“MOBILE DATA USE IS INCREASING AT 30-40% PER YEAR.”
The market for new cell tower leases is generally flat in 2019 as compared to 2018 and even 2017. While it is true that mobile data use is increasing 30-40% year over year, it is simultaneously true that the wireless service providers are under increasing pressure from competition between each other. The chart below shows the average revenue per user for the Big 4 wireless carriers in the US (AT&T, Verizon, T-Mobile, Sprint) and US Cellular. In general, there has been a slightly downward or flattening trend over the last few years in average revenue with the exception of AT&T who increased between 2015 and 2016 before starting a longer decline. As a result, there has been a general effort by the wireless service providers to lower their ongoing lease related costs. Two indicators of this are efforts by wireless carriers to push extremely low escalation rates (2% per year or less) and the rise of Build-to-Relo tower companies who build towers near existing towers for the express purpose of encouraging companies on the existing towers to abandon more costly leases for a lease on the new tower at better overall terms and rates.
CHART SHOWING THE AVERAGE REVENUE PER USER FOR WIRELESS CARRIERS CALCULATED OVER THE LAST 3 YEARS.
CHART SHOWING THE TOP 10 POPULATED AREAS IN THE UNITED STATES ALONG WITH THE AVERAGE CELL TOWER LEASE RATE IN 2018 FOR GROUND LEASES IN THOSE AREAS
2018 POPULATION (ESTIMATED)
AVERAGE CELL TOWER LEASE RATE (PM)
Lease rates for all new offers that we have tracked in 2018 average $1,050/month across the entire country. This is not surprising in that the average of all cell tower ground leases in our database across the US is $1,223/mo. This includes urban, suburban, and rural areas. In our cell tower lease database, we have about 10,000 lease rate data points to which we add 50-100 additional data points per month. Whether the data comes from the 50-75 landowners who contact us monthly inquiring about our services, from our 3,500 plus clients, or from newspaper articles, we track everything. We have a single staff member whose primary job it is to update our database. One of our clients recently engaged us to evaluate lease rates across the country for them. We analyzed our data and determined that the following list of average lease rates in 2018 for leases in the top metropolitan areas across the United States as listed in order of population.
A HEAT MAP SHOWING THE AREAS OF THE UNITED STATES WITH THE LOWEST CELL TOWER LEASE RATES (GREEN) AND THE HIGHEST (RED).
In examining this list, you can see that the highest rates in the country are in San Francisco and in New York City. Why you might ask? Because San Francisco has some of the most difficult zoning ordinances in the entire country, a very hilly terrain, and the cost of property is high. New York is costly for everything. Compare this to Houston, where the average lease rate is the lowest of the top 10 cities. Houston has some of the weakest zoning regulations in the country, relatively low property values, and a very flat terrain. As you can see in the chart, supply and demand for cell tower lease sites varies between the top 10 urban areas. Even in these metropolitan areas, there are pockets of variation- meaning that leases in Oakland generally average less than San Francisco proper. Below is a heat map showing areas of the US where lease rates tend to be lower and higher. (The red areas are hotter or higher in average lease rate while the green areas are “cooler” or lower in average).
Cell tower land lease rates range from $100/year to $150,000/year depending upon the location in the United States and the uniqueness of the location. What makes a $100/year location different from a $150,000 per year location? In other words:
MAP SHOWING HYPOTHETICAL SEARCH RING AND ALTERNATIVE LOCATIONS FOR CELL TOWER PLACEMENT.
When a wireless carrier or tower company first approaches a landowner, they use a site acquisition agent to contact the landowner. The agent typically already has a starting lease rate in mind when they knock on the door to start negotiations. The rates they will propose is based upon a number of factors. The primary factor is what their experience tells them is the lease rate at which most landowners will agree. Most site acquisition agents have a significant amount of experience in the area where they are acquiring new cell tower sites. These lease specialists will know the average lease for a given area. They know what the carrier or tower company is willing to pay. The wireless carrier or tower company also provides suggestions on the appropriate starting offer lease rate. The site acquisition agent, if they are good at what they do, will have already reviewed the area and chosen the sites that best fit the objectives provided by the wireless carrier or tower company. They are required by their contract with the wireless companies to find three alternative candidates for the proposed tower or rooftop site. (See the map below showing a search ring and alternative candidates). They know whether your site will work under local zoning regulations, federal regulations, and whether the site is easy to construct or not. They will have done a competitive analysis of the area to determine whether multiple properties could work and meet the carrier’s objectives. Unfortunately, they won’t tell you what they found in their research.
In 2018 and 2019, some tower companies (Tillman Infrastructure, Uniti Towers, Cityswitch) have been aggressively shopping for sites to relocate an existing tower. These tower companies may or may not tell you that they have a tower on a nearby property. The new tower company will be aggressive in trying to get lower lease rates, sometimes because they have no intention of building the new tower and just need a signed letter of intent to use in negotiations with the existing landowner. Other times, it may be a different tower company than the one that owns the nearby tower. Whatever the case, lease rates are highly contingent upon the uniqueness of the property.
Contrary to popular belief, lease rates aren’t tied to population density nor are they tied to the ground elevation. As shown above, while ground lease rents for tower do tend to be higher in more urban areas, some urban areas command completely different lease rates even though they are similar in population. While we believe any landowner can network and find a few friends/neighbors with a cell tower lease and ask them what they are getting paid, that doesn’t mean that the small sample you have is representative of the fair market value of your site. Nor does it mean that you deserve to get the average value for your site. Your site may be preferable to the wireless carriers, and they may be willing to pay more for it.
