fibre optic

Fibre-optic internet shifts real estate industry

More companies are thinking about future connectivity needs when looking for office space
Tuesday, July 12, 2016
By Rebecca Melnyk

As more municipalities implement telecommunication infrastructure to attract business, fibre-optic internet is causing a shift within the commercial real estate industry. Big data storage, cloud computing, advanced analytics, social media strategies and video conferencing are just a few applications companies now use on a regular basis. In turn, buildings with access to fibre optic-ready office space have a competitive advantage compared to assets without this amenity.

Companies are now demanding fibre-optic internet because it significantly impacts day-to-day operational efficiency, says a new report from Colliers International called “Plug in to Peak Productivity.” From faster upload and download speeds to superior connectivity, more and more companies want this kind of technology in place of traditional fixed-line copper broadband.

“There are many other factors that tenants are considering when choosing office space, but fibre optic is one of growing importance, when it was not in the past,” says Shawn Gilligan, senior analyst at Colliers International and lead author of the report. “Some companies, though, are valuing fibre optic greater than any other amenity.”

Beyond technology and media companies, Gilligan says other industries are starting to adopt internet-heavy applications. Demand used to come from start-ups and engineering firms.

“But now we’re starting to see interest from finance companies where losing a minute could mean losing millions of dollars,” he adds. “There is also demand among real estate companies in which cloud services are used. In cloud computing, data is stored at a data centre where it has to be accessed online. The medical field is another industry seeing demand.”

The report features a download speed comparison table to help show why industries are latching onto fibre. Using poor internet translates to poor productivity or, more specifically, the difference of a 10-minute download compared to an eight second download.

Fibre optic accessibility

“Throughout the GTA we are definitely seeing increased demand for office space and even industrial space in which fibre optic is available,” notes Gilligan. “And it’s not just where it’s available, but finding space in which every suite is wired for fibre optic.”

Even if a neighbourhood network is created, individual buildings need to be wired throughout each office, which is expensive.

So, even though internet traffic in Canada is expected to more than triple between 2014 and 2019, tenants in the GTA are having a more difficult time tapping into a fibre-optic network.

However, certain regions seem to be getting it right. Markham, Ontario, for instance, was used as a case study in the report because its located in York Region where broadband connectivity is being provided at appropriate costs and speeds through its regional broadband strategy.

With no public information on what buildings have fibre optic internet, Gilligan conducted a survey of every Markham office building and found that 99 per cent of buildings or 7.7 million square feet of office space currently has access to fibre-optic internet. This includes 5.5 million square feet of Class A office space and 2.3 million square feet of Class B office space.

The report also found that companies in Markham ranked telecommunication infrastructure as a more important site selection factor over 19 other factors such as transportation infrastructure, skilled labour, cost of utilities, taxes and quality of real estate.

“Still, while many buildings in Markham are providing this space, demand is increasing, and the right type of supply isn’t necessarily meeting that demand,” adds Gilligan.

For companies looking for office space with access to fibre optic internet, Gilligan has created a checklist of questions to ask. First, interested parties should contact a landlord or building owner to see if fibre is available. They should then find out if it is wired to individual suites, wired to all desks, who are the service providers, what are the speeds and costs, and if there are different access points.

Fibre optic costs and demand

Just this past week, Telus announced it is planning to expand its fibre optic network in the Greater Montreal area with a $111 million investment, while last year, it made a $1 billion commitment to install a network across Vancouver. That capital investment is expected to increase to more than $4.5 billion over the next four years. Waterloo, Ontario is also attempting to make improvements to its network.

“When Google announced that cities bid to install their fibre-optic internet, more than 1100 cities applied because they understand how important it is for their growth and how companies are demanding this more and more,” Gilligan adds.

Demand for fibre optic internet is expected to increase, and Gilligan says many new developments in Toronto are using this as a selling point and advertising it due to the productivity gains.

“A real estate company in the U.S. looking to come to Canada is starting to certify buildings from a technological perspective, like LEED buildings,” he says. “They have been getting more recognition and building owners are starting to actively advertise it.”

Still, some regions don’t have comprehensive networks for now because installing a fibre optic internet network, along with service provider fees, is expensive.

Information on the costs to wire fibre optic to individual office spaces isn’t always readily available. Costs could also vary depending if a tenant has negotiated with a landlord to help pay for some of the fees.

While every building has different situations, more and more businesses are now thinking about their future connectivity needs when looking for office space, says Gilligan, adding that companies sign long-term leases so it makes sense.

“Markham and even smaller communities such as Liberty Village—areas that have invested a lot so fibre can be installed throughout many of its office buildings—will have an advantage and continue to have an advantage,” he adds. “Companies sign five to 10-year leases. Being able to go to the building owner and know that everything is ready to go and who the service providers are, gives these regions an advantage.”

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