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Report: How 5G connectivity can impact the CRE market

Digitization within enterprises has increased steadily but became more prominent during the COVID-19 pandemic. Businesses needed high-quality connectivity as employees began working from home as well as to ensure the secure communication that was required within their offices.

As more employees are working in offices again, the demand for wireless connectivity has grown in terms of reliability, availability, latency and enhanced broadband capabilities, according to Ericsson’s recent report, 5G Connectivity in the Real Estate Market. Commercial real estate owners and property managers are seeing firsthand how big the demand has become for high-quality wireless networks to help support tenants’ business operations.

Ericsson and technology consultancy ABI Research surveyed 195 real estate owners, managers and commercial executives at communication service providers (CSPs) across North America, Europe, the Middle East and Northeast Asia for their report to better understand key developments within the real estate market.

The report focused on 5G opportunities within the CRE market, what’s currently available and how this next level of wireless connectivity can address the pain points facing today’s in-building wireless connectivity.

“While interest in using 5G for in-building connectivity in the real estate market is there, more education is needed to ensure real estate owners, managers and commercial building tenants have a clear understanding of 5G capabilities and form realistic expectations,” the report said. “At the same time, potential suppliers of cellular connectivity need to understand key pain points of the sector, as well as budgetary constraints and financial abilities to design appealing offerings for the commercial real estate market.”

What 5G can do and why it’s important for CRE

Currently, 5G connectivity can offer high data rates as part of the enhanced mobile broadband (eMBB) capabilities — 20 gigabytes (GB) per second in the downlink and 10 GB/S in the uplink, according to the report. These capabilities are key in providing high-capacity connectivity to buildings with multiple offices and tenants that need it for data intensive apps like video streaming, conference calling or remote presentations.

“Enterprises across the globe are rapidly advancing their digitization initiatives,” the report said. “As a result, not only does the demand for connectivity increase, but the quality of connectivity will become an increasingly important factor that will influence tenants’ decisions when selecting a certain building or site.”

Ericsson also noted that the inability of Wi-Fi networks’ infrastructure to cope with increased demand is currently the most important pain point facing in-building wireless connectivity. However, 5G could seamlessly address this challenge with its enhanced mobile broadband (eMBB) capabilities.

“Maintaining multiple indoor connectivity networks for different use cases simultaneously can become very complex and therefore highly costly and resource intensive,” the report said. “By providing the opportunity to slice a network and dedicate different slices to individual use cases, 5G can unite all heterogenous use cases under one connectivity umbrella and therefore deliver important savings in terms of Total Cost of Ownership (TCO) – both from a CAPEX as well as OPEX perspective.”

CRE owners’ connectivity pain points

Forty percent of Ericsson’s survey respondents noted that Wi-Fi not being able to keep up with the rising demand for in-building connectivity is their biggest pain point. Meanwhile, 65 percent of respondents said they were considering 5G for their in-building connectivity use cases because they found cellular connectivity to be less expensive than other wireless technologies.

“As even Wi-Fi will operate in unlicensed bands, 5G will remain the best fit for particularly critical use cases requiring highly reliable, low latency connectivity and/or wide-area deployments,” the report said.

While survey respondents may find cellular connectivity more cost-effective than other wireless alternatives, building operators will still be tasked with justifying the 5G deployment costs to CRE owners.

The current macroeconomic climate – which is sending production costs for many enterprises and the cost of living for consumers soaring – spending will remain scarce for the time being and any investment in telecommunications infrastructure will need to be carefully assessed,” the report said. “In bringing 5G connectivity to the real estate market, CSPs and neutral hosts predominantly hear about high investment barriers as well as an immature device ecosystem, which ultimately leads to higher deployment costs. Making the business case for 5G connectivity in the real estate market is therefore arguably more important than ever before.”

The key to selling CRE owners and building managers on 5G deployment is the network’s value proposition. For example, cellular connectivity needs less infrastructure deployments to cover a similarly large area than legacy connectivity technologies like Wi-Fi. Additionally, tenants are likely to pay more in rent if it means they get better in-building connectivity.

Ericsson’s report revealed that 55 percent of respondents said the main challenge they face when presenting 5G connectivity to CRE owners is the high investment barrier. Perhaps if CRE owners were shown how much more rent could be generated with a 5G in-building network, there would be less hesitation to deploy it.

“At the heart of successful 5G service monetization lies careful management of customer expectations,” the report said. “After all, commercial entities must justify their investments (in terms of return on investment) and guarantee certain services to their tenants.”

Key to a successful 5G deployment for in-building wireless

For CRE owners to fully embrace a 5G network, the value proposition must address their pain points, according to Ericsson. Additionally, since most wireless devices currently run on 4G LTE, upgrading to a 5G network will require device upgrades and they’ll have to be carefully managed.

If enterprises and real estate companies want to successfully embark on the 5G journey, they’ll need a roadmap that includes successful 5G deployments that will show CRE owners how they can deploy 5G technology for their in-building connectivity — and guarantee data protection.

“As commercial real estate tenants often deal with highly sensitive data, integrity and security of the network and its data are at the forefront of every building owner or manager when deciding about a new connectivity technology,” the report said. “The deployment of 5G should be the result of a carefully carved out digitization strategy, that should follow distinct steps of conceptualizing use cases and determining the investment value to decide on the most appropriate deployment model and which channel partners to engage with.”

Click here to read Ericsson’s full report, 5G Connectivity in the real estate market.

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