Connected Real Estate Magazine - Vol 2 Issue 1 - 20
A VIEW FROM THE TOP
Can you provide some background on how Vornado has
developed its strategy related to delivering in-building
cellular to its tenants?
Approximately 10 years ago, we realized the growing need to equip
our assets with technology, specifically in-building cellular systems.
We executed one of the first portfolio-wide agreements with the
major national cellular carriers and a real-estate company to allow them
to install their equipment and services in our buildings at their cost. It
was and continues to be a great partnership. We wanted to be in front
of the curve as much as possible to make our properties more attractive,
make the marketing of those properties more exciting. We realized that
the workforce coming into these properties live on and through their
smartphones. As such, their communication needs don't subside when
they enter our buildings to start their workday. Once at their desk
they have continued reliance on that cellular or Internet connection in
order to communicate and perform their critical business functions. It
was perfect timing in that the carriers urgently needed help in offsetting
the insatiable need for bandwidth from their macro in New York City.
They needed a lot of large buildings...and we were more than happy to
help them come into our portfolio. They helped us with tenant attraction,
satisfaction and retention; we helped them with macro offload and
gaining a foothold inside major buildings.
I understand you have and are continuing to see
potential tenants write cellular coverage requirements
into leases. How has that process evolved, and how do
you see that arrangement playing out over time?
About six years ago, we owned a small office building and a prospective tenant wanted AT&T's indoor cellular to be installed. By that time we
had a great working relationship with AT&T, but it wasn't a property that
AT&T was interested in; it was a small property, about 150,000-squarefeet. It wasn't so much a tenant requirement as it was a soft ask. AT&T was
generous and subsidized the system. We were able to get the system
installed on time and delivered the space to the tenant who was very
happy.. That was the first time something like that had ever come up.
Subsequent to that, we've had a few other instances where a tenant
was moving into one of our New York City properties and wanted a
specific cellular carrier to be present. This too was not an absolute requirement but more of a strong request. At the time, that type of build
out in New York City wasn't too difficult because the carriers wanted
to cover of as much indoor square footage as they possibly could. That
all changed recently when we had a large prospective tenant in one
of our properties rewrite the requirement book with detailed cellular
coverage levels in their lease. It was very specific, down to the decibel
level of signal strength in that building for their employees. That was
something we had not dealt with before. We held multiple discussions
20 CONNECTED REAL ESTATE | WINTER 2018
between IT, our leasing department, the tenant and the carriers to
make certain that all parties understood the requirement and could
deliver on it - which we did.
Going forward I believe that this type of installation will be a more
common event. I think once a tenant like the one I mentioned has
gotten what they've asked for, they will continue to request that
moving forward at other properties regardless of the market or the
landlord. I think that will probably be the new norm and Vornado is
very well positioned to fulfill their needs.
Although Vornado has successfully worked with carrier
partners to have the service provider invest in in-building
cellular, a current trend in the space pushes that upfront
investment over to the landlord. Can you discuss how you
see that dynamic continuing to change?
We're well situated to continue this trend because of the head-start
we've had in our portfolio in that many of our properties are already
on-air with at least one of our national cellular partners. In the event
that a tenant wants a different carrier at a property it is significantly
easier since all of these systems were developed as neutral host
installations.. This can make the approval and overall installation
process much easier to achieve.
As for the future of funding, I see a few things changing in the years
ahead. Currently, the model of having the carriers fully fund a DAS
installation is shifting to more of a landlord/carrier partnership, or simply a landlord funded model. This may or may not continue with the
current changes in net neutrality laws and other potential technology
improvements the carriers are working on. In addition to the great
assets we have, we've seen that both size of the development and
specific tenant mix can help in attracting carrier Capex. For the near
term, we plan on continuing to offer our Class A buildings to the carriers who are interested in wiring them to mutually benefit both parties
like we've always done. If the current trend is sustained and carriers
continue to reduce their capital contributions to DAS installations then
we will either have to develop a new type of partnership between us
and the carrier or possibly fund the installation ourselves. Another
option is to work with a third-party installer who would front the
capital in order to build the system and then offer the carriers an OpEx
model in order for them to join. We haven't had the need to employ
those alternatives just yet.
Tell me a little bit about the technology mix Vornado
uses. Is it all neutral host DAS, or do small cells figure
in, and what about these emerging hybrid small cell/