Telecoms Have a Place in CMBS Capital Markets

NEW YORK CITY-Although dot-com and Internet companies are now suffering dramatic declines from the “irrational exuberance” that investors once lavished on them, the telecommunications industry is here to stay, despite its current travails. So, what opportunities do telecom centers, also referred to as data centers and carrier hotels, offer to real estate investors.

At the moment, according to the recent Real Estate Update report from Fitch, the international rating agency based here, there are about 40 million sf of telecom space in the US or under construction. Many of those communications centers are being built in class B office buildings, industrial facilities and underutilized or abandoned malls. Space at these sites is typically provided with few improvement allowances and the tenant is often required to install heating, ventilation and air conditioning equipment, backup power as well as flooring, which can run up to $300 per sf to $400 per sf and more.