VTS recently announced a new service that will amalgamate data it has on individual leases and will give clients a peek into new market trends, reports The Wall Street Journal.
VTS provides landlords and brokers with a mobile-friendly dashboard so they can track prospective tenants from the time they inquire about the space until their move-in date. This dashboard has given the company insight on critical market metrics like current rents and how much interior work landlords have to promise to persuade tenants to sign deals.
“We can show average base rents, tour activity, what kinds of industries are looking and average transaction times for different industries,” said Nick Romito, chief executive of VTS. “Now you’re making decisions with empirical data versus, ‘I’ve got a feeling the market is hot.’”
“This well attended conference was full of the who’s who of commercial real estate,” said Rich Berliner CEO of Fifth Gen Media. “How much this avalanche of data from VTS will be used is anyone’s guess, but it certainly presses the case that connectivity matters in CRE. If you can’t access the data, how valuable is it?”
VTS is not the only company, nor the first, to understand how valuable market insight can be to tenants and landlords. CoStar Group, Inc. has also sold market data; the company was listed on the Nasdaq Stock Market in 1998 and less than $10 a share and today is trading above $400. Startups like CompStak, Inc. have also offered similar services recently.
Traditional real estate service companies like JLL, CBRE and Newmark Group, Inc. are beginning to transition from market data keepers to advisor roles. This change isn’t too different than when in the financial industry, stock market brokers turned into financial advisors.
“The real-estate brokerage world has gone through and is going through a similar transformation, albeit 15 years behind,” said Michael Shenot, a managing director at real estate services firm JLL.
The real estate industry has not been quick to adopt new technology. According to some real estate executives, a lot of landlords maintain a tight grip on building and lease information because they thought they could drive higher rents.
As new commercial real estate data service emerges however, that tide is changing.
“There are very few industries in the world where you aren’t using large data sets to make decisions,” VTS’s Mr. Romito said. The office, retail and industrial sectors “have been this laggard part of the space where everyone around us is using market information to make decisions except for us.”
It was CoStar that initially disrupted the commercial real estate data industry. Prior to its 1987 launch, landlords and brokers held most information for commercial rents, building tendencies and occupancy rates. Then, CoStar started to gather property data by talking with brokers and landlords, taking pictures and viewing building tenant rosters. Eventually, traditional brokerage firms gave up control of some of its market data to CoStar and begrudgingly formed a relationship with the company. Firms loved CoStar’s data, but not how much it charged.
Since then, companies have taken different avenues to collect data. CompStak for example uses a crowdsourcing system to gather specific lease details from brokers and others who report data in exchange for other information CompStak has.
CompStak currently has information on approximately 600,000 building in more than 70 commercial real estate markets. It plans to sell nuanced sales data and roll out its own analytics service so use can benchmark property against the market. Michael Mandel, CompStak Chief Executive, stated as companies like his and VTS expand, there’s a higher probability of butting heads.
“As we each get bigger we will start competing more with each other,” Mandel said.
For now, new entrants into the commercial property data field have respected traditional brokerage firms’ territory. VTS and CompStak don’t sell information to tenants for example. However, some traditional brokerages welcome new entrants.
“I think brokers will be able to leverage the information for the benefit of their clients and interpret the information and help execute transactions in a more seamless fashion,” said Barry Gosin, Newmark chief executive.
Others expect that the barrier between data firms and brokerages to start to blur in the commercial real estate industry. The example they use is what’s happened in the residential data industry—Zillow Group no longer just provides data. It now buys and flips homes, too.