Great timing: just about the time our mercury is heading north to melt the ice, New York-based CompStak is launching in Dallas to melt down walls about pricing and other juicy terms of the deal in Dallas commercial real estate.
What is CompStak? A new tech company that aims to create transparency in commercial real estate transactions. Let’s talk CRE for a minute. There is no MLS to join in commercial real estate, as there is in residential. Therefore it is difficult for brokers, investors, anyone outside the loop to figure out pricing. Indeed, when my husband leased his office space, we had to call CRE friends to verify the asking rent and make sure we were not getting ripped off. The purpose of the MLS is to give residential real estate agents and participating brokers financial information on properties — appraisals, price per square foot sales, and market pricing/condition services that help agents price a listing intelligently, fairly and market it.
More than anything, those comps are the secret sauce of commercial office leasing. Traditionally, brokers have kept comps close to their heart. Some leases even include confidentiality clauses, and unlike sales in most states, leases are not public record. But if you research forever, or have a strong network, a good broker knows how to get them.
CompStak is an online database of leasing numbers that make it easier for brokers to get their hands on the comps they need, be it detailed records of rent prices, square-footage, landlords, tenants, or income that buildings bring in.
The way they do it is remarkably simple: they crowdsource. Or, to put it in a post-50 year old’s vocabulary, they get it from people on the street, in the business, by creating a virtual currency for information.
“It’s a meritocracy,” says CompStak co-founder Michael Mandel.
Mandel, a New Jersey native and Babson College graduate, was a New York real estate broker (Grubb & Ellis) dumbfounded by the lack of transparency in commercial pricing, very much as I was when my husband leased. He knew agents and firms had small chunks of data, but no one was collecting lease term “comps” in a database or readily sharing it.
Mandel and his partner, a programming guru from Columbia Engineering named Vadim Belobrovka –they found each other at a NYC networking conference in 2011 — fleshed out Mandel’s nugget of an idea to snag data. To pull it in, CompStak seeded the site with comps from a handful of broker friends and let ‘er rip Jan. 1, 2012: anyone with access to lease comps could upload them to earn points they could spend to access comps they needed.
The beauty: CompStak was able to obtain fresh, accurate data without paying for it.
Fine, you say: how do they make money if this info is free to CRE agents?
Photo from the Wall Street Journal
CompStak sells information to institutional investors, real estate investment trusts, hedge funds and private equity firms, any firm hungry for comps to crunch into investment decisions. Clients include Boston REIT Beacon Capital Partners, Empire State Realty Trust, Tishman Speyer, Wells Fargo Securities and more. While he won’t say how much his company charges for this, the media has tagged the firm’s revenue at $1 million for 2013. The 25-employee start-up (plus one dog) has raised about $5.6 million from investors, and the firm is growing. CompStak currently operates in it’s home base of New York City plus San Francisco, Chicago, Washington, D.C., Los Angeles, Minneapolis and, as of December 10, Dallas.
“Dallas is one of the largest commercial real estate markets in the country,” said Michael. “We have already gathered a TON of data –well over 20,000 comp versions already. After accounting for duplicates, we have nearly 10,000 unique comps and we’re still loading in a lot of data.”
Mandel has estimated that CompStak’s user base has grown an average of 160% percent per month over the past six months, or at least that’s what he told The Real Deal in NYC. About a year ago, TechCrunch reported that CompStak had data for 50% of Manhattan commercial leases over the last two years, 40% of leases in the last 10 years. Now CompStak has banked virtually 100% of Manhattan lease data over the past two years, 50% over the past 10. Data coverage is similarly extensive in the other markets.
This data is not in the public record and I hear it’s much better than the smaller collections held by traditional real estate research firms like CoStar… also which neighborhoods are trending, and what’s a fair price per square-foot in an area.
“I would say that we illuminated trends in what industries are “leasing” more spaces, not “buying”, says Mandel.
Everyone asks me how CompStak differs from C0Star Group, the D.C.-based firm that now owns LoopNet. CoStar focuses on listings, says Mandel, space currently on the market. The CompStak database is focused on transactions that have already taken place.
“We are the only ones who are able to successfully gather information on lease comps, because we incentivize our members to give us this information by offering them other valuable information in return,” says Mandel.
The site is free for brokers, and now offers the CompStak Team, where brokerage teams can manage and share comps with their colleagues in the same office. The Wall Street Journal, The Real Deal, The Commercial Observer and Bloomberg also utilize CompStak data.
“Michael had a vision and expanded it,” says Belobrovka. “this exchange of information has never been done in the way we have implemented it.”
Commercial real estate brokers tell me the first thing to do when they evaluate a building is look at the lease comps.
But where to find them? That’s the million dollar question CompStak has answered through “disruptive technology”, and oh how we love it.
Imagine the possibilities.