With the 4th of July week long celebration – it is likely that you have either missed, or simply skimmed the recent news regarding Xceligent’s counter-suit against data behemoth Co-Star. If by chance you missed this news, I highly recommend you read Jon Banister & Ethan Rothstein’s article in Bisnow from June 28th.
This legal battle of heavy weights has the feeling of Tyson vs. Holyfield – or more current, McGregor vs. Mayweather. But really, we may be looking at a decision that boils down to monopoly vs. duopoly.
Here is a quick summary: Co-Star originally filed a suit again Xceligent for intellectual property infringement, as well as a myriad of other claims. Now, Xceligent has filed a counterclaim against Co-Star, accusing Co-Star of numerous offenses – including violating imposed restrictions the FTC placed on Co-Star in 2012.
The general feeling in the market is that Co-Star is a monopoly. Can’t live with them (the service is deemed to be expensive), can’t live without them (the information, although not completely accurate, is easier than doing it on your own). Note, I said easier – not necessarily better. Xceligent does not have the same coverage – but this is changing (or at least Xceligent is attempting to change this) pending the settlement of these suits.
The outcome of these claims, and the ultimate decision by the courts – will provide you, the commercial real estate broker, with one career-making lesson.
[Tweet “”The best commercial real estate brokers understand that they are in the information business; and that real estate is simply the mechanism in which they leverage this information.””]
Years ago, one of our coaching clients, Bob Knakal (Chairman of NY Investment Sales for Cushman & Wakefield) told me that he was not in the real estate business. Imagine the look on my face when one of the world’s top producing commercial real estate brokers says this. Bob then, correctly, shared with me that he was in the information business. In fact, Bob built his company (then Massey Knakal) based on their deep understanding of their market and all NY City submarkets. Bob, his partner Paul, and their 100 plus brokers did not use Co-Star. They had more accurate information themselves, and couldn’t justify giving away their information simply to buy it back. Xceligent was not in the market at the time so they were not an option (Xceligent has now recently entered NYC).
The original ideas by Andrew Florence (CEO of Co-Star) and Doug Curry (CEO of Xcelligent) of providing a portal where information can be collected and shared has transformed the commercial real estate industry. The evolution of this idea has, unfortunately, evolved into a series of legal battles that will ultimately determine the efficiency of most commercial real estate brokers.
The key point here is: the best commercial real estate brokers understand that they are in the information business; and that real estate is simply the mechanism in which they leverage this information. Information is paramount. Most of commercial real estate brokerage has become dependent on third-party providers for their information – the demand is incredible, if not insatiable.
Top producers, however, do not rely completely on third-party sources. They validate, confirm and/or originate their own information.
There may be a winner in the Co-Star vs. Xcelligent battle. The courts may find Co-Star to be a monopoly, or they may find Xcelligent to infringe on Co-Star’s patents. Ultimately, one or both of them (or even a new player) will find a better solution for the market; where information can be exchanged at a fair price, and open for the entire market to use as they see fit. Regardless, it will always be the individual broker (or brokerage firm) who leverages the information best – that will be looked at as the market leader.
Great post! I don’t like using these resources at all. Getting my own info thru my relationships is 100% more accurate. Recently brokers have been calling me saying my properties are listed on Xcelligent- I didn’t list them there and the info is completely inaccurate. The Rockstar Brokers get their own info like Bob’s team, and don’t rely on 3rd parties. The only time costar is good is for completed sales- as per public record- in my opinion. Thanks for the post- I had missed the news about the lawsuit.
Beth, keep on being a Rock Star! It will be interesting to watch the progress of this case.
Very well written and accurate. The need to be a master of information is more important then ever today,especially in the retail sector. Disruption can create great opportunities if you are one step ahead and the knowledge will earn your place at the table and saving your clients from bad decisions will keep your seat for life
I use both systems–my area commercial board switched to XCeligent about a year ago. XCeligent has a long way to go to be user-friendly and still can’t get a tour map to match the number sequence of the attached property search. That is hard to explain to a client and reflects poorly on me. Co-Star is expensive but very easy to use and covers 3 states where I operate. If I had to choose one, it would