Cell Tower Lease Rates are a mystery for many property owners and with good reason. There is a lack of information available to property owners which in turn negatively impacts owners in negotiations. We want to turn the tables in your favor and share with you some industry secrets. So how are cell tower lease rents determined in the first place? To answer your question we want to walk you through a few factors that influence lease rates.
Linked closely to the law of supply and demand, desirability means how bad does the cell phone company want your property. If your property meets their needs and there are no comparable properties nearby, then there is a really good chance we can increase rents much higher than their initial offer. If your property is similar to nearby properties, then the cell phone company may have other options nearby and rent higher than their initial offer will be more challenging to secure.
In new cell tower construction typically a cell phone company creates what is called a “Search Ring”. The Search Ring is created to identify a few properties to provide their radio frequency engineers options with real estate. Often we hear property owners say, “I have the best property in town…” when if they rode in a car along with the radio frequency engineer, as we have many times before, they would realize that they unfortunately do not have the best property. We also hear, “I don’t know what my lease is worth?”. The only way to know for sure how desirable your property really is to the carrier is to have your opportunity reviewed by cell tower experts such as Airwave Advisors.
Nick was able to more than double the monthly rent we had previously negotiated for a cell tower on our property – PLUS a significant signing bonus! There are several aspects to these deals that only someone with a detailed understanding of the market can explain.
Sam H., President of Cal-Sorrento LTD
2. Capital Improvement Costs
Like any development project whether it be to construct a new house or an office building, costs are a heavy factor. In the case of constructing a new cell tower a cell phone company has many costs to consider. The company will need to hire an architectural and engineering vendor, site acquisition agents, and a construction contractor. Then comes into consideration the cost of the design. Are they proposing to install a rooftop cupola or a faux monopalm? A guyed tower or FRP screened signage? Did we lose you?
The cell phone companies have been constructing cell towers for over 30 years and there are now many designs solutions available to meet their needs. To truly understand the costs of the capital improvements associated with each design and how it impacts your property give us a call to discuss further.
3. Common Misconceptions
The following are common misconceptions of factors that do not influence lease rates:
Square footage – Occasionally a cell tower representative will try and justify a lower lease rate based on price per a square foot. This tactic is often used on property owners familiar with lease rates with office, industrial, or retail leases. While the idea translates from the wireless to real estate industry it is not really how your tenant calculates the value of the property.
Population Density – Although urban locations generally demand higher lease rates than rural location that is more to do with supply and demand than population density. Rural locations typically present cell phone companies more options and flexible zoning laws. Urban locations can often be difficult to construct cell towers in due to buildings obstructing coverage and stricter zoning laws. This can often leave less options available to the carrier in urban locations.
What your neighbor is receiving for rent – Often a property owner who is unfamiliar with cell tower lease rates will call a friend or a friend of a friend who has a cell tower to see what they are getting for rent. Cell phone companies like this method of valuation because it puts the property owner at a disadvantage because (1) the property owners sample size is typically small and (2) if the friends signed bad deals at low rents the property owner will think he got a good deal.
To truly understand the value of your cell tower opportunity you need to contact cell tower lease experts such as Airwave Advisors. With years of experience leasing cell towers for the top carriers in the industry we know exactly what the cell phone companies are looking for. This unique insight gives you a huge advantage in negotiations tipping the scales of negotiations in your favor.
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About Nick G. Foster
Since founding Airwave Advisors® in 2014, Mr. Foster has added value to over 400 clients ranging from the State of Nevada, City of Beverly Hills, to Habitat For Humanity. Mr. Foster focuses on cell tower lease renewals, buyouts, new lease negotiation, and cell site lease management. Prior to starting Airwave Advisors® Mr. Foster founded and led the Cell Site Services Group within nationwide commercial real estate services leader Cassidy Turley (now known as Cushman & Wakefield).