We read headlines about the race to 5G in the news almost daily. The news promises that 5G will exponentially increase the speeds at which we receive and transmit data over our mobile devices. To get to the stage where the U.S. consumer can enjoy 5G, U.S. carriers will need to upgrade all cell sites from their current technology to 5G. To upgrade a cell site to 5G, the carrier will need to replace antennas, equipment, install fiber cabling to the site and make other technical modifications to their cell sites. Since the majority of cell sites are located on commercial real estate properties, the forecasted wave of 5G upgrades presents an opportunity for property owners who have cell sites to increase the rent they receive from their cell site tenant.
The current status of the deployment of 5G technology to cell sites
Most of what we read and hear about 5G is media hype well in advance of reality. Wireless carriers are announcing network upgrades to U.S. consumers prior to their wireless networks actually being upgraded to 5G. Sprint even filed a lawsuit against AT&T earlier this year alleging that AT&T added “5GE” to consumers’ phones, when AT&T’s network isn’t even close to utilizing 5G on a whole.
What we do know is the majority of cell sites located on rooftops and on the grounds of commercial real estate properties will be upgraded to 5G within the next year or two.
When contacted with a cell site upgrade project, never sign consent letters without doing due diligence
When cell site tenants on commercial real estate buildings pursue projects to upgrade their wireless communications facilities, they often instruct contractors to try to obtain landlord consent. If the landlord consents to the project in writing, the landlord has agreed to allow the project to proceed at no additional cost to the tenant; there are no negotiations, no increase in rent, and no additional payments to the landlord.
Often the contractors and the tenants are well aware the lease should be amended and additional consideration should be due to the landlord. It is, however, the landlord’s responsibility to identify that opportunity and to halt the project until fair compensation is paid to the landlord.
Review the space the tenant is occupying and their access to utilities
Anytime a wireless tenant presents the landlord any project for the landlord’s approval, the landlord has the tenant’s full attention. This is the perfect time for the landlord to review the space the tenant is occupying on the property. The landlord wants to make sure the tenant is not in breach of contract by occupying real estate outside their agreed-upon leased premises. Believe it or not, this happens more than landlords think, as contractors installing equipment often do not follow the agreed-upon terms in the lease.
In addition, often it is discovered that while it was agreed to in the lease that a tenant should have its own meter with the local utility company, the tenant has actually hooked up to main electric meter in the building. Construction contractors don’t always follow the lease when they are building cell sites. It is in the landlord’s best interest to always double-check the tenant’s work and to make sure they are not unknowingly paying for their tenant’s utilities.
Have the cell site tenants project reviewed by a professional in the wireless industry
Property owners, attorneys and property managers who have been duped by wireless tenants in the past typically learn from their mistakes and run all future projects by a professional in the wireless industry. It is in the landlord’s best interest to have the lease, plans and permits reviewed by a cell site lease expert. In addition to understanding the correlation between the documents and having the ability to identify opportunities for the landlord, an expert should also know what the tenants will typically agree to pay in connection with their scope of work. They should know how much the rent can increase, what additional one-time payments can be made to the landlord, and what business terms will typically “kill the deal.”
If the lease needs to be amended, the entire lease is now open for re-negotiation
When both the landlord and the tenant agree that the lease needs to be amended, the landlord is free to propose any additional language they would like inserted into the agreement. Often cell site leases are dated and do not include language required to appropriately manage modern-day commercial real estate properties. Landlords have acquired decades of knowledge on how to manage cell sites since cell sites were first deployed on commercial real estate properties in the early 1990s. Adding certain provisions can help protect the landlord from unwelcome expenses in the future, such as temporary relocation for re-roofing, redevelopment in the event there is a future redevelopment opportunity, and updating insurance requirements for the tenant.
Nick G. Foster is the founder and president of Airwave Advisors. He has 14 years’ experience in both the commercial real estate industry and in the telecommunications industry. His company, Airwave Advisors, has served over 400 clients as the nation’s leading cell tower lease expert serving landlords only.