Cell Towers have been installed around the world on both residential and commercial properties. From rooftop antennas on office buildings to large towers on rural land, wireless infrastructure can either have a positive or negative effect to real property values depending on the asset class.
Contents
- 1 Cell Towers effect on Commercial Property Values
- 2 Cell Towers effect on Residential Property Values
- 3 How to determine the Value of a Property with a Cell Tower
- 4 Selling a Property with a Cell Tower
Cell Towers effect on Commercial Property Values
When a cell tower is installed on a commercial building such as a Hotel, Sports Complex, Office, Industrial or Medical Building, the property value will likely increase due to the additional revenue and mass perceived benefits from visitors. Unlike someone’s home, the common thought on being next to a cell tower and having full signal at work or while shopping is not as impactful as having one installed in your own back yard.
So, when adding a cell tower to a Commercial Property, the value will likely increase relative to the lease rate/income received with almost no negative impact to the value of the property.
Cell Towers effect on Residential Property Values
Similar to the concept of “Not in my Back Yard”, installing a cell tower on a residential property can have a significant impact to the property value. Family’s are not drawn to wanting any negative external obsolesce on their property which could potential harm their family.
This creates a major impact to the type of buyer that would be comfortable purchasing the property. Research shows that over 90% of home buyers would pay less for a property near a cell tower. In fact, the Department Housing and Urban Development (HUD) even classifies a cell tower as a Hazard and Nuisance, requiring appraisers to make adjustments to value due to the effect on marketability.
The impacts cell towers have on property values will also change based on the proximity the antennas are to the house itself. A residential property with a lot of acreage, could see a much lower impact to property values if the cell tower is located far away from the residential home, such as on a farm. While cell towers located in close proximity to the house could have a tremendous negative impact to the property value.
Research Study
A study by the The Empirical Economics Letters, Aug. 2019, titled The Disamenity Value of Cellular Phone Towers on Home Prices in Savannah, Georgia found that “homes close to towers sell for a discount of up to 7.6% and that any noticeable effect disappears at 1500 feet.
The study also found that the effect of a cell tower on residential property values during a declining market can drastically decrease the value while in an increasing market it could have little effect.
| Property Value | 8% devaluation |
| $2,000,000 | $1,840,000.00 |
| $1,500,000 | $1,380,000.00 |
| $1,000,000 | $920,000.00 |
| $900,000 | $828,000.00 |
| $800,000 | $736,000.00 |
| $700,000 | $644,000.00 |
| $600,000 | $552,000.00 |
| $500,000 | $460,000.00 |
| $400,000 | $368,000.00 |
| $300,000 | $276,000.00 |
| $250,000 | $230,000.00 |
| $200,000 | $184,000.00 |
| $150,000 | $138,000.00 |
| $100,000 | $92,000.00 |
How to determine the Value of a Property with a Cell Tower
If you’re considering selling your property which includes a cell tower, whether residential or commercial, the first step is to request a free Site Valuation from our team. We will review your current leases and property to determine the highest possible sale price based on the sale type and timeframe.
Value of a Cell Tower Lease
We will first determine the value of your cell tower lease based on several factors, which include: the current lease amount, wireless carrier, lease end date, escalation % and term of the lease. After review of the lease, we can provide a valuation for a Lease Assignment – which will be the least profitable but also the least encumbering.
Value of a Utility Easement
Next we will determine the valuation our investor network will pay for a Utility Easement, which will include the assignment of the lease into a defined area for a fixed or perpetual term. This easement area will match the terms of the existing lease but can also be expanded to provide the ability to add new tenants to the site. A valuation will be provided for an expanded easement (or general easement if a rooftop) on a perpetual term in order to provide the highest valuation for your cell tower.
Value of a Property with a Cell Tower
Once we know the valuation of your lease and easement we can determine the overall market value for your real property with the lease included or excluded from the sale. This will include our Brokerage network determining a real estate market valuation, which we will cross reference with our Lease and Easement Value to determine the estimated market resale value.
Selling a Property with a Cell Tower
When deciding to sell a property with a cell tower, a decision should be made on whether to
- Sell the Cell Tower Leases with the Property
- Sell the Property separate from the Cell Tower Leases
- Sell the Property and Retain Ownership of the Cell Tower Leases
Selling Commercial Property with a Cell Tower Lease
Based on the valuations for commercial properties with Cell Towers provided above, and with the understanding that Cell towers improve the value of a Commercial property, determining if a cell tower lease should be included in the Sale of a Commercial property revolves around the end cap rate %.
Commercial real estate is valued heavily on the income the property generates and most Commercial real estate investors determine if the investment makes sense based on the Cap Rate %. This percentage can be identified by dividing the annual net operating income the property generates by the total amount invested (purchase price). E.g. a property that generated $50,000 in net operating income and is offered at $1,000,000 would have a cap rate of 5% ($50,000/$1,000,000 = .05).
On average Cell Tower Leases in 2023 are being sold at an average of a 5% cap rate.
So, in areas where the average cap rate percentage is 10% or higher, it is better to separate the Cell Tower Lease through a master lease assignment or easement and sell the property and Cell Tower Lease separately. Including the lease in the sale of the building at a high cap rate would lower the overall cap rate % for the building and overall interest in the investment.
However, if the average cap rate % for the area is 5% or less, it would likely be better to include the Cell Tower Lease in the sale of the property, especially if you have multiple carriers on the site (co-location).
Selling Residential Property with a Cell Tower Lease
Unlike commercial real estate which is mainly based on cap rates, unless your residential property is purely income based for valuation purpose, it is almost always best to sell your Cell Tower Lease separately from the sale of your residential property.
