Will the much-awaited arrival of 5G increase your cellular site lease value? Could it reduce or even eliminate your cellular site lease value? Or will it have little or no effect on you cellular site lease value? It all depends on circumstances largely beyond your control – the technology required for 5G, the location and cellular demand at your site and the cost to replace the value of your site.

WHAT IS 5G?

5g is the next generation of wireless protocols that will make possible the higher speeds, and greater ability to handle the massive amount of information required to power the next wave of cellular technology.  In addition to calls, texts, gaming and downloads, 5G is going to power everything from home security and self-driving cars to smart cities and smarter industries.

TECHNOLOGY

5G works on higher frequencies than current 4G technology. These higher frequencies can not carry information as great a distance as lower frequencies, so there will need to be an increase in the number of cellular antennas to make 5G work, especially in and around cities. Unlike today’s larger, stand-alone cell towers, much of the 5G data will be carried by small cell sites. These smaller antennas can be as small as a breadbox and can easily be placed on light poles, buildings or highway overpasses. In Realtor Magazine, Steve Kazelle, a wireless leasing consultant notes ‘that only 10% of small cell antennas will be place on private property”,most new small cell sites will be located on public right of ways and other government owned properties. These small cell sites are expected to be much less expensive to locate and could replace existing cell towers in higher density areas.

LOCATION AND DEMAND

The cost of 5G coverage will not be cheap, so naturally the telecom companies are going to roll it out in areas of high demand that offer the fastest and largest payback – cities and higher density areas. That also makes it likely that replacements or upgrades to existing sites will first be taking place in these areas.

While 5G service will require thousands of new cell towers to be built, its effect on existing sites will vary. Sites that are ideally located and structurally able to handle the new equipment of 5G may benefit from additional new leases on their properties. Unfortunately, some existing cell towers and sites will be replaced by less expensive new towers or the 800,000 new small cell sites that will be built.

COST/VALUE PRESSURES

The cost of implementing 5G is going to be enormous for the cellular carriers and they will be pressured to reduce their expenses as much as possible. This will affect current tower owners in a number of ways:

• For higher-cost existing sites, carriers may find it more cost effective to replace these sites with new towers or through the use of multiple small cellular sites in areas of higher demand or population density.
• The political pressure for municipalities and public entities to offer lower-than-market rents combined with the availability of small cell sites, could enable carriers to negotiate lower cost leases on existing sites or even decommission older more costly sites.
• Rather than face an uncertain future of possible ground lease rent reductions of loss of leases, many site owners may want to consider the advantages of a ground lease buyout. This provides them with a large cash payment now , eliminates the risk of income reduction and can provide future revenues on any new leases are acquired on their property.

If you are interested in this learning more about how 5G can affect your ground lease values or to proactively protect the value of your cellular ground leases contact one of Crescendo’s cell tower lease experts at 203.972.3200 or email us.