Zoning Analysis: Don’t Go into Your Projects Blind
Md7 Land Use
Even with extensive experience and ability in the realms of candidate identification, leasing, RF propagation, and construction management, a client can still go into the wireless infrastructure site acquisition process blind. An understanding of the zoning and permitting process is needed to truly see your project through to completion. The inability to visualize how a particular municipality’s zoning laws will affect your project can lead to excessive costs and delays that can curtail even the best planned projects. However, unlike the other stages in the site acquisition process, zoning is always different for every project, as each municipality across the US has its own unique set of zoning regulations. So, what can a client do to give them the vision they need to see their project through to completion?
Before starting a new wireless infrastructure build, or even a simple mod, clients should obtain a Zoning Analysis in order to clearly understand the required zoning process, permits, timelines and costs that will be associated with their project.
A Zoning Analysis can provide an assessment of the practicality of a proposed project at a specific property or it can compare the likelihood of successful zoning at multiple properties within a search ring. Zoning Analyses are most helpful in the preliminary stages of a project, when a client needs to confirm what type and size of wireless facility is permitted in a specific city or county. Zoning Analyses may also be requested by clients with difficult landlords, who would like to determine the likelihood and costs of relocating the facility to a more favorable location.
Depending upon the client’s needs, Zoning Analyses may contain such information as:
- A concise and thorough explanation of the costs and timelines associated with the zoning process, from the pre-application meeting to post-build inspections
- Permitted wireless facility types and heights
- Required setbacks and fall zones
- Landscaping and buffer requirements
- Specific zone and overlay restrictions
- Site specifics, including:
- Environmental hazards
- Historical landmarks
- Special purpose districts
- Flood zones
- FAA notice requirements and development restrictions
Zoning Analyses require combing through the zoning code, analyzing the zoning map, and interpreting how that information applies to the client’s scope of work and the specific property. All of this takes time, and someone unfamiliar with the process might not know what to look for and could end up causing additional delays and costs. For instance, oversight of overlay designations could greatly influence the height or appearance of a new facility in a particular area. You don’t want to wait until after you’ve signed the lease with the property owner to find out that only a 20’ tower is permitted or the cost of the required landscaping at the site is too far outside of the buildout plan’s budget. In addition, a casual researcher might not understand how a setback from residential structures is calculated or how it relates to the permissible height of a new facility within the site.
Expert help from a site acquisition firm with experience in a multitude of jurisdictions across all 50 states will not only ensure that there will be no surprises during the zoning stage of your project, it will also supply you with the tools and information you need to adequately budget and foresee the overall process for your multi-site project.
What is the Market Price for Cell Site Rent?
By Tom Leddo
WHAT IS IT WORTH?
Everyone wants to get paid what they’re worth.
Whether it’s based on principle or pride, it absolutely galls us when someone else gets a better deal, or we lose out to someone who undercuts our asking price. While we steadfastly hold something’s worth as an absolute, we have often come to this determination by a subjective, mind’s eye calculation of what is commonly referred to as “the going rate.”
For cell site landlords, the determination of worth goes something like this: “My buddy is making $1,850 a month on his cell site lease and my site is in a much better location than his so I should be getting $2,000.”
Landlords are often irked and even angered when they are told that’s not the rate that the tenant wants to pay. They think they’re getting duped. They don’t understand why this tenant is not honoring the going rate. And therein lies the problem: never confuse the “going rate” with the “market rate.” The last house to sell on my street in San Diego almost a year ago has nothing to do with what a different buyer will pay for my house today.
The real market rate for cell site leases is not what another tenant paid down the street. In today’s business environment, it’s what the competing potential landlord across the street will accept. Thanks to a flattening industry growth curve, carriers’ escalating operating costs, the public’s voracious appetite for bandwidth and the network’s evolving engineering requirements, cell site leasing has become a competitive marketplace.
AVERAGE RENT IS NOT MARKET RENT
For years, it has been said that the going rate for a cell site lease is roughly $1,800 to $2,100 for space on a tower or rooftop and $500 to $600 for ground space to build a tower. Obviously, this varies widely depending on a downtown Manhattan location vs. rural farmland. But this dollar amount represents the “average rent” that tenants have been willing to pay over the last several years in a market where speed and coverage were a carrier priority, the high costs of which were off-set by an ever-increasing number of subscribers. With subscribers now reaching market saturation in tandem with escalating operating costs to meet technology demands, carriers are reevaluating their expenses and what they’re willing to pay for their cell site leases. Add to that new technology and network evolutions that have redefined “the best site in town,” and you’ve got a new model that will change the business of cell site leasing. This dynamic is slowly but surely redefining what is market rate rent.
Let’s refresh on how “market price” is determined. Market price is the price of a product or service as determined dynamically by buyers and sellers in an open market. Thinking back to Econ 101, it is simply where the demand curve intersects the supply curve. As the desire for goods increases while the supply of goods holds constant or decreases then the price for those goods rises (Exhibit 1). Conversely, if the desire for goods holds constant or decreases while the availability of goods increases, then the price falls (Exhibit 2).
In cell site lingo, if a potential tenant really desires a cell site and there is only one potential location for that lease, then the rent will increase. And if that tenant’s desire holds constant or decreases while the potential options for cell site locations increase, then rent will decrease.
The anatomy of the cell site network is rapidly changing to accommodate a progression in services that started with voice communication and now includes email, photos, music, video and more. This network evolution has redefined what “the best site in town” looks like, which dramatically affects the supply-and-demand formula of lease rates.
