AgentGenius on CRE Websites

AgentGenius has a post up on CRE websites, listing 32 top web destinations in the space.  But the best thing in my mind is that they have left Costar out of the top 32!  First, I have no idea whether or not this is just an error, or perhaps a subconscious thing, but no matter how you slice it, Costar has to be in the top 32.  But that doesn’t make it any less entertaining!

I wouldn’t have even noticed the omission if not for the comment from a Costar employee at the bottom of the page.  The comment is great and needs to be reprinted in its entirety.

It blows my mind how you continue to leave off CoStar Group, The NATIONS PROVEN #1 PROVIDER OF COMMERCIAL REAL ESTATE INFORMATION, from the majority of your blogs unless you are questioning their credibility or putting out a negative thought about their platform based SOLEY on what you perceive to be a high cost. You, as a non subscriber with no access to the platform, have no idea what kinds of information you are missing and therefore can not provide an accurate list of TOP CRE sites.

The facts speak volumes about CoStar’s relevance in our market place. CoStar has more viewers, subscribers, and firms feeding CoStar data than any other CRE site. It combines a full inventory and more verified listings than any of the sites listed. Not to mention, it combines what about 15 of your sites mentioned do, all under one platform.

Now, I have used Costar in the past, though I no longer subscribe.  That’s full disclosure, so take my comments however you want.

I don’t think anybody has a problem with the actual Costar service.  It’s pretty good.  The Costar employee is probably right on.  And the cost is the cost.  You wouldn’t leave Mercedes off the list of top car makers simply because of the price.  But I think there is something else going on that I have heard numerous people complain about.  It’s the way that Costar charges for their service, and the general arrogance that their sales force displays.

The most irritating part of Costar pricing is what is called “beneficial user pricing”.  It was the major thing that led to our office dropping Costar.  It essentially means that they are going to charge you for anybody in your office with a real estate license.  When we dropped the service we had 15 brokers in our office, of which only about three would ever use the service.  I have talked to other companies who voice the same complaint, and I even saw that somebody on Twitter was complaining that they were being charged for four licenses in a three broker office.

If you bring this up with the Costar sales force, their response is that they can come to your office and train the rest of the brokers so that everybody can enjoy Costar.  I find that to be an extremely tone deaf response.  To start with, Costar is an internet service, not the space shuttle.  It’s pretty easy to figure out how to use.  So it’s almost sort of insulting to be told that your objection to their product is because of your lack of intelligence.

So that’s my small complaint, and if you disagree that’s fine.  Chalk it up to a disgruntled former user.

But let me step back for a second and say what I’ve said before.  The Costar business model is flawed and will be replaced in the near term.  Maybe Costar will be proactive and do it, or maybe Loopnet will do it, or maybe a third party will do it.  Here’s how they’ll do it.

1. Start with a huge reduction in data acquisition costs by crowdsourcing the data acquisition process.  Replace the Costar researchers with a national data infrastructure that allows brokers to input data on properties, requires high data standards for membership, and allows the brokers that participate by inputting data to also gain access to the system for free.  If I feed a comp into the system, I get a number of free comps.  This isn’t revolutionary – residential MLS systems already do this.
2. Build on top of that broker-based system, a property management platform that will also send data on building fundamentals back to a central data dump.  If I own a building that is 13% vacant, and the rest of the building is leased up at an average of $2.25/sf, that data goes into my property management suite, and also gets sent back to a central server for use by others.  The property management suite would give you analytics in near real time in terms of how your assets are doing versus other nearby competing product.  Again, this is not revolutionary as the apartment market already has something similar.  Give the system for free to landlords to gain their participation, charge the brokers for access.

The key difference between the residential market and the commercial market in terms of data access has to do with some assumption of confidentiality in commercial deals.  But the very existence of Costar is a testament to the fact that the confidentiality doesn’t actually exist.  Costar is verifying comps with people who are familiar with the transaction!

There are a number of possibilities for the platform I outline above.  Maybe commercial appraisers should band together and create their own data dump for their confirmed transactions.  The key is that internet and tech startup costs are so low right now, somebody could build the system I describe above for not very much money.  If it’s done by a challenger to Costar or Loopnet, look out – the service will be cheap.  If done by Costar or Loopnet, they would have an opportunity to tamp out potential competition and could probably keep fees higher.  When Gmail launched, because they did not have huge scaling issues, and because their user base was relatively small, they could allow something like 100X the storage of Yahoo mail for free.  Because Gmail was the challenger, and because they needed to acquire users, they made the service as great as they could out of the gate.  Expect something similar in the CRE data space.