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Rooftop Telecomm Revenue Is the Cherry On Top

Owners that want to increase their building’s NOI should look upward. The telecommunications industry is rolling out its new 5G technology, which requires an extensive network of physical antennas turning rooftops into moneymakers. Leasing space to telecommunications infrastructure is some of the easiest money a building can make. Making the deals happen, though, is proving to be the hard part. 

The fifth mobile network generation is designed to connect everything and everyone, delivering higher multi-gigabyte data speeds at ultra-low latency. The higher performance, faster speeds, reliability, and greater network capacity of 5G are creating a new standard of wireless communication, but building it has not been easy. 5G networks require far more physical infrastructure to create the necessary coverage, meaning the old model of one antenna serving a 10-mile radius is gone. Because of the limited range of the higher frequencies that enable greater bandwidth, 5G infrastructure needs dozens of smaller antennas of all shapes and sizes working in unison. Telecomm carriers will spend close to $750 billion worldwide over the next five years building 5G networks. To create that type of network, 5G providers need willing partners in the property sector, but the real estate industry and telecommunications sector are having trouble speaking each others’ language. 

“You’ve got these huge carriers, multibillion-dollar entities, each has their own culture and business model,” JLL Leader of Technology Infrastructure Jason Lund said. “They don’t look at the asset like a building, but as antennas. It’s very much about them. Building owners look at the asset as a building. They sell space, they want to keep it nice. The amount of money being talked about is nice, but it isn’t life-changing.” 

That disconnect is at the heart of the tension between telecommunications carriers and building owners. Carriers are looking to build out a cost-effective 5G since installing an antenna on an existing building is far cheaper than buying land, pouring concrete, constructing a tower, connecting electricity and internet on-site, and installing the antennas. The ballpark cost of traditional telecommunication towers is roughly $250,000. Installing an antenna on top of a building costs half that price. The building already has height, power, and an internet connection. To make the numbers work, considering how many antennas are needed, telecom carriers are offering anywhere from $1,800-3,000 monthly to building owners for a single antenna. A particularly well-placed building may earn nearly $5,000 a month. Still, that sum of money isn’t getting anyone in the real estate industry excited. “When carriers approach owners through intermediaries, they don’t understand the real estate model or speak the language, nor do they care,” Lund said. “Because the money isn’t life-changing, owners are not as driven by this.”

Many of today’s building owners may not know how far telecom antenna technology has come. Gone are the days of giant metal quad pods, tripods, or large poles jutting out the top of a building. New antennas are far smaller and lighter, and most don’t even need to penetrate the roof to be secured. A 5G antenna looks like a box, not a metallic antenna with wiry components. Installation is quick, easy, and handled by the carrier. Practically all owners have to do to earn extra money is say, “yes.” 

“This is found money not in the original acquisition parameters,” Lund said. “It drops straight to the bottom line. Owners are looking at $30k extra a year, straight to NOI. Divide that by 5 percent, that’s the value enhance of one antenna.” 

Now we’re speaking the language of real estate. Buildings are often valued off of a multiple of their NOI, so a small boost could lead to quite a bit of appreciation. Better yet, telecoms are looking for scale. Intermediaries and aggregators approach building owners about the feasibility of allowing telecom carriers to use their assets. The more buildings intermediaries and aggregators can offer, the juicer the deal. Building owners are putting entire portfolios up for review, and when antennas are installed across entire portfolios, the amount of money becomes meaningful for large investors and asset managers. 

Portfolio review means revenue at scale. The bottom line looks even better when you realize exclusivity isn’t part of the deal. Any deal can happen, but generally, telecom carriers are not willing to pay extra for exclusive access, so owners can stack several antennas atop their assets. Lund knows of one well-placed building in Boston with 23 telecom tenants on its rooftop. That’s serious money. 

The difficult part for owners is knowing just how valuable their building and location are. Building out a telecom network is like installing lawn sprinklers; one sprinkler in the middle of the lawn won’t cut it. You need coverage for the edges, the flower beds, and the corners. In the urban environment full of obstacles and challenges, coverage dead-spots are everywhere. 5G antennas want to be four to five stories off the ground, aimed downward, making them viable for mid-rise and multifamily properties. Population density is a major factor. Carriers release coverage needs maps to businesses known as turf vendors, who then act as intermediaries that approach owners of suitable sites in the designated need area. A typical deal with an intermediary, aggregator, or turf vendor has the owners keeping 70 percent of the take from the telecom carrier. 

‘Found money’ that boosts your assets’ NOI while requiring hardly any work from the owner sounds like a great deal, but many owners are hostile towards those types of deals. That just means more for the few owners that see the opportunity. Carriers often work with turf vendors who show where their competitors have placed antennas to see if they want to put an antenna in the same location. “There’s a lot of education and groundwork to be laid,” Lund said. “If you’ve got a telecom deal, you’re signaling to the market that your building is an open door.” 

5G networks will need many more locations than ever before because the number of connected devices is growing exponentially, and every user uses more bandwidth every year. To achieve the next generation of coverage, antennas will need to be everywhere at many different elevations and at many different angles. Today’s 5G antennas are already lurking among us in plain sight, disguised atop streetlights, hidden on rooftops, strapped on telephone poles, and hanging off the side of buildings; antennas don’t look like antennas anymore. 

How many we need isn’t knowable. The intricacy of 5G networks and an endless number of obstacles and nuance leaves experts with only estimates. Covering Manhattan alone with 4G took about 100 antennas. Experts estimate 5G coverage in Manhattan will take somewhere between 5,000 and 20,000 antennas per carrier. Telecoms are discovering where they need additional antennas daily as they wage an all-out war on dead spots. The next generation of mobile networks will unlock a new paradigm in the built environment, connecting devices, buildings, and people better than ever before, but telecoms can’t do it alone. Willing partners looking to boost a building’s earning potential will find telecoms eager to work with them, as long as they speak the same language: green.

Associate Editor
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