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Cell Tower Leases Add Big Value with Little Maintenance

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Industrial building owners looking to add value to their property need to look no farther than the cell phone in their pocket—and the tower that provides its service. Cell tower leases are providing property owners with thousands of dollars a year in additional lease income for relatively low maintenance or other responsibilities.

A cell tower lease is an agreement between cell phone service providers (“provider” or “lessee”) and a property owner allowing the provider to install and maintain a cell service tower for a specified number of years at a predetermined lease rate, typically with multiple lease renewal options. More than 300,000 such towers are in operation throughout the United States, providing cellular service and data to consumers nationwide.  Ever-increasing demand for cell phone and data reception has led to the construction of nearly 10,000 new cellular sites each year, with an average lease rate of $45,000 annually.

Cell service lessees are responsible for maintaining, repairing, upgrading, and removing the tower, giving the property owner few if any responsibilities for lease upkeep. In addition to generating rent for many years, the cell tower lease often adds value at the time of the building’s sale. The average cost to build a cell tower is about $175,000, but the cell tower lease can add $600,000 to $1 million or more in value to the property.

There are some disadvantages from cell tower leases for some property owners. The tower takes up space that could be used for other land uses such as parking lots or retention ponds. Towers create long-term easements on the property, restricting use on that or other portions of the property owner’s land site. These leases can also delay or stop a property sale if a seller can’t find prospective purchasers for the cell tower leases.

Cell tower demand is currently high, but with several pending mergers in the cellular communications industry, that may change. What’s more, developing cellular technologies could one day replace the need for cell towers, rendering the structures obsolete. For now, some providers are developing smaller towers that can be mounted on buildings to save land space and expand the number of potential locations for the cell towers.

Specialized brokers and attorneys can advise on the best course of action for property owners considering a cell phone tower lease, including for example: lease structure and terms; ongoing marketability of the impacted real property; legal compliance; and appropriate market valuations of cell tower leases. These specialists typically work with property owners on the initial cell tower lease as well as the late stage purchase and sale process.

As consumers demand more cellular and data services, real estate owners can reap significant benefits from such demand.  Cell tower leases provide property owners with long-term income and potentially substantial added value upon the real property’s future sale.

David J. Liebman, SIOR

David J. Liebman, SIOR

Managing Broker at Merit Partners LLC, takes a creative and client-centric approach to commercial real estate deals. An active voice in his industry, David communicates its subtleties to colleagues and its complexities for customers, structuring and brokering transactions primarily for commercial property tenants, buyers, and investors, as well as owners and landlords. Focused, practical and methodical, David leverages his prior legal background in commercial real estate and corporate law to provide prudent, trusted advice to all parties in property transactions.
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