AAA Financing In Real Estate

Extensive IT implementation in the commercial real estate market has led office tenants to become evermore demanding. The standard telecoms services package moves with the times and adds new services. However, given the deficit of highquality premises developers and owners are prepared to lose tenants in order to maintain their existing business models in working with the building’s communications operator. Few take into account the fact that the telecom infrastructure can increase their building’s competitiveness.

The telecom services provided in business centers by operators can be divided into three basic groups: external, internal, and specific, or additional, services. The first group was formed over 10 years ago. The two other groups are new and no more than four years old. But market participants believe that in the next five years it is precisely these services that will generate no less than half of IT companies’ income from business centers.

The standard approach

External services offer access to telecommunications services and the Internet, providing telephone numbers, multichannel telephone lines and hosting. In addition, some operators also include providing tenants with additional communications channels and linking offices. “The basic package of services developed and was formed together with the commercial real estate market,” say experts at Comstar. “At the very beginning, it consisted of just telephone lines, then Internet access became vital and DialUp technology appeared.” Much later highspeed channels emerged, and already today access at a speed of 5, 10 or even 20 Megabytes/sec. is considered normal, although operators are gradually implementing Gigabyte speeds.

Internal services (local services) refer to a group of services provided on the basis of the building’s telecom infrastructure, including renting ports (sockets), supporting user networks (various companies’ office networks, computers, etc.), outsourcing computer technology, ensuring the operation of information services in the business center and so forth. Naturally, to offer this set of services the building must have installed a single structured cable network (SCN).

In terms of specific (additional) services, the first would be IT consulting, which offers tenants help in optimizing their IT and telecom costs, effectively developing the organization’s information systems, managing the ITbudget, etc.

Obviously, it is a competitive advantage to be able to offer tenants a ready office, when the tenant can move in to fully prepared premises (refurbished, technically equipped, etc.). “Consequently, there are office buildings in which the telecommunications system has already been installed,” explains Dmitry Trofimov, commercial manager of DTS Ltd Telecommunications Company. “Tenants then do not have to spend their own resources on equipping the building, programming and similar.”

Additional services may also include access to financial services, stock exchange information, news agencies, and so forth.

“We have recently observed a trend for what can be called ‘partial outsourcing’ of information services,” adds Andrei Shishlo, business and new services development manager at Golden Telecom. “These include data center services and call processing centers.”

“In addition to the standard package,” says Yaroslav Shuvalov, head of property management at Knight Frank, “A and B class business centers contemplate additional services such as those offered by point to point channels systems, united in a single local network and allowing online recording for surveillance of various building (usually between an office and a production facility, or between several offices).” Also, as required, tenants can use satellite links for videoconferences, etc. “However,” he emphasizes, “on the basis of Knight Frank’s experience, the great majority of business center tenants use the standard package of services (telephone + internet).”

Wireless radio

At present another set of telecom services is being formed on the basis of different technological solutions: for example, unifying fixed and mobile links, or socalled FMC (FixedMobile Convergence). “This solution makes it possible to link a tenant’s mobile numbers to fixed telephone lines at office desks,” explains Mikhail Sergeev, corporate communications manager at Gars Telekom. “Being able to redirect phone calls makes it possible to have short dial access to all employees – both mobile and stationary, and to form a closed group of users, to establish different rights and rules for using the airwaves and so on.”

“Undoubtedly, convergence is already a vital component in the communications infrastructure of the business sector,” confirms first deputy general manager of Central Telegraph, Konstantin Kravchenko. “At present, the fact that services are transferring to IP technologies and solutions (such as Skypе) is a clear confirmation of this fact.” This is why operators who offer a full range of convergence services “Triple Play”, namely, data transfer, video and voice, have a leading position on the market, he believes. Moreover, Konstantin Kravchenko asserts it is on the basis of the overlap of these three basic services that additional services will develop: videoconferences over corporate IP networks, a single office number for fixed and mobile telephones, real time high speed transfer of large volumes of information and so forth.

