Business occupiers rely increasingly on SIM-based telecoms equipment that provides fast, efficient connectivity in the workplace. By providing this cutting-edge equipment to their occupiers, landlords can enhance their profits over the medium and long term.
At Cluttons, we advise TMT clients including Vodafone and Telefonica – firms that demand top-quality SIM-based communication infrastructure. By embedding this equipment into the fabric of an office during construction, landlords can attract quality tenants on long leases at higher rents.
But what about the initial outlay? The landlord will need to pay for the capital cost of installation of the telecom operator’s equipment during the property’s construction phase. Many landlords and developers are often put off by this extra cost. However, the equipment will provide owners with an average of £10,000 to £15,000 of rental income each year, paid by the telecoms operator. The initial cost would be recovered after about five years with future rental income pure profit.
In addition, all maintenance and upgrades are provided by and paid for by the telecoms operator, so it is a limited investment that yields substantial returns and keeps occupiers happy.
Where to start?
Landlords can approach telecoms providers directly or use specialist agents. Once the demand level is determined, the technology solution is designed specifically for the property.
Large floorplates usually require less telecoms equipment. However, it is important to know how the building is used and tenanted or sub-tenanted to embed the right amount of infrastructure and ensure the best level of connectivity.
Next, a commercial arrangement is negotiated – that is, how long the equipment is to remain in the property, the installation costs, how it will be engineered into the fabric of the building and how much multi-purpose use it can generate. Multi-purpose refers to a “plug and play” solution to permit multi-operator usage.
The final stage of the negotiation is centred on legal terms. The use of all equipment will require a lease, whereby the operator owns and manages the equipment and the landlord receives rental income.
A standard utility
Connectivity is now a standard utility within the workforce and domestically. It is as crucial as gas, electricity and water. If one of these is cut off, the workplace becomes unusable. It is the same for mobile and telephony connection – now and even more so in the years to come.
More than 6m sq ft of office space is currently under development in the City of London, with completion expected by 2018. Developers and landlords now have a significant opportunity to dial into and provide occupiers with better connectivity that also yields an attractive income.