You now have an idea of the average lease rate for cell towers in the United States. You might know from the chart above what the average rate is in your metropolitan area. And best of all, you may know what your neighbors are getting for cell towers on their property. You might think that at this point, you have enough information to negotiate the proper lease rate for your location. If your site is average and the wireless carrier or tower company has other options, then you likely have enough information to negotiate a fair lease rate. However, if your property is not average or the wireless carrier doesn’t have other options, you will likely leave money on the table. And this is the second most important factor related to cellular tower lease rates: the knowledge or relative knowledge of the landowner. Unless you deal with cell phone tower land leases daily (or weekly or even monthly) you are unlikely to know what you don’t know.
When I was doing site acquisition, I can specifically recall when and where I came up with the idea of being a lease consultant. It was while I was walking away from a piece of property in St. Charles, Missouri after pitching the landowner on a T-Mobile lease for ground. We had offered $700/mo. and the landowner countered at $900/mo. thinking that he had done a good job. I personally knew that even though we rarely paid had to pay more than $1000/mo. in the area, we would have easily paid $1,500/mo. or possibly more for this specific location because it was the only property located in the search ring with the proper zoning. This landowner didn’t know what I as the site acquisition agent did and as a result, left $600/mo. on the table. To figure out what he left on the table, I used our handy cell tower lease rate calculator. In short, this individual left over $300,000 on the table over the standard 25-year lease in that negotiation because he didn’t know what he didn’t know. And after I left that property, I knew that only 1 in a 100 people would have known what T-Mobile would have paid and unfortunately this landowner didn’t have any of them helping him.
UNLESS YOU UNDERSTAND CLEARLY WHAT OPTIONS THE CELL TOWER COMPANY HAS, YOU AREN’T ON EQUAL FOOTING AND YOU WILL END UP DOING ONE OF THE FOLLOWING.
Until you know why they are selecting your property and whether they prefer it as compared to your neighboring property, you can’t effectively negotiate the appropriate lease rate. That is where Steel in the Air, Inc. comes in as your trusted advisor. We can review the factors listed above, provide a complete cell site lease appraisal, and assess whether your site would cost more or less for the carrier to construct. From this, we can tell you what tower lease rates other landowners in similar situations received. We don’t just tell you what other people in your area receive as a lease rate, we tell you why your site is better or worse and whether you should get the average lease rate or higher or lower. We can’t guarantee that you will get a better lease as a result of using our services, but we can guarantee that you will know exactly why you accepted a particular lease rate so that you don’t have to wonder for 25 years whether you left $300,000 on the table.
– We will conduct a thorough cell tower lease evaluation. The process begins when we evaluate the terms and language of the cell site lease, answer any questions you might have, and explain the real-world effects it will have on you in the short and long term. We help you understand how the terms in the tower lease influence the total future value. We also address other financial terms found in your cellular lease. What should you receive for escalation and how often? What is an appropriate option payment (even if they don’t offer one)? Should you ask for revenue sharing if additional tenants collocate space on the tower? (The typical answer is no – but there are situations when you should). Should you be reimbursed for having an attorney review the lease? (The typical answer is yes – we can tell you how much to ask for).
– We review the proposed location of the tower or site carefully examining the zoning ordinance, zoning map, parcel map, property records, aerial and street view images in Google Earth, and other proprietary and non-proprietary information sources. We get to know the property as if we were visiting it. We have a conversation with you and ask questions about the offer and your neighbors.
– We examine our tower database and find out where else the wireless service provider or tower company has other cell sites or towers in the area. We look at carrier coverage and from this information we figure out what the objectives are for the wireless carrier.
-We then backwards engineer the search ring- the area in which they need to find a tower site. We figure out where they need to be and whether any existing tower or other property in the area would work for their purposes. We then provide you with a map showing you what the top three other alternatives are for them (if there are three) and rank them as compared to your property location.
– We will analyze current market dynamics, specifically involving the company who has approached you, to determine how valuable your unique property is relative to other viable options.
– Using our proprietary cell tower lease rates database, we will determine what the fair market value of your lease is (and what the expected value will be in the future). We will recommend rent, escalation and revenue sharing (if applicable) amounts taking into consideration the net present value and future trends.
– We will advise you on how to favorably position your property.We will recommend as part of our assessment what you should ask for if you want to be conservative, moderate, or aggressive in negotiations and counsel you on the probability that you will lose out on the lease in each of these stances.
– We make ourselves available after the assessment is done and after you have started negotiations to answer your questions.
– If the wireless carrier accepts your counteroffer, then great. If not, then we will review their response and advise you on an appropriate counteroffer. Our goal is simple- to make sure you get the best lease possible with the operative word being “get”. Unlike other consultants who work off an increase or on a percentage of your lease income over time- your happiness and peace of mind is our goal. If the proposed lease is fair, we will tell you that. If you want to push back aggressively, we will support you. If you want to make sure you get the income as opposed to your neighbor getting it, we will make sure that happens.
– Your satisfaction is our goal and we strive to make sure you are happy enough with our services that you will provide us with a testimonial like the hundreds of happy clients who have done so before on our testimonial page.
No other consultant has more expertise or better data. We have done more assessments than any other entity. We have been in business longer than any other consultant. In 15 years, Steel in the Air has helped over 3,500 clients nationwide with cell tower lease negotiations, buyout offers and asset management. We provide lease valuation and brokerage services using comprehensive, timely data and in full consideration of all fixed and variable factors that might influence the rental rates of your wireless lease. We are a reputable company with a proven track record of satisfied clients – and we plan on keeping it that way. We have helped Fortune 500 companies, federal agencies, not for profits, and individual landowners – and give each of them the best service and information we can. For any type of wireless asset valuation – from proposed leases to lease expirations or buyouts, we are your trusted source.
Call or email Us if you want help figuring out the real value of your proposed or existing lease.