Tangled in wires

Journal of Property Management,  Nov/Dec 2006  by Morey, Scott

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Adopting telecommunication services presents challenges for property owners

Whatever happened to the idea of commercial property owners offering wireless services to their customers?

In the late 1990s and early 2000 a substantial amount of money flowed into wiring commercial buildings and offering a range of telecommunication services to customers. The results were mixed, however, and short-lived. While numerous things went wrong-thwarting the trend-much has been learned from the experience.

Real estate managers offered services diey believed tenants needed. Initially, telecom companies were all-in-one providers of phone and Internet access, offering a range of services like Web hosting and software to automate human-resources tasks and other small business back-office chores. Tenants could sign up for the service as part of their lease. In some cases, the building owner paid all or some of the costs to encourage tenant participation.

This idea, however, soon created concerns for real estate managers. They realized they would risk potential income during lease renewals if tenants were unhappy with their telecommunication services. In fact, property owners also discovered tenant demand for wireless services was not as strong as they had speculated.

Despite the guaranteed quick cash managers would make from having contracts with communications companies, the risk of losing long-term profit in the form of lease renewals was not worth the reward for property owners, especially considering the small profit margin to be made from the contracts.

Another problem with the trend at the time was the types of wireless service equipment available. They often complicated the already busy electrical systems. The situation got worse in cases where the property owners chose not to purchase the equipment, leaving it to the telecommunication company to supply it. As a result, the quality of the equipment varied significantly.

Fortunately, real estate managers have recently created successful models for wireless services. With advances in building control technology and the value of integrating systems, many information technology departments are now taking responsibility for the telecommunication architecture in their buildings.

They are finding security, energy and utility systems can utilize a common "backbone." Under this structure, the backbone pays for itself from the savings gained in integrating building control systems and streamlining front and back office processes.

Over the last several years a number of companies have led the charge in technological systems integration. In fact, many of these companies received awards at this year's RealComm conference for their achievements. It will be interesting to see what technology develops in the years to come.

Scott Morey (scottmorey@realfoundations. net) is managing director of RealFoundations' London office.

Copyright Institute of Real Estate Management Nov/Dec 2006
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