Financial Benefits of Pre-Installation of the Telecommunications Infrastructure
A typical commercial office building has a 40-50 year life as shown in Figure
2 (Courtesy NAIOP). By contrast, the telecommunications systems have a 3-5 year
life cycle, after which they typically need to be completely overhauled or upgraded.
From a business perspective, it is crucial that the building owner control
as much of the infrastructure as possible. By designing the telecommunications
infrastructure to be as robust as possible, it is conceivable that the telecommunications
life cycle can be increased to as much as 10 years or more. This is achieved
by installing the latest technology at the outset, and sizing it to allow for
future growth in demand, while minimizing re-construction costs. The independent
telecommunications consultant should have the industry knowledge and relationships
to help minimize the frequency of upgrades to the telecommunications infrastructure.
The cost of installing the minimum acceptable telecommunications infrastructure
in a building (riser conduit, copper to the basement demarcation point and telecom
closets on each floor) is typically estimated at $6-$8 per square foot of leasable
space. Each tenant will then be required to extend this copper infrastructure
to their workspace. If tenants want fiber, satellite or cable in their suite,
additional construction and installation costs will be incurred. This basic
infrastructure will have to be upgraded on a 3-5 year cycle. The cost for logistics,
management and maintenance of such a system will be considerable.
2. Building Systems Life Cycles (Courtesy NAIOP)
A robust, multiple service provider broadband backbone in a building will cost
about $15-20 per square foot to design and install and extend throughout the
building. The infrastructure will include copper, fiber and coax, extended to
each tenant suite in a highly flexible network grid. This backbone should require
no upgrades or major modifications for at least 10 years. Initially the cost
may seem high - about 3 times the cost building owners are used to spending.
However, the savings in future upgrade and maintenance costs will far exceed
the initial cost. In addition, the owner can pass the additional costs on to
the tenants, in the form of higher lease rates.
The rooftop is one of the most lucrative (and often ignored) portions of the
building. By owning and leasing any towers on the rooftop, the building owner
can generate a significant additional revenue stream. Table 4 demonstrates that
a rooftop tower will generate positive cash flow with only a single tenant,
and yields extremely high (70%) margins and return on investment.
(land rent, taxes, maintenance, insurance etc.)
Cash Flow (TCF)
(assuming $225k cost per tower)
4. Telecommunications Tower Cash Flow Projections (courtesy Punk &