The commercial real estate industry is in the early stages of a revolution. Property data and listings are becoming more accessible to all industry participants. The future availability of commercial real estate data will help buyers, sellers, and brokers all make better real estate investment decisions.
Commercial real estate brokerages haven’t really changed how they operate despite great advances in technology. Large brokerages and big data companies still have a valuable information advantage compared to most investors.
It’s somewhat understandable to see why the commercial real estate industry is slow to adopt the open sharing of real estate data. Entrenched industry players want to withhold this valuable information so that they can sell it for a profit.
Industry Information Monopoly
Commercial real estate property data and listings are mainly controlled through a near monopoly that is the CoStar Group. Many brokers have a strained relationship with the CoStar Group and their owned commercial real estate search and listing websites.
The CoStar Group sells real estate data to brokerage companies and large investors who have the means to pay thousands of dollars a year for access. However, many brokers are frustrated that CoStar has complete leverage to charge high fees for listing data due to their monopoly on this information.
In the movie Wall Street Gordon Gecko says, “The most valuable commodity I know of is information”. Commercial listings and property data are certainly valuable commodities being sold to large industry players that monetize the data into client consulting fees and commissions.
The frustrating fact for most investors is that it doesn’t have to be this way. In the related residential real estate industry, property listing information and data is now available through many national website portals such as Zillow, Realtor.com, and Redfin.
Residential brokers at one time controlled all the listing data in the MLS. Now the data is freely available to all buyers and sellers. It’s hard to imagine today but over two decades ago buyers had to work with a residential broker just to see all the properties on the market. But this is exactly where the commercial real estate industry is today.
Still, residential brokers are involved just as often in the home buying and selling process, even after all the property listings and data are now freely available to the public. The residential real estate marketplace is more efficient now that buyers and sellers have access to property information.
What Went Wrong
An important turning point in the commercial real estate property data industry was CoStar’s acquisition of their closest competitor, LoopNet, back in 2012. This gave CoStar control over its biggest rival and more commercial real estate property data. US market regulators mandated CoStar spin off the affiliate company named Xceligent to prevent a full blown industry monopoly and leave some remaining competition to CoStar.
The bankruptcy of Xceligent in 2017 cemented CoStar’s control of commercial real estate information and listing marketplaces throughout the US.
This failure of major competition allowed CoStar to raise prices on its customers and make LoopNet an advertising only marketplace. The LoopNet changes would help push customers who used some of LoopNet’s similar features to purchase the much more expensive CoStar suite packages.
CoStar’s stock price has soared since the Xceligent bankruptcy, given their near monopolistic position and ability to consistently increase prices to broker customers.
A small amount of competition to CoStar and LoopNet does exist today, however, they do not yet have the amount of website traffic or as many listings as Costar. Brokers continue to pay to list their properties on CoStar and LoopNet because they have the most buyer website traffic.
Commercial Real Estate Property Information in the Future
The future of commercial real estate information technology looks to follow a similar path as the residential market. Residential real estate marketplaces show property listings, sold property data, valuation estimates, and other local information to consumers for free.
The commercial real estate investment market will follow these important advances, but at a slower pace. Consumers should be given the necessary information to make informed property investment decisions. The need for a real estate broker will remain as a trusted adviser through the investment process.
An investor needs to see all the properties on the market to make the best decisions. The information should not be sold at excessive prices, where only large brokerage firms have the means for access.
The future starts with opening property data to everyone. Buyers are better served with having the information on all listings. Sellers are better served because their property listings will be marketed to everyone, instead of only a select number of buyers and brokers.
New Commercial real estate marketplaces and property data companies are starting to emerge with innovative solutions to the expensive monopoly of the CoStar Group. The commercial real estate market will be more efficient with the free flow of property information available to everyone. All buyers, sellers, and investors will eventually have access to important property data needed to make challenging real estate decisions.
MarketPier is committed to helping buyers, sellers, and brokers make better investment decisions. View commercial real estate listings and property data throughout California markets on MarketPier.com.