In this article, we identified the companies providing benchmarking and market intelligence in real estate. Such companies collect information on performance such as transaction prices and occupancy rates from the market participants and produce anonymised benchmarks. So far such companies have tended to specialise in sub-segments of real estate: commercial (long leases), residential (multi-family), hotels and flexible workspaces (short leases).We describe for each examples how companies have adopted and adapted the model of “data co-op” whereby market participants access anonymised benchmarks in exchange for their own data.
As we made the research, we understood a common slightly counter-intuitive theme. It seems that the most successful data companies do not win on technology but on customer service.
CoStar is the largest real estate benchmarking company by any metric. Founded in 1987 by Andrew C. Florence, it generates over a billion dollars of annual revenues and hire over 4,600 employees. The company is publicly traded and has as market capitalization a multiple of more than 30 times its revenues. This certainly reflects high equity valuation at the time of writing this article but also the dominant position of the company. CoStar is the reference for commercial property landlords and brokers who all have an access to its platform.
CoStar Group actually consists of a myriad of related real estate websites such as LoopNet, the commercial property marketplace market leader, Apartments.com and Homes.com. CoStar has thus expanded outside of commercial real estate into residential. In fact, CoStar is so big the US regulatory authorities have started to look into the potential antitrust issue of its position when it ventured into residential real estate. The kind of problem a startup dreams to have.
CoStar started and is still organised as a data co-op of leases between brokers and landlords. Over time, CoStar has developed ways to generate primary data such as an impressive fleet of planes and helicopters taking breath-taking enterprise-grade pictures of buildings. In fact, CoStar pictures are so good that they seemed to have fed through to (at the time) competitors website. CoStar is known to not take these lightly and the CoStar v. LoopNet case was a major litigation in the real estate data industry. CoStar had another lawsuit with Xceligent about pictures property. The case raised fundamental questions about who is responsible for the action of a piece of software, which is still an open and important question for the future of the internet.
Several companies have tried to challenge CoStar with innovation in technology. CompStak, the company led by Michael Mandel, aims to facilitate the submission of lease data with a technological platform. We understand however that the process still require some manual work, perhaps a classic case of our tendencies to overestimate the ability of technology to automate things.
In the residential real estate, in particular multi-family apartments, RealPage is the reference property management software (PMS). RealPage is also listed with a valuation of $9bn at time of writing this article. RealPage core business is not market intelligence like CoStar, but management of properties. However, we understand that RealPage has built an internal market intelligence companies, which extracts the data by connecting to his and other property management systems and aggregating the data in one consolidated place.
Even more than CoStar, the reference real estate data co-op is Smith Travel Research. Founded in 1985, focusing solely on organising a data exchange between hotels and publishing state-of-the-art reports, the company has achieved the status of master of the trade. Marriott, Hilton, Accor are all using STR. The company has created standard for measuring the performance of an hotel such as Revenue per Available Room (RevPAR), which are used by all the industry. Interestingly, We understand that the success of STR has not been only on the quality of its data and reports but perhaps even more importantly on the outstanding quality of its customer service. They came for the data, they stayed for the smile.
Find yourself a spouse who looks at you as I look at STR’s website
Several companies have tried to outcompete STR with technology. One of them is SnapShot, which was acquired by hospitality technology company Shiji Group. We understand that SnapShot has built an impressive solution connecting to hundreds of hotel management software to pull the data directly from the systems. This ensures accuracy and a great customer experience. We also understand however that building and maintaining so many external connections is a huge challenge. Perhaps another case of technology backfiring. Other companies providing market intelligence on the back of technology software include TravelClick.
In the adjacent vertical of short-term vacation rental, Transparent has developed an impressive offering of market intelligence tools.
Commercial real estate is undergoing a fundamental change. Tenants want more flexibility. Some operators have stepped up, taken the risk to take long-term leases and sell shorter term one and even provided a level of service on top of just flexibility. WeWork, Industrious, Convene in the US are venture-backed flexible workspace operators. During the pandemic, flexibility has been even more in demand, this time from more traditional tenants who were not familiar with the “coworking” experience. As a result, large landlords are now offering more flexibility as a default and are considering offering service on top of the real estate to attract people back in the office.
From a small share of commercial real estate, flexible workspaces and coworking are thus taking over. However, none of the companies mentioned above are providing market intelligence specifically for flexible workspaces and coworking. CoStar does have information on the leases of these companies but no one has STR-like information on occupancy rates and achieved price per sqf and desk.
This is why we created CoworkIntel. We collect data through various sources both public and private with a STR-like model of operators’ data co-op. After contemplating all the pilgrim fathers, we took away that customer support is a key factor of success and not just fantastic products.