THE BEST SITE IN TOWN
While one might think the Empire State Building may offer great coverage of Manhattan, it is actually not a useful cell site because a single site that high will not be able to handle the millions of calls made each day in New York. Obviously the best way to cover Manhattan is through several sites, much closer to the ground and spread throughout the city. Additionally, more cell phone users and more varied applications now require a greater bandwidth, which further increases the need for sites closer to the ground. Instead of one mountaintop site covering lots of users, carriers piece together lower elevation sites to accommodate greater bandwidth requirements necessary to meet technology demands. In other words, the average Rad Center is decreasing. As sites come closer to the ground and closer to each other, carriers are less particular about their location. This flexibility combined with an increasing ability to use non-typical cell sites (such as light poles) creates a competitive environment that drives cell site rents down.
VARIABLES OF SITE SELECTION
In negotiating leases on behalf of tenants, the most common response we at Md7 hear is, “Another carrier just paid $X down the street so I want at least $X.” But the variables of site selection are unique to each site and situation.
Historically, tenants have focused on quick deals for “must have” locations as determined by radio frequency needs, rather than good deals. This has resulted in short-cutting the negotiation process which determines the market equilibrium. The saying “you want it bad, you get it bad” characterizes the situation carriers have created for themselves – over-inflated rents. Carriers are now beginning to manage their real estate assets with the same savvy indicative of corporations focused on maximizing their investments and minimizing their operating costs.
As a landlord, what can you control when it comes to your cell site? Site selection is based on a number of factors that tenants consider when determining sites to include in their network:
Constructability – Is the land or rooftop viable for developing and maintaining a cell site?
- Zoning/Permitting — Will the tenant be able to obtain the necessary zoning approval and permits for site development?
- Access – Is the location reasonably accessible for the development and ongoing maintenance?
- RF Coverage — Will the site provide the desired coverage?
- Rent — How much will the landlord charge?
Of all these variables, the only one you can control is rent. And to win, you may need to reconsider your perception of the “going rate” — especially when there are other sites in the search ring that are competing for the carrier’s business. Not to mention the fact that carriers are coming to terms with the fact that they have to live with this site for a long time and they’re willing to negotiate it correctly upfront. Remember that in a dynamic market, the market price is what BOTH parties will accept. What’s the guy across the street willing to do? Will you let him steal your deal? Will you put yourself at a competitive disadvantage by clinging to an outdated understanding of the going rate?
As one tower landlord told us when he saw a surveying crew staking out a site on his neighbor’s property, “I would have to look at that tower every day on my neighbor’s property, so I might as well do what it takes to get it on mine and get paid for it.”
The new realities in the wireless market place are putting more pressure than ever on what carriers are willing to pay each month. And both sides of the cell site negotiating table are much more aware of the need to negotiate hard for good rents. Let’s be smart with each new and or modified lease we touch.
Ronald Reagan & Uber
By Tom Leddo
In October of 1984 I had just begun my senior year of high school in Tuscaloosa, Alabama and Ronald Reagan was running for reelection against Walter Mondale. President Reagan came to the University of Alabama on a campaign stop and I had the opportunity to hear his remarks.
I was one month under the voting age of 18, but more importantly to me, I was thirteen months under the old legal drinking age of 19 in the state of Alabama and now, thanks to President Reagan, I was 37 months under the new drinking age of 21.
Reagan had recently signed a law that withheld federal funding for highway construction from states unless they had a drinking age of 21 so Alabama and several states raised the age to 21 to get the money. This law immediately added two loooong years to my desire to legally consume cheap beer in a can.
While at the time, I certainly was not very knowledgeable of the Tenth Amendment to the U.S. Constitution, I do know that Reagan had often spoke against the intrusion of the Federal government in matters belonging to the state and local governments. So I, of course, considered him a hypocrite for forcing the states to change their own laws.
President Reagan changed my mind with a response that he gave to a college student who asked him about this issue in a question-and-answer session following his speech. Reagan replied “…when we saw the difference in areas where the drinking age had been increased and the difference in the accident rate, that I just thought that your lives were worth it.”
On that day; with that simple, unrehearsed, well delivered statement the “Great Communicator” convinced me that waiting two more years was a good idea and I never complained about it again.
[See the entire exchange between President Reagan and the student in the inset included herein.]
You may have seen one of the many recent articles in the news that addressed the reduction in the number of drunk driving related deaths in cities after the introduction of Uber – the Ride Sharing service that works through an app on your smartphone. Articles appeared in a variety of publications across the political spectrum such as Newsweek, the LA Times, The Daily Beast and Fox News. Each of these articles is based on a study by Brad Greenwood and Sunil Wattal of Temple University where the authors note “we find a significant drop in the rate of (alcohol related vehicular) homicides after the introduction of Uber.”
The coupling of Uber’s disruptive technology with the company’s labor practices has made the ride-sharing app quite controversial. Uber has severely dented the market share of traditional taxi services despite the fact that Uber drivers are considered self-employed contractors rather than employees, thereby receiving no benefits such as health insurance.
A class-action lawsuit over Uber labor practices is playing out in California and protests have risen across the globe including one in France that forced Uber to suspend its service in order to protect its drivers from violent attacks.
Love or hate Uber, there is no denying that the company has rocketed from a start-up in March of 2009 to company which the Wall Street Journal notes as having a valuation of over $50 billon (yes that is a “b”).
I acknowledge that I am a fan of the Uber business model. I have used the service several times in many cities and compared to traditional taxi services I have had friendlier drivers, cleaner cars, faster pick-ups and no body odor issues. But even if I weren’t a fan, the aforementioned news articles would sway me to support Uber for a single reason.
Just as I heard Ronald Reagan say over thirty years ago, “… lives are worth it.”