Could the traditional seesaw totter between lessors and lessees of wireless sites be leveling itself out?
Balanced markets exist when buyers and sellers are on an equal footing, with neither party having a significant advantage over the other. With wireless, balanced market-conditions would exist when the lessor and lessee have an equal amount of influence.
Historically, wireless carriers have had more negotiating leverage compared with property owners or lessors. The carriers knew what it would cost them to construct a typical wireless site, the length of time to recover that investment, and what they are paying in rent for other sites in their network. Yet owners, by and large, did not have any of this information. Without a market vehicle to check rent offers (like classified ads, multiple-listing services, commercial brokers or appraisals), owners often accepted the first offer presented by the carriers—set at deliberately-low amounts that favored the lessee.
Although wireless leasing is still not as open and porous as the markets for others forms of real estate, the supply of new site leases is beginning to slow down in metropolitan areas with established wireless infrastructure. In
Recent numbers from the Cellular Telecommunications and Internet Association are indicating that the supply of cell sites may be leveling off, after more than a decade of exponential growth.
In fact, for the last three years, the annual rate of growth dropped below ten percent for the first time in several years, averaging 6.28%. In 2005, the number of sites nationwide increased by only 4.5% from the previous year, and 2006 reported a 6.5% increase from the 2005 total.
Since a key precursor to a balanced market is the equalization of supply and demand, these early cell-sites totals may indicate that supply and demand are trending closer together.
Another early indication that the wireless market may be balancing out is the emergence of tenant brokers (like Black Dot Wireless, MD7 and ITRA Realty Group) who only represent carriers and other lessees. These tenant reps have had some initial success at re-negotiate existing leases with high rents to lower amounts—a process these companies call “lease optimization.”
This is a marked shift from the early days of wireless site-leasing, when carriers could find plenty of opportunities to negotiate favorable lease terms—and could mean that balanced market conditions are not far off.