Commercial Investment Real Estate Winter 2020 | Page 33

The CRE industry needs to strategize for the arrival of 5G,
which will revolutionize communication demands of office
and multifamily tenants.
C
ommercial real estate professionals
who have been scrambling to keep up
with the latest building tech are fac-
ing yet another major game changer — the
pending arrival of 5G.
Fifth generation wireless, or 5G, is a
major step forward in the continued evolution
of cellular network technology. Its massive ca-
pacity will allow networks to accommodate a
greater density of users at significantly higher
speeds. 5G also has the added benefit of ul-
tra-low latency — or, in layperson’s terms, su-
per-fast response times in transmitting data
— that will open the door to new applications
in virtual reality, telemedicine, robotics, en-
tertainment, and autonomous vehicles.
“I think everyone has the giddiness
that 5G is going to be the next big thing,
and it likely will be simply because of the
speed, bandwidth, latency, and efficiencies
it can provide,” says Jeffrey Sheehan, CCIM,
a senior vice president at the Site Selection
Group in Houston. Yet a pretty steep learn-
ing curve awaits commercial real estate pro-
fessionals when it comes to understanding
5G and what it means for connectivity and
networks both inside and outside of build-
ings. “Ultimately, we are all going to get used
to having much higher bandwidth connec-
tions straight from our cellular carrier to
our phone,” says Aaron Lapsley, co-head of
Smart Building & Workplace Technology at
Cushman & Wakefield in San Jose, Calif. So,
what people have been leaning on Wi-Fi to
do, such as connect to the internet or stream
videos and music, people will be able to easi-
ly do with their cellular connection.
Cellular carriers are working to bring
5G network technology to their customers
in all aspects of everyday life. That means
establishing coverage both outside and inside
buildings, which creates broad implications
for commercial and multifamily real estate.
“The big question is how much 5G is going to
substitute for Wi-Fi,” says Lapsley.
For example, financial institutions
are not going to be comfortable substituting
5G for private corporate networks. They’re
going to want people on their own network
for security authentication and access con-
trol. However, over the next five years, every
individual employee is going to get used
to having a much, much faster data signal.
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“I have to believe that buildings that have
much stronger signal strength are going to
be able to market that and get value out of
it,” says Lapsley. is going to be critical for carriers, notes Rick
Varnell, executive vice president of Valuation
& Advisory Services heading the building
technology consultancy division at CBRE.
THE 10-YEAR ROLLOUT
Commercial real estate professionals need
to be forward-looking when it comes to 5G
and the implications for both landlords and
tenants. What strategies do landlords and
developers need to put in place now to fu-
ture-proof buildings and be able to monetize
5G technology? How will 5G change a build-
ing experience and drive location decisions
for space users? These are critical questions
even though the U.S. is still in the early stages
of its 5G rollout.
The U.S. is just starting Year Three of
what is expected to be a 10-year rollout, and
a lot of work remains to get 5G networks up
and running. The major wireless carriers,
including Verizon, T-Mobile, and AT&T, all
have plans in motion to establish 5G net-
works. Carriers must calibrate their radios
to transmit a 5G signal. New and upgraded
infrastructure needs to be built to transmit
that signal to devices. In addition, phone
manufacturers need to start selling phones
with 5G chips that allow devices to receive
the signal. (Samsung’s Galaxy S10 is one of
the few 5G-capable cell phones out now, with
Apple expected to release its 5G model later
this year.)
One of the big changes with 5G is
that it operates on a much higher spectrum
and frequency versus 4G LTE. Although the
existing network of macro towers will still
be used, 5G will require adding significantly
more small cell towers — likely hundreds of
thousands of such towers — across the U.S.
over the next decade. Many of those towers
will be placed on light poles, which have a
ready power source.
Cellular service providers need a much
larger footprint to roll out the smaller 5G cell
towers. Property owners will have an oppor-
tunity to monetize 5G with leases for small
cell towers on rooftops and parking decks,
as well as light poles and other structures. In
addition, 5G signals are having difficulty pen-
etrating solid surfaces, such as walls and even
some coated windows. Having access to real
estate and partnering with building owners WILL CONSUMERS WANT 5G
EVERYWHERE?
People are excited about the potential of 5G.
Although some have touted the power of 5G
at 100 times current levels, the reality is that
type of performance will take time to achieve.
According to Deloitte, initial 5G capacity in
an urban environment will be about double
that of 4G LTE. In three years, that will grow
to 10 or 20 times and then to 50 to 100 times
in five years; although, 50 times current
performance is likely to be the ultimate max
capacity, notes Dan Littmann, a principal and
national sector leader of telecommunications
at Deloitte. Coverage will depend on a variety
of location-specific variables, such as the
number of cell towers and density of users.
The expectation is that once that
power is turned on, people will want it ev-
erywhere. Its availability within buildings
will become even more important, especially
as millennials and Gen Z play a bigger role
in both the workforce and apartment renter
pool, notes Sheehan. These younger genera-
tions have grown up accustomed to mobile
devices, and 5G will likely play a significant
role in live-work-play location choices in the
future. From a real estate and asset manage-
ment perspective, it is smart to be investing in
the capability to offer the latest technologies
as tech continues to evolve, he adds.
5G will put even more emphasis on the
growing focus and value surrounding tenant
experience and tech-enabled operating effi-
ciencies. For example, Deloitte’s Commercial
Real Estate 2020 Outlook surveyed 750 CRE
executives in 10 countries around the world.
The survey found improving tenant expe-
rience was a top priority. In fact, 92 percent
of respondents said they plan to maintain
or increase their tenant experience–related
technology investments. “The old real estate
mantra of location, location, location for real
estate morphed into location, information,
and analytics as the three drivers. Now we
believe the new mantra is around location,
experience, and analytics,” says Matt Kim-
mel, a principal and U.S. real estate leader
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