HighSpeed Need Is Same For Small Large Tenants

May 28, 2002
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GRAND RAPIDS — As the demand for high-speed telecommunications services grow, the majority of large, high-profile, “downtown style” office high-rises are not wasting time getting wired for speed.

The trend, however, appears slower for small and mid-sized office properties that cater to small business.

There are a half-million Class A buildings alone in the U.S. that aren’t wired and offer no real technology advantages for tenants, said Tony DeBella, president and CEO of Atlanta-based NISCO Systems Inc., a firm specializing in design and installation of advance telecommunications infrastructures for Fortune 500 companies.

But DeBella told the Business Journal that the problem is more acute for the older, small- to mid-sized properties, the majority of which are located on the peripheries of metro areas.

“The biggest focus in the coming decade will be on the residential/urban tenant that could be anything from a telecommuting home-office resident to someone who’s a tenant in a B or C or D Class office building.”

As DeBella observed, tenants of small and mid-sized office buildings have most of the same basic technology needs as do Fortune 500 companies, though their needs are typically not as sophisticated.

The smaller office tenants usually don’t have wide area network requirements because their networks have fewer users; thus, the configurations of their networking systems are less complex.

But Glenn Turek, president of Silveri Company, a Grand Rapids-based real estate firm specializing in commercial and industrial properties, pointed out that local office tenants aren’t going without the connections, even if they have to provide them for themselves.

Many tenants of small to mid-sized office properties are turning to DSLs (dedicated service lines) to meet their high-speed connection needs.

“It’s pretty easy to get a DSL just about anywhere,” Turek observed. “Typically tenants are getting DSL for themselves. Sometimes a couple tenants will share those services. We’re seeing all kinds of different options. People are being creative.”

Eric Wynsma, partner and project manager for Terra Firma Development, owner of the Brass Works Building, said the building started out with “a bunch of T-1 lines” and a number of its tenants continue to use straight T-1s through Ameritech.

Brass Works also has the capacity to get up to four megabytes of DSL service, which is provided by a company called One Protocal, formerly known as Global DSL Communications.

In addition, the building has a new tenant, Leap Frog LLC, a wireless service provider that can offer tenants a wide range of wireless products, Wynsma said.

“We have discount packages available based on quantity discounts. We have so many tenants that are on the DSL program that it just gets cheaper for everyone who signs up,” he added.

When constructing new small to mid-sized office properties, most building owners and developers tend to give some thought to “wiring for speed” with fiber optics, but not all are doing it, Turek said.

Rockford Construction has renovated a number of local office buildings. Mike Maier, president of development, said his company typically doesn’t do the actual wiring, but builds in the space for that purpose.

Only one of Rockford’s recent renovations on Ionia Street was built to allow fiber optic cable to go through the building.

“Fiber is tough to do, but if they’re smart they do it when they can,” Maier said. To his knowledge, most tenants are relying on T-1 lines rather than fiber optic cable.

However, potential tenants are starting to ask about infrastructure on a regular basis.

“They’re asking what other tenants in the building are using so they’ll have some idea of how they can satisfy their Internet needs. I would say one out of four tenants is now asking that question,” Turek said.

DeBella stressed that landlords who want to remain competitive in the future and keep their spaces occupied and their leasing agents busy, have to provide the infrastructure that supports high-speed bandwidth requirements today and that is flexible enough to accommodate technologies that might emerge tomorrow.

And it doesn’t matter what the availability of broadband connectivity is in an area now, he added. Landlords have to be ready for whatever services might be delivered in the future.

That’s why there’s a major technology upgrade initiative going on across the country, he said. In New York City, for example, landlords are touting their high-tech infrastructure capabilities on the fronts of their buildings.

It all began with the divestiture of AT&T in 1983. Before then, the wiring in buildings and homes was owned and leased by AT&T, meaning people paid over and over again for the wiring in their own buildings via monthly fees.

Because the divestiture prohibited AT&T from owning and leasing the wiring, landlords suddenly inherited the very expensive, very old technology, referred to as POTS (plain old telephone system), that was wired into their buildings.

Since the wiring wasn’t “broke,” there was no need to “fix it,” and landlords simply went about the business of collecting rents, DeBella explained. Then the Internet came along and changed the way business was done.

“Seventy percent of the cost of upgrading a building is in labor. So if you’re upgrading a building and have the walls torn out, you might as well put all the available technologies that you can to future-proof the building.”

Although “future-proofing” requires a significant investment, the return on investment can come in the form of stable occupancy rates and higher property values and rents, he said.

For tenants, upgrading adds about $1 to $2.50 per square foot to rents, but the payoff is in enhanced competitiveness, improved efficiency and greater productivity.

The initiative is going to take years, DeBella noted. In the larger metro areas everyone is cognizant of the need to be future-proofed. In rural America it’s more difficult to find wired office space, though that’s changing.

The further out from the metro area, the more difficult wired space is to find. Generally, buildings within a 25-mile radius of a metropolis are wired or are being wired, he said.

For small business the options are to try to find space within that radius or cut deals with the landlords to wire buildings for their needs as a contingency to a lease, DeBella said.

“Make arrangements with landlords to provide the backbone structure from a fiber optic or networking backbone for bandwidth. Get them to build it out to suit your needs.”

The minimum requirement for small businesses is eight strands of fiber optic multi-mode cable to each floor of the building, DeBella said.

“The overall requirement is to assure yourself as the potential resident of that space that the landlord does have a fiber optic backbone in place as these broadband services become more and more available so that you have the medium in place to carry that bandwidth.”

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