Since Cell Towers de-value the overall residential appraised value of a property, separating the Cell Tower Lease can still allow you to achieve the Commercial Valuation on the tower listed above, in addition to the home value. A traditional home buyer will not even be able to cover the mortgage amount for the extra value a wireless infrastructure company can pay.
Estimated Return for Cell Tower Purchase with 6% mortgage
| Buyer Costs | Mortgage | Rent/m | Tower Value |
| ($1,521.91) | $6,521.91 | $5,000 | $1,110,000 |
| ($1,488.81) | $6,388.81 | $4,900 | $1,087,800 |
| ($1,455.71) | $6,255.71 | $4,800 | $1,065,600 |
| ($1,422.61) | $6,122.61 | $4,700 | $1,043,400 |
| ($1,389.51) | $5,989.51 | $4,600 | $1,021,200 |
| ($1,356.41) | $5,856.41 | $4,500 | $999,000 |
| ($1,323.31) | $5,723.31 | $4,400 | $976,800 |
| ($1,290.21) | $5,590.21 | $4,300 | $954,600 |
| ($1,257.11) | $5,457.11 | $4,200 | $932,400 |
| ($1,224.01) | $5,324.01 | $4,100 | $910,200 |
| ($1,190.91) | $5,190.91 | $4,000 | $888,000 |
| ($1,157.81) | $5,057.81 | $3,900 | $865,800 |
| ($1,124.71) | $4,924.71 | $3,800 | $843,600 |
| ($1,091.61) | $4,791.61 | $3,700 | $821,400 |
| ($1,058.51) | $4,658.51 | $3,600 | $799,200 |
| ($1,025.41) | $4,525.41 | $3,500 | $777,000 |
| ($992.31) | $4,392.31 | $3,400 | $754,800 |
| ($959.21) | $4,259.21 | $3,300 | $732,600 |
| ($926.11) | $4,126.11 | $3,200 | $710,400 |
| ($893.01) | $3,993.01 | $3,100 | $688,200 |
| ($859.91) | $3,859.91 | $3,000 | $666,000 |
| ($826.81) | $3,726.81 | $2,900 | $643,800 |
| ($793.71) | $3,593.71 | $2,800 | $621,600 |
| ($760.61) | $3,460.61 | $2,700 | $599,400 |
| ($727.51) | $3,327.51 | $2,600 | $577,200 |
| ($694.41) | $3,194.41 | $2,500 | $555,000 |
| ($661.30) | $3,061.30 | $2,400 | $532,800 |
| ($628.20) | $2,928.20 | $2,300 | $510,600 |
| ($595.10) | $2,795.10 | $2,200 | $488,400 |
| ($562.00) | $2,662.00 | $2,100 | $466,200 |
| ($528.90) | $2,528.90 | $2,000 | $444,000 |
| ($495.80) | $2,395.80 | $1,900 | $421,800 |
| ($462.70) | $2,262.70 | $1,800 | $399,600 |
| ($429.60) | $2,129.60 | $1,700 | $377,400 |
| ($396.50) | $1,996.50 | $1,600 | $355,200 |
| ($363.40) | $1,863.40 | $1,500 | $333,000 |
| ($330.30) | $1,730.30 | $1,400 | $310,800 |
| ($297.20) | $1,597.20 | $1,300 | $288,600 |
| ($264.10) | $1,464.10 | $1,200 | $266,400 |
| ($231.00) | $1,331.00 | $1,100 | $244,200 |
| ($197.90) | $1,197.90 | $1,000 | $222,000 |
| ($164.80) | $1,064.80 | $900 | $199,800 |
| ($131.70) | $931.70 | $800 | $177,600 |
| ($98.60) | $798.60 | $700 | $155,400 |
| ($65.50) | $665.50 | $600 | $133,200 |
Retaining Ownership of a Cell Tower Lease
The final option, that is not as common but possible to do, is to sell your property without selling your Cell Tower lease and retain the ownership of the income stream through either a Master Lease Agreement or Utility Easement.
Master Lease Agreement
A master lease would be the most common and easiest way for a property owner to retain Cell Tower Lease income rights. The master lease agreement would be drafted between the property owner and buyer, whereby the Seller becomes the primary lessee of the defined area and the carrier becomes a sub-lessee. The contract is typical set to match the terms of the existing lease.
It is very important to make sure a wireless infrastructure company, like Wireless Equity Group, prepare and/or review a master lease assignment in order to ensure you retain the appropriate rights that would allow you to sell the lease at a later time. Failure to include the appropriate language could end up costing you if you need to go back to the new property owner to retain additional approval or rights.
Utility Easement
Retaining ownership of a cell tower lease through a Utility Easement would need to be done between the current owner and another entity, such as a corporation or relative. The easement would need to be recorded as a sale and a valuation determined. This is a more complex agreement when trying to retain ownership of the cell tower, but is the most used tool when selling rights to another entity; such as a tower company or carrier.
The Cell Tower Utility Easement can either be for a fixed term to match the current lease or on a perpetual 99 year term. See our article on easement types to learn more.
Free Cell Tower Lease and Real Estate Valuation
If you’re ready to sell your property with an active wireless antenna lease, Wireless Equity Group can provide a guaranteed offer on either your cell tower leases through an easement (which you can share with prospective buyers for your property) or will make you an offer on the entire property. To receive a no obligation offer on your property or cell tower, call our acquisitions team at 858-295-3040 or request a free site valuation.
