By Kelsi Maree Borland | GlobeSt.com
LOS ANGELES—With the ubiquity of the internet, it seems that inclusive internet—an internet service included in an office or multifamily lease—is just around the corner. However, Marc Gittleman, the CEO of 5×5 Telecom, a fiber optic internet and VoIP phone company, says the concept of inclusive internet may not be good for tenants or real estate owners. The company, which was launched by Rising Realty Partners’ executives, offers built-in internet services in office buildings at a huge discount to typical providers, and while the service could be bundled into the lease package, Gittleman says that their service doesn’t preempt a tenant’s option to choose an alternate service provider.
“I am a firm believer in choice in commercial offices,” Gittleman tells GlobeSt.com. “As an owner, we get a lot of requests from different carriers, and we believe the more the merrier in terms of high-quality carriers. Tenants want choice, and they should have choice. The competition makes the market, and it is really easy for us to sell our product when we say our product is $500 and they say that their product is $1,000, and we say our product can be installed today and their product can be installed is next month. There isn’t a whole lot of actual competition going on there, but people still have a choice.”
It isn’t just the need to provide tenants with the option to choose their own carrier. Gittleman also says that it also could affect the sale of a building, especially for investors that don’t want to or don’t know how to operate a telecommunications service. “There is a very clear distinction between what is good for tenants and what is good for owners, so I stop short of saying that internet should be included in leasing. In the real estate market, you have to be able to facilitate transactions,” he says. “As a buyer of real estate, I can look at an income statement from a property and I understand parking income; I understand the janitorial expense, but if I went to sell you a building, and there was a line item that said telecom income and telecom expense, along with info on how to manage it, most sellers would not know what to do with that. It would inhibit otherwise productive transactions. While tenants should have choice, and they may or may not want it bundled in, for the near future, it is not good for the market of buying and selling property.”
But, it doesn’t only complicate the real estate transactions. Gittleman says that inclusive internet could potentially affect the value of the real estate and reduce the buyer pool. “I want to be able to get the highest and best dollar for my building, and any with respect to anyone that I am buying from, they deserve to get the highest and best dollar their building,” he explains. “For that to happen, we all have to be working with the same vocabulary and the same denominator when we are valuing a building. If we introduced some new denominator, it wouldn’t make the market more efficient, it would confuse and it would reduce the pool of potential buyers and sellers, thereby making it even less efficient.”
While a movement toward inclusive internet may not be on the horizon, Gittleman does think that landlords have an obligation give tenant’s access to the best internet services, because all tenants need the internet to run their business. “I firmly believe that every suite should be pre-connected or have the ability to be pre-connected well ahead of a tenant’s occupancy,” says Gittleman. “Internet should be like power. It is the first thing that you should bring, not the last. As a building owner, I see far too often that even sophisticated tenants fail to provision their internet service in a timely manner because they don’t realize how far in advance the lead times are. So, I do think that it should be pre-deployed.”