Cell Tower REITs: Living On The Edge
Cell Tower REITs have been one of the primary 'growth engines' of the REIT sector, but are poised to snap their six-year streak of outperformance over the REIT Index this year.
The recent slump began around mid-year as several risk factors emerged including potential competition from Low-Earth-Orbit satellite networks and delays in 5G deployment over airline interference concerns.
American Tower’s $10B acquisition of data center REIT CoreSite was also met by a lukewarm response, but we like the overall strategy to establish dominant positioning in emerging "Edge" networks.
The near- and medium-term outlook for cell tower REITs remains quite promising, and macro towers should continue to be the primary "hub" of communications networks throughout this decade, at least.
Some caution is warranted, however, given the potential longer-term technological uncertainty, the sector's premium valuations, and tower REITs' massive weight in the market-cap-weighted indexes.