You’ve probably heard that 5G, the fifth generation of cellular-network technology, is on its way. It’s being touted as a platform that won’t only change how we communicate but, to some extent, how we live our lives.
In 2010, most major carriers introduced 4G, which changed how we use wireless devices. It allowed more online access, increasing activity on social media and video-streaming services. In short, it made us more mobile. Building on that progress, 5G will enhance user capabilities further still. From driverless cars to new, instantaneous streaming, it’ll put more technology at our fingertips. Let’s take a closer look at what it brings to the table, and how self-storage operators who have cell-tower leases may be able to leverage this technological advancement.
How Will It Be Different?
The simplest answer is 5G provides greater speed and enhanced capabilities. It’s forecasted to be up to 100 times faster than current 4G standards. Even more impressive is it’ll allow users to instantaneously send and receive data without any sort of disruption or delay. This is expected to open emerging markets like driverless cars, remote automated equipment and real-time transaction capabilities for business owners, which could substantially lower costs.
How Do We Get There?
Before 5G can take off, equipment on existing cell towers will need to be upgraded and more infrastructure added. While 5G networks will be much faster than 4G, their signal has very limited range. As a result, it’s estimated that 100 to 300 or more small cell sites may be needed per square mile in areas that require heavy 5G services.
This has some interesting implications for landlords, including self-storage operators. New infrastructure means new cell sites, which means more opportunities for property owners to lease land to wireless carriers, who’ll need to substantially increase their number of cell towers, rooftop cell sites and other similar installations.
To be clear, 5G won’t be a replacement for existing cell towers. Instead, it’s expected to be the catalyst for the next major buildout of new cell sites across the United States.
How Can Owners Benefit?
The 5G buildout will take two paths, both of which can be beneficial for property owners. First, in many instances, current sites will need to have their antennas upgraded or swapped out entirely. As a result, it’s critical that existing cell-site landlords understand any rights under their current lease agreement that would allow them to financially benefit from a 5G upgrade. You need to know if you have the right to re-enter your cell-tower lease, which could allow you to renegotiate rent received as well as critical non-monetary terms.
Again, within the next few years, self-storage owners could see an increase in opportunities to make their property available to wireless carriers for 5G cell-site installations. To take advantage, it’s important to understand not only how to get your property in front of the right people, but how to optimize the value of the cell-site lease by correctly structuring the agreement.
How Will Cell-Tower Rent Be Affected?
One of the biggest mistakes landlords make is viewing their cell tower as leased space and not a utility. The value of a cell site to wireless carriers isn’t based on the value of the real property on which the tower is located but by the utility the property affords them. Landlords who lease the tower as a utility will unlock a treasure chest of opportunities to increase not only the rent they collect but, consequently, the overall value of their property.
Another mistake property owners make with cell-tower leases is focusing on the monthly rent and not the overall lease structure. Let’s say your lease pays $1,500 per month with an annual escalator of 3 percent. In this case, assuming inflation of roughly 3 percent per year, you’ve effectively agreed to stand still. The cell-tower company is having a laugh because you accepted a long-term agreement that fixed the company’s cost over the length of the lease. No matter how much value 5G or other upgrades may bring to the cell site, your rent is set.
This is akin to an oil company getting increasingly more oil from your property but never paying you a dollar more. Remember, rent is only a derivative of the financial structure of a cell-tower lease. The wider your focus, the bigger the reward will be for you in the short and long term.
The 5G buildout could be a self-storage operator’s chance to get either a better existing cell-tower lease or structure a new, financially beneficial agreement. No matter the situation, a cell-tower lease is a long-term commitment, so it’s crucial to understand the pros and cons.
Hugh D. Odom is president of Vertical Consultants, a telecommunications-consulting firm currently working with approximately 5,000 self-storage facilities across North America. Vertical Consultants clients more than 20 of the self-storage industry’s top 100 operators. Mr. Odom has more than 22 years of legal and telecom experience, including being an AT&T attorney for more than 10 years. For more information, call 877.456.7552; visit www.celltowerleaseexperts.com.