAS) also fall into this category and can be installed outdoors and indoors. Many office buildings are electing to build these systems internally to accommodate their tenants needs and of course as a source of additional income. DAS is great for providing coverage in buildings where normal wireless signal cannot penetrate the steel and concrete of the building. In the past wireless use was primarily in the automobile or outside, but wireless device us is trending indoors and the use of wireless devices is becoming more prevalent in the workplace. Carriers take advantage of businesses such as hospitals or office complexes that have indoor systems to open up pop up stores since strategically they have a customer base to market their services.
Standard lease rates or rents for facilities vary depending on whether these are full sites known as macro sites or small cell sites known as mini-macro sites. In the early onset of wireless the carriers and their site acquisition companies threw around a lot of money to rent space. Nowadays this has leveled off and rents average anywhere from $1,500-$2000 per month for a macro site to $500 for a mini-macro small cell site. These prices can vary based on the negotiating skills of the prospective landlord but if you are within those price ranges you are close to the average. Prices can vary depending on the marketplace and location as well. Rooftops in Manhattan and Hoboken certainly will yield a greater rental amount than in some less affluential urban areas. Most leases also allow for a yearly or term increase. Yearly increases or escalators are anywhere from 2% to 3%. Most carriers prefer term increases to annual increases however, as is it easier to maintain their records and process payment. Some times for lesser monthly rents the carriers will offer a percentage of another carriers rent but this is primarily on towers built on raw land locations.
Carriers and tower companies are actively pursuing lease space for antenna and wireless services now. The advent of 5G services that will create smart cities as we move into the 2020’s has created the demand for the carriers. It is the landlord willing to enter into these agreements with an open mind, and willing to help the carrier in his quest for quickest time to market, who will reap the benefits of this latest wireless lease boom.