Valuations and Historical Wireless Lease Rates
SiteBid monitors the dynamic landscape of wireless leases offered by carriers and utility infrastructure firms to property owners, enabling us to discern prevailing market conditions and forecast future trends in lease valuations. Our analysis of lease data reveals the following insights and trends:
Market Outlook for Wireless Leases:
What does the future look like for the value of wireless leases, rooftop antennas and cell tower assets? Here are some of our thoughts:
- In the short term, prices are likely to have stabilized at the current level and current lease rates have peaked.
- In the long term, prices for leases will come down for the following reasons:
- Inflation and the increase in the cost of borrowing will result in decreases in prices to property owners.
- Carriers have shifted to reduce overhead and operating costs through co-location. If your site doesn’t have multiple tenants sharing resources, there’s a good chance the carrier will need a rent reduction or additional tenants need to come to the site to split operating costs at the site.
Average Lease Rates by Geographic Region: Understanding the regional variations in lease rates is essential for property owners and investors. Lease rates for cell towers and rooftop antennas can significantly differ based on the location. As of our latest data, here are some notable trends:
- Urban Centers: Lease rates in densely populated urban areas tend to be higher due to increased demand for wireless coverage. Key metropolitan areas continue to see strong lease pricing, with an average annual escalation of approximately 3-5%.
- Suburban and Rural Areas: In less densely populated regions, lease rates may be lower. However, these areas may still offer attractive opportunities for property owners, especially if they can attract multiple carriers to a single site through co-location agreements.
- Coastal Regions: Coastal areas often command premium lease rates, driven by their desirability for network coverage expansion. Lease agreements in these regions may feature more favorable escalation clauses.
Historical Pricing Trends: A historical perspective can provide valuable insights into how lease rates have evolved over time. Analyzing lease data from the past decade reveals several significant trends:
- Upward Trajectory: Over the last decade, lease rates for cell towers and rooftop antennas have generally exhibited an upward trajectory. The proliferation of mobile devices and the demand for higher data speeds have driven this growth.
- Escalation Clauses: Lease agreements with escalation clauses that provide for annual increases of 3% or more have become increasingly common. Property owners who negotiated such terms in the past have seen their rental income grow consistently.
- Technology Advancements: Advances in wireless technology, such as the deployment of 5G networks, have further boosted demand for tower and antenna space, influencing lease rates positively.
Future Projections: While past trends provide valuable insights, it’s crucial to consider future projections when assessing the market. Here are some forward-looking insights:
- Co-Location Opportunities: Co-location agreements will continue to play a pivotal role in lease pricing. Property owners should explore ways to attract multiple carriers to their sites, as this can help offset potential downward pressure on lease rates.
- 5G Expansion: The ongoing rollout of 5G networks will likely drive increased demand for cell tower and antenna space. This could lead to higher lease rates, especially in areas where 5G deployment is accelerating.
- Inflationary Pressures: Keep an eye on inflation and borrowing costs, as these factors can influence lease pricing. Property owners should be prepared to adjust their lease terms to account for changing economic conditions.
- Easement Structures: Consider the benefits of easement purchase structures that anticipate future tenant expansion needs. These arrangements can position property owners for higher valuations in the long term.
The cell tower lease market is dynamic and influenced by a range of factors, including geographic location, historical trends, and technological advancements. Property owners and investors should stay informed about market developments and adapt their strategies accordingly to maximize the value of their lease agreements. While historical data provides insights, future projections and flexibility in negotiations are key to navigating this evolving landscape successfully.
Focus on multi-tenant co-location efforts to bring several carriers to your site ASAP. Incentivize with re-location assistance, like abated rent, to attract new carriers. Try to keep at least a 3% escalation each year in your lease and remove any right of first refusal language.
Structuring your Lease Terms for future Sale/Exit:
The most significant differentiation in pricing for both rooftop and tower ground leases can be seen in offers structured with upside potential for the buyer. The highest prices in the market today for lease/easements are available leases include the following;
- Lease Escalations are at 3% per year or 15% every 5 years or higher,
- There is no Right of First Refusal in the Lease.
- There are multiple tenants sharing resources.
- There is alternative energy available on site.
Disclaimer: Information provided is based on publicly available resources, experience in the industry, as well as frequent conversations with industry professionals. It is opinion and thus should not be relied on for financial purposes.