A company that allows commercial real estate brokers to share information about lease deals on a free database could shake up the brokerage world when it launches in Boston this October.
CompStak hopes its crowdsourced lease comps will help the firm, created by a former commercial broker, to break into the highly competitive Boston real estate market, where CRE professionals are often reluctant to adopt new technologies.
The concept is simple enough. When brokers complete a lease transaction, they can access CompStak’s online database and share information there – like the rental rate paid by a tenant, the square footage the tenant will occupy, which firm represented the landlord, tenant improvement dollars and other pertinent information.
Secrecy And Competition
When a broker logs all that into the database, he or she earns points that can be used to essentially purchase lease information about other deals. Therein lies the incentive – you give a little, you can get a little. If you give a lot, the idea is you can get a lot. CompStak’s officials are betting that will prompt brokers to share, and share often.
That runs smack up against the way the CRE world often operates. Now, brokers play those lease comps very close to the vest. There is a grand bartering that occurs between brokers at competing firms, where a broker at Company A will call up a friend at Company B and say, “I was hoping you could tell me about this lease you just completed. In return, I’ll tell you about my lease.” It’s commonplace and expected in the secretive industry. That’s just how things work, according to brokers. In fact, it can be so secretive and competitive that, sometimes, a broker at Company A won’t even share the info with other brokers at Company A.
“The way brokers and researchers share data now is in many ways stuck in the Stone Age,” said David Peterson, whose official CompStak title is expansion hacker. The company’s website says he is charged with “blazing the way” for CompStak to enter new markets.
“We’re really an online marketplace,” Peterson offered. “People can only get out of it what they put in. It’s fair and efficient, and we get enough people on board and provide a comprehensive view of the market.”
The big question is how the firm will convince professionals in a highly secretive and competitive industry to get on board with sharing their valuable lease comps. In other markets, CompStak counts property owners and investment banks like Wells Fargo, Tishman Speyer and Beacon Capital Partners as clients. Those users, however, are required to pay for lease comps – only brokers have free access, since they are the ones providing the information.
Brokers use the database to understand the market better, to see what other properties have comparable rental and occupancy rates and to know what leases are set to expire in a certain year, which is also beneficial for landlords that may be seeking new tenants to fill a future expiration.
“The secrecy is a barrier we run into all the time,” Peterson said. “But once [brokers and landlords] understand how the product works, they realize they only increase their competitive advantage by sharing early and a lot, because they get more points and more out of the system. We partner on an unofficial level with some of the biggest firms in the country.”
But, he added, it’s often mid-sized firms that are the most active. Unlike a CBRE or Jones Lang LaSalle, the mid-sized companies might not have the massive database of lease comps in their offices like their national counterparts, and by opening the market for them, “those firms are able to build up a competitive advantage.”
Real World Use
The firm launched in New York City two years ago, and has since spread to San Francisco, Washington, D.C., Los Angeles and Chicago. According to information from CompStak, the firm captures nearly 100 percent of all lease deals in NYC, 75 percent in San Francisco, 60 percent in D.C., and 40 percent of Chicago deals.
According to one New York broker, the company has altered the way the industry operates and increased transparency. Lauren Davidson, a tenant rep for Transwestern, said it has greatly simplified the process of finding lease comps, and she makes at least daily visits to the database, if not several times a day. Instead of making multiple calls to landlords and other brokers, she can just go to the database and find what she needs there. And even if she does get rental rate or square footage information from her colleagues, it can often be altered, depending on a broker’s or landlord’s motives, she said.
Yet, Gary Kerper, a tenant rep and associate director for real estate advisor Studley in New York, said CompStak’s information is “just another resource” in his arsenal, and the information can often be incomplete, especially the concessions from the landlord for tenant improvements to a space. Even so, he said he uses it every other day, especially since the database lists transaction going back as far as five or 10 years.
“When concessions or other parts of a comp are blank it’s not really useful to me, but it’s still helpful,” Kerper opined. “But even if they’re not 100 percent accurate it gives me an idea of when someone’s lease is expiring.”
Many people in New York are likely aware of the product, but brokers and others in the industry still use “the old word-of-mouth,” Kerper added.
Email: jcronin@thewarrengroup.com