“Broadband wireless access (BWA) – WiFi and WMax – is still not in demand from the corporate sector,” notes Mikhail Sergeev. “Despite the fact that almost every communications operator is able to provide this service, in practice this type of internet access is designed not so much for the corporate sector as for retail.” The fact is, he explains, working with the corporate sector has its nuances. Large corporate clients usually divide the business between dozens of offices, and their communications’ speed and reliability directly influences their efficiency. However, broadband wireless access cannot yet guarantee either the required speed or reliability. In some sectors, for example, telecoms and finances, telecommunications are not just at the heart of corporate networks, they are part of the business processes. This means that the telecom solutions influence the business to an extent that can be calculated in real money terms and can be either a catalyst or a factor that reduces effectiveness. This creates an approach towards all services that is distinct from retail – quality is more important than price.

According to J’son & Partners’ statistics, of the 5.5 million broadband users in Russia approximately 1.27 million are from the corporate sector. According to Gars Telekom, only 140,000 of these use broadband wireless access. Forecasts for the end of 2006 are that broadband wireless connections in the corporate sector will grow 5560%, to 250,000. In other words, even with such a high pace of growth, the development of BWA in terms of corporate users will remain minimal given the scale of the country. At the same time, the number of subscribers in the retail sector is scheduled to grow much faster.

It is interesting to note that although operators announce that they are able to install fully wireless solutions, in the majority of cases this is not entirely true. However, channels continue to be installed and wireless simply plays a part as one more infrastructure component.

A stick in the wheel

Research by equipment manufacturers for wireless links show that in European companies 45% of the staff are “mobile” employees (at least one working day a week is spent outside the office using mobile communications). For these employees access to corporate databases with mobile devices is very important. It is particularly important for companies and structures working in the fields of health and medicine, communal services, civil safety and security, transport and communications, which need to be prepared for immediate mobilization.

Based on the experience of Russian implementations, market participants observe that the most broadband wireless networks cannot replace cable networks but can be a convenient (or inconvenient) plus (such as, for example, videoconferencing). This technology is currently at a stage of development that cannot guarantee the risk of losing information, which for corporations is much more important than mobility.

“Operators do not like to mention this,” notes Mikhail Sergeev, “but broadband wireless technologies are still weak on security. For example, in commercial real estate, almost all BWA projects end up being installed in office centers’ public zones such as restaurant areas and the lobby.” In offices, BWA is installed only due to the decisions of owners or individual tenants (separate base stations installed at system administrators’ initiative are not included in the rent).

In fact, owners frequently ask not to reveal that their buildings have wireless access. This is the result of business owners’ perception of BWA, which is that their networks will be broken into and fail. This means that business centers are waiting for subsequent versions of WiFi and WiMAX that are able to satisfy security requirements at a reasonable cost. Until now, projects to satisfy modern office infrastructure requirements using wireless solutions cost much more than they are worth.

At the same time, the corporate sector is not aiming for mobility. Employers want their employees to sit at their desks and work, and not to wander about with their notebooks containing valuable information. The level of development of Russian business still does not encourage the appearance of “mobile” employees.

“In many business centers the communications operator may be related to the owner and the infrastructure is poorly designed,” notes iKsConsulting analyst Tatiana Tolmacheva. “They see their task as obtaining maximum profit in return for minimum quality.” The operator will offer the standard package of telephony and internet, and only a higher quality provider can offer additional services. “Frequently, building owners are interested in an exclusive provider because by agreement with the provider they will receive a certain percentage of the revenue from the communications services,” explains the consultant of the division for working with office managers at Jones Lang LaSalle, Alexander Averkin.

“Our surveys show that most Russian companies are currently satisfied with their telecommunications services and in the shortterm are will not require any new ones,” continues Tatiana Tolmacheva. “Regarding the medium term and long term most companies do not think ahead and plan their business, which means they do not consider the services they may need in future.” However, there are large companies who invest in their IT structures, although they may be very few, and this policy is probably not the result of increasing market competition, but rather preparation for this in the future,” she believes.

Changing patterns

The telecommunications market is currently shifting its patterns – transferring from infrastructure models to service models. In other words, the infrastructure will belong to one company whereas the service will be offered by a serviceprovider in the form of virtual operators in the field of mobile communications. We also observe the emergence in this market of mobile operators who are starting to offer solutions for corporate clients.

Market participants believe that telecommunications will acquire greater importance and will soon become one of the main competitive advantages, reducing the role of a building’s location as one of the determining factors for an office building’s classification. Mobility and accessibility will become the most important features.