Commercial property owners dedicate much of their time considering location, foot-fall, tenant covenant strength and yield. Very few dedicate equal amounts of time considering what sits on their roof space or passes through their risers. However telecom infrastructure such as mobile masts, roof top antennae, small cells, fibre backhaul and data cabling has a quantifiable and increasing impact on how an asset is valued, let, insured and sold.
As UK networks densify in readiness for the 5G and full-fibre network roll-out, more buildings than ever before are being sought after by operators and more tenants than ever before are demanding connectivity as a pre-requisite for obtaining occupation. Landlords who understand this nexus and proactively manage it will be at a distinct advantage in protecting income, mitigating transaction risk and perhaps increasing the market value of their asset.
Connectivity Has Become a Core Occupier Requirement
Mobile coverage and broadband connection are no longer an extra but a given. Tenants will consider building coverage prior to entering into a lease; High street retail will expect broadband connectivity to run EPOS systems and control stock, deliveries through the logistics chain will expect robust satellite links and feeds for management information. A building with poor mobile coverage or poor cabling system may struggle to attract and retain tenants damaging rental and capital value, a well-connected building can command a premium rent and a faster letting, levels of connectivity have become part of the agency and tenant due diligence process along with fire risk surveys and EPC bands.
Rooftop Telecoms Installations: Asset or Liability?
Many commercial sites will already have telecom equipment – a rooftop base station, an operator’s array of antennas or fibre through riser and ducting. If managed correctly, this is of great value to the landlord; it provides additional income, and as the site operators often need to prove the site is capable of hosting the equipment, it can even increase the site value to future operators seeking additional capacity. Managed poorly, it can be a burden. Since the Electronic Communications Code came into effect in 2017 and was subsequently amended by the Product Security and Telecommunications Infrastructure Act 2022, many landlords with no specialist assistance have entered into agreements under significantly less favourable terms than they would have previously; in some cases, rental value has been reduced substantially when compared with the pre-Code arrangements.
In addition to the rent itself, a badly negotiated or badly documented telecoms agreement can make a future sale more difficult. The solicitors to the proposed purchaser will check Code agreements with a fine-tooth comb, and poorly defined rights of access, minimal break provisions or standing compliance issues can hold up the sale or reduce the amount a purchaser will be prepared to pay. Telecom tenancies that have been properly structured can be sold as a relatively steady, low-management income stream that enhances valuation.
Compliance, Risk and Insurance Considerations
Telecom installation on a commercial building has many structural, electrical and access issues which impact the risk profile. Unrecorded installations, uninspected mounting structures or unclear responsibility for maintenance issues will be highlighted at a valuation survey or on renewal and will be viewed suspiciously. Ongoing site audits with sound due diligence documents alleviate concerns from surveyors, insurers and buyers and mitigate any additional risk premium assigned to the property.
The Wider Infrastructure Rollout and Its Effect on Values
With the continuing UK 5G densification and full-fibre rollout, it is not necessarily fewer buildings; it is more that will be approached by operators looking for new sites in the years to come. Locations close to transport interchanges, high-density city centres and busy retail routes will be highly sought-after by network operators, meaning owners of those assets will be targeted more and more frequently. Landowners who are fully prepared – with expert knowledge of their rights under the Code, a professional valuation of the opportunity and a strategy for negotiation – are in a much stronger position to translate approaches into value, rather than simply be able to hand back access on favourable terms to the operator.
Concurrent with this is the fact that as-built connectivity infrastructure, such as distributed antenna systems or fibre-to-the-desk provisioning, has become more and more incorporated into office space commercial lettings. Property owners who install this infrastructure in advance of demand often find that it is a cost-effective measure as it speeds up the leasing process and prevents large numbers of tenants from leaving.
How Can Landlords Protect and Enhance Property Value?
Value protection requires clarity on what telecoms infrastructure is present on a property, under what conditions, and with what compliance history. Gas and electricity suppliers benefit from expert advice in negotiations with operators over rents and lease terms, securing rents consistent with the open market value and appropriate provisions over break rights, access restrictions and reinstatement. Ongoing site audits identify any structural or regulatory problems that could delay sale or insurance renewal, while estate-wide corporate strategies enable landlords with many holdings to bargain more effectively than on a piecemeal basis.
The Bottom Line
Telecom infrastructure is now no longer an optional consideration for owners of commercial property. In today’s world, it is a key component affecting rental income, occupier demand, transaction risk and by extension capital value. Whether the task is renegotiating a new operator agreement, carrying out due diligence on an existing site or just assessing how a building’s connectivity compares to the market, expert advice improves results.
Arc Partners are RICS regulated Chartered Surveyors who act solely on behalf of landlords advising on all telecommunications property issues including rooftop and site acquisitions and disposals, Code negotiations and estate-wide telecoms strategy. Contact Arc Partners to see how your telecoms position might be enhanced.
Frequently Asked Questions
Does a rooftop mast increase or decrease property value?
It can go either way. An agreement that is negotiated effectively and documented thoroughly can be a source of additional income, as well as instilled buyer confidence. Conversely, an agreement that is poorly negotiated, with lackluster provisions, or non-binding terms can have a dampening effect on value and a challenge for a subsequent sale.
What is the Electronic Communications Code?
It’s the Telecoms Act, legislation in force in the UK that covers the rights of landlords and operators regarding telecoms equipment installed on property. It is highly operator friendly and very often results in significantly lower rents if the landlord does not ensure they have specialist representation.
Can poor mobile signals affect commercial lettings?
Yes. Occupiers are now evaluating connectivity in addition to safety and EPCs. Unreliable in-building signals or broadband may have an impact upon speed of let, achieved rent, and tenants’ renewal prospects.
Should landlords audit existing telecoms installations?
Yes. It ensures the structure remains sound; maintains the paperwork necessary for compliance, and reassures underwriters, surveyors and buyers, helping to prevent delays or disputes when the structure is sold on.
Do telecoms agreements affect a property sale?
Yes. The buyers’ solicitors will certainly examine a Code agreement carefully. If there is ambiguity over access, or if the break provisions are inadequate or the property is not already clear of compliance matters then delays or a lower offer may result.
How can Arc Partners help landlords?
Arc Partners arranges operator contracts, inspects sites, and provides information and guidance on Code compliance to landlords to help reach a fair deal, limit risk, and preserve or improve the long term value of the property.