Earlier this month, we did our Wireless Industry Forecasts for 2021 webinar, which is available for viewing here, along with some other webinars about the industry that we did in 2020. While there were a few forecasts related to wireless leasing in the webinar, we thought it might be helpful to pen a blog post on what we anticipate in 2021 regarding cell tower and cell site leases specifically for those of you who own towers or have buildings, structures, or land with cell sites. Here are our top forecasts:
- Wireless carriers and tower companies continue to push for lower lease escalation. As wireless carriers push for lower escalation (but don’t always get it) on their colocation leases with tower companies, tower companies will continue to seek lower escalation themselves so that their revenue (colocation leases) matches their expenses (ground lease) in escalation. When it comes to new leases, for the most part, they have been successful. However, on expiring leases, our clients have been able to hold firm more often.
- DISH will get started, but slowly. Our clients (especially those with Sprint leases on site) are being approached by DISH to lease space on the (building/tower/steeple/water tower). We expect DISH to focus on some core large markets initially as proof of concept and then to expand to other markets in 2022, when the activity will really get started. DISH is contacting landowners and requesting a new lease instead of asking about taking over an existing Sprint lease. However, in some cases, they are offering less than what Sprint is paying. This creates a potential dilemma for the site owner in that it might make more sense to reject the DISH request and instead make them use the Sprint lease when T-Mobile terminates it.
- Overall lease activity for the construction of new cell towers will be slightly down. Deploying new cell sites is a capital-intensive activity. Building a cell tower costs in excess of $250,000. With AT&T and Verizon both having spent in excess of $20B each on the C-Band auction, both companies will be a bit more conservative on spending money, that is until the C-Band spectrum is available toward the end of 2021 to deploy fully. Thus, as compared to 2019 and 2020, we anticipate that there will be less new cell tower development overall in 2021.
- Tower companies attempt to pull back (unsuccessfully) on their previous aggressive buyout and lease extension offers. 2020 was a crazy year for lease buyouts and lease extensions – landowners received offers that were much larger than previous ones in prior years. Part of this was due to the influence of new (or renamed) entrants into the lease buyout sector, which pushed tower companies to be more aggressive than ever before. We have already observed some “take backs” in 2021, where tower companies have indicated that the offers they made in 2020 are no longer available. That doesn’t mean they won’t eventually honor those offers, just that there appears to be an attempt to pull back a bit in negotiations.
- Modification activity to existing sites will flourish. With T-Mobile actively pursuing their “Anchor” project (the addition of Massive MIMO and Sprint’s 2.5GHz spectrum to T-Mobile sites) and Verizon kicking off C-Band and CBRS upgrades on macros, expect to see a flurry of activity on existing sites, especially toward the end of 2021. Already in 2021, we have been inundated with requests from our clients for modifications.
- Third-party buyout companies will continue to make aggressive offers until most of them blink. There are a few buyers who are willing to pay top dollar for good leases (tower company, AT&T, Verizon, and T-Mobile leases), especially those with shorter terms to expiration. In the past, this created a “bubble,” and once competitors started offering less, the top bidders would as well. Simultaneously, buyers are, and will likely become, more concerned about the quality of their purchase agreements and the creditworthiness of the landowner. So the sellers who need to sell the most may have difficulty selling unless their lender is willing to sign a non-disturbance agreement.
- The number of lease optimization companies continues to steadily increase, as do the exaggerations, misleading statements, and straight-out lies from their agents. We wish we could say that things will get easier for landowners, but they won’t. You should continue to expect frequent requests to lower or renegotiate or extend the lease, along with threats if you don’t comply. Particularly for those of you with Sprint leases. We are hard-pressed to see where it makes sense for landowners to renegotiate Sprint leases. Either T-Mobile is keeping them – in which case there is no need for renegotiation – or they plan on terminating your Sprint lease eventually (we estimate 75% of Sprint sites will go away) and there is no need for renegotiation. In other words, there are very few situations where renegotiating your Sprint lease will help prevent them from keeping it or terminating it. If you renegotiate a Sprint lease –you are likely either giving up money they already plan on paying you or you are giving them an easier and cheaper route to terminate. One recommendation that applies across the board: Never give up language that requires them to remove their equipment and tower.
How Steel in the Air Can Help
If you have read through to this point, just know that whatever the situation, we are here for you. Please call us at (877)-428-6937, send us your questions, or pose them on our Q&A forum. The initial call/inquiry is free, and we don’t sell or share your information with lease buyout companies like other consultants do. If we believe we can help your situation, we will provide a no-obligation, flat-fee quote.