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Cell Tower Lease Rates Explained

Of all the types of leases out there in the world, cell tower leases are probably the least familiar to the general population. However, while most people may not be aware of them, these leases are an exceptional asset, and one that can be sold for cash.

A cell tower lease is an agreement between two parties: a property owner who has space available for the installation of cellular equipment, and a cellular provider such as AT&T, Verizon, T-Mobile or Sprint. Sometimes the agreement is between the property owner and the tower company, such as American Tower or Crown Castle. The agreement grants the cellular provider permission to operate equipment on the property owner’s land in exchange for rent.

Cell Tower Lease Rates - Cell Tower Ground Lease

Why Are There So Many Cell Towers?

We live in a mobile-first world, and these days, having a stable internet connection is an absolute necessity. Much like owning a car, a washing machine or coffee maker, most Americans simply cannot imagine living without their smartphone. It’s the remote control for their lives.

But it’s not just people that are clamoring for screaming-fast connectivity. The Internet of Things has led to Internet-connected TVs, refrigerators, washers and dryers, lights, alarm systems and much more. It’s no longer the stuff of science fiction, but common fixtures in American households. Each of these ever-growing group of devices requires additional internet bandwidth, and that bandwidth must come from somewhere.

Cell towers on private or municipal property are one of the best ways for cellular providers to generate future network capacity. As such, cellular providers are constantly securing property for the placement of new cellular towers in areas where there is a high demand for additional bandwidth.

The Basics of Cell Tower Lease Rates: How is a Lease Rate Determined?

Cell tower lease rates can vary a great deal from location to location. As mentioned, for some property owners, rental fees from a single cellular provider can exceed $150,000 in a single year, while in other locations they may barely top $200 per month.

Why the big discrepancy? Cell site lease rates vary depending on several variables.

Understanding Cell Tower Lease Rates

Cell tower lease rates are essentially based on these factors:
1. What type of cell tower lease is it?
2. How critical is the site to network continuity?
3. What are the alternatives for the telecommunications company?

1. Cell Tower Lease Types

There are several types of cell tower leases to be aware of and each of them is worth a varying amount in rental fees to property owners.

Cell Tower Ground Lease

This is a standard lease agreement between a cellular provider and a property owner. The cell tower lease agreement specifies how much land will be dedicated to the construction of the cell site, and the contract provides the wireless operator access to and from the lease area.

Typically, cellular providers and tower companies will need approximately 100’x100’ of available space for a cell tower ground lease; however, in some cases, cellular providers might be able to work with a space that is only 300 square feet total area.

Lease Expansions

This type of cell tower lease agreement occurs when a party wants to expand the agreed-upon area established in the original ground lease. This expansion typically serves the purpose of either expanding or upgrading equipment, or to provide space to a separate wireless carrier.

Additional Ground Space Lease

Unlike a lease expansion, an additional ground space lease involves leasing an entirely new section of land to a separate carrier. Once this lease has been established, the new carrier will install their own equipment on the property so that they can use the existing tower that is currently part of the original ground lease.

Tower Collocation Lease

This type of lease is used when a carrier wishes to utilize the cell tower and ground space on an existing cell tower already owned by another wireless carrier or tower company. This type of cell tower land lease usually does not involve the primary property owner, unless the property owner is also the tower company or carrier.

Cell Tower Lease Rates - Collocation

Rooftop Lease

Like a collocation lease, a rooftop cellular lease is the method used when the carrier does not own the structure in which they wish to install their transmission equipment. As such, the carrier needs to enter a cellular lease agreement with the owner of the structure so that they can acquire permission to install cellular antennas and equipment like a cellular base station.

Cell Tower Lease Rates - Rooftop Sites

Cellular rooftop leases are especially popular in locations with high population density, like cities, busy suburbs, or other locations with the need for high-bandwidth capacity. Many large buildings (think small skyscrapers) now leverage rooftop leases for additional income, and as the need for capacity continues it’s likely that the number of rooftop leases will continue to grow.

Tenant Improvement Lease

Similar to the above two types of leases, a tenant improvement lease occurs when a carrier wishes to install transmission equipment on structures that were not originally designed for cellular connectivity (i.e., water towers, billboards, utility poles, etc.).

These structures typically reside on property owned either by an individual or an organization, and as such, the carrier must enter a lease agreement to install their transmission equipment on the existing structures.

2. Location of the Cell Site

In tightly congested urban areas where there are no plots of land available for a traditional tower or where there are very few rooftops available, cellular rents will naturally be higher. For example, a city like San Francisco has some of the highest cellular rental payments in the entire country. On average, property owners in the city of San Francisco can expect cell tower lease rates around $3,000 a month, which is nearly double what one might receive in a city such as Los Angeles.

Why? Because expanding internet connectivity in San Francisco is hard: with some of the most difficult zoning restrictions in the country, coupled with a highly variable terrain and high property cost, cellular providers are often left with very few alternatives when it comes to expanding their cellular networks.

San Francisco is also the 2nd most densely populated city in the United States (18,451 people per square mile), which means that there is an extremely high demand for stable and reliable internet connectivity in an area where space is very limited.

This truly puts cellular providers and tower companies alike into a predicament because any delays in internet connectivity for their customers will ultimately result in a loss of profit, and as such, these companies are literally racing to expand their network bandwidth to compensate for this high demand.

What Are Femtocells?

New Technologies

The advent of small cell technology is beginning to impact cell tower land lease rates. Small cells, such as microcells and femtocells, are beginning to become a more favorable option for cellular providers as they are more efficient, less costly, and somewhat easier to implement in a variety of locations, especially in urban areas where open space is growing scarcer by the day.

In certain situations, cellular providers will not consider the implementation of a cell tower at all, and instead, will only consider the use of a small cell in conjunction with a dark fiber network. While small cell leases can still pay well, the typical amount is much less than what property owners would receive for a traditional, full-sized cell tower.

Landmark Dividend’s Role

Because of our busy day to day schedules, it can be difficult to set aside time to properly conduct the research necessary to evaluate the economic value of a cellular tower or rooftop antenna site.

This is where we can help. Landmark Dividend can analyze your cell tower or rooftop site lease and provide liquid market value. Through a free site valuation, we provide property owners with insight into the value of your cell tower or rooftop lease, as well as the value of the cell tower sites in the surrounding area. As a lease acquisition company, we can also monetize your lease to help you reach your financial goals. If your site qualifies, Landmark will purchase your cell tower or rooftop lease for a significant lump sum cash payment. For a free, no obligation site valuation, click here. You can also reach us toll free at 1-844-722-0113 or reach us by email at info@landmarkdividend.com.