High barriers to entry and limited supply are boosting long-term growth prospects for REITs in the cell tower, data center and outdoor advertising sectors, according to a panel at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT.
“Technology is changing the traditional model” of real estate, said panel moderator Jim Sullivan, managing director with Green Street Advisors.
Rather than building new towers, Benjamin Moreland, president and CEO of Crown Castle International Corp. (NYSE: CCI), noted that his company is focusing on adding density to existing sites.
“It’s always been difficult to build a tower,” Moreland said. “The real opportunity for us is to grow organically,” he noted.
William Stein, interim CEO and CFO at Digital Realty Trust (NYSE: DLR), said he expects data growth to be “overwhelming” in the next several years. That creates an advantage for bigger companies in the sector, according to Stein.
“It’s a difficult space to execute,” he said. “There are not that many well-qualified operators. The large players are in the catbird seat.”
Sean Reilly, CEO of Lamar Advertising Co. (NASDAQ: LAMR), told the panel that he does not expect new supply coming online to be an issue in the outdoor advertising business for the next two decades.
“There are huge barriers to entry,” said Reilly, pointing to regulations at the federal, state and local level.
Reilly said Lamar is focusing on switching its existing analog billboards to a digital format "as fast as we can,” which will allow for additional capacity.
Meanwhile, the executives expressed confidence that technological obsolescence would not impact their business models.
“Every few years, there’s an alleged threat to our business, and invariably it’s a boost,” Stein said. As the storage of data has become more efficient, the actual creation of data has increased, he noted.