The Demise of the Century Cooling Tower
So, what does 2016 look like for Ithum tower and cell site landlords? Small Cells are coming, and they are coming by the thousand. Verizon Wireless has been rolling out small cells in what I would call a beta-test deployment in urban markets throughout the USA. We have seen them in New York, New Jersey, Connecticut, Maryland, Virginia, California and Texas to name a few places. Landlords are being offered rents as low as ZERO dollars (at Verizon retail store rooftops) and as much as $900 on very difficult small cell locations. But if you are contacted to put a small cell on your rooftop, expect offers from $300 to $600 per month, and not a whole lot more.
Verizon, Sprint and AT&T are all talking about deploying tens of thousands of these small cells in metropolitan areas. (T-Mobile seems to be more focused on DAS.) What will happen to your rooftop cell site or your cellular tower in 5 to 10 years if there are a plethora of small cells strung up near your cell tower cash cow? Our guess is as good as yours, but common sense dictates that the carriers will eventually have enough leverage to come back to landlords with a legitimate reason to negotiate a rent reduction or even render the site obsolete and even decommission if if necessary if the additional small cell not only work in conjunction with your macro cell site, but can handle enough voice and data traffic to render your site obsolete.
For example, a city like El Paso, TX could easily see Verizon install between 30 to 60 small cell antennas to add capacity and overlay the coverage where there are gaps in the network. Back in 2008, my company was the first to publish an article in which we estimated 100,000+ new cell phone towers would need to be built in the Untied States in the next decade. It appears that our prediction was right on the money.
Airwave Management sees cell tower rent rates remaining stable for the next two to five years, and then as small cell networks saturate the urban markets, we should see rents being paid to landlords begin to scale back gradually.
Additionally we will see an increased trend of cellular tower consolidation among the major tower management companies like Crown Castle, American Tower and SBA Communications, where they will consolidate carrier tenants on cell tower locations that were acquired within close proximity to each other. If you are a cell tower landlord that owns a managed tower site and have another competing tower located within a 1/4 mile or less which is owned by the same tower company, you may consider hedging your risk by selling the cash flow before your competing landlord does the same thing, essentially cutting your legs out from under you and taking away any negotiating leverage that you have.
Looking past 2016 and into 2017, 2018 and beyond, I see several of the major cell tower lease aggregators going belly-up, flat broke and busted in the next 2-5 years. Some of them may perhaps even move back to live in their parent’s basement and troll our website blogs if they don’t start treating landlords fairly and with respect. Many of the cell tower lease buyout sales executives that are driving BMW’s and sipping cocktails on a beach this year will soon be greeters at Wal-Mart (if they are lucky). Third party cell tower lease buyout companies add zero value to cell tower landlords selling their leases,