Technology Rising, Cell Site Tower Leases Falling
Massive development has occurred in the cellular market over the past quarter century. Beginning it’s life as a gadget that only the elite could afford, the cell phone has become a basic commodity for everyone in all walks of life. This transition couldn’t have taken place without the global growth of wireless networks, the backbone of the mobile phone. For many years, constructing new cell sites and towers was essential for all cellular networks just so they could accommodate the rising demand. Today, market changes and fast-paced technology upgrades have stimulated wireless network providers to reevaluate many of their older cell sites, cell towers, and their wireless leases.
When cell phones started to gain popularity, there was a rush to build cellular towers everywhere. This rush occurred during the first and second generation of cellular technology, in the time period of the late 80′s and early 90′s. At this time, both cell sites and cell towers were often chosen because of their location. There were particular properties and buildings that were considered “prime” spots for coverage, and because of this, cellular network companies had to pay large amounts of cash to get these “prime” spots since the choices were very limited.
But as the expression goes “times, they are a changin’.”
Today’s third generation cell phones operate completely different than the first and second generation of just a few years ago. Older cellular networks were far less sophisticated than today’s networks, and they required higher antenna sites to cover more area. Today’s networks?not so much. Today, carriers need more sites closer to the ground that are operating with greater bandwidth. The closer to the ground, the more locations to choose from.
This is the bottom line: cellular networks no longer need all the “prime” spots they leased a few years ago – the technology has changed.
These advances have benefited the consumer, but cell site lease holders have not profited from this new reality at all. Recently, in an effort to cut costs, wireless networks have been meticulously going over every lease they have because a good number of them are much too expensive in the current climate. Changes in technology have also allowed for an increase in competition between property owners. Now that there is no longer such a things as an “ideal” location, more property owners can offer leases at lower rates than current leaseholders.
The advances in cellular technology in the past 25 years have been tremendous, and the industry shows no sign of slowing down. As the physical requirements for a cell site change, cell site and cell tower lease terms are being renegotiated. While many property owners are disappointed at lower cell site and cell tower rents and renegotiated leases, consumers are delighted with better cell phone performance and service and the country as a whole has come to depend of the stability of the network. The upside for cell site and cell tower landlords is that lease renegotiations are now making rent guarantees available for landlords to secure their rental income in this dynamic marketplace. And, cellular operators are still great tenants, with low very low credit risk. Property owners just have to be a bit more competitive to retain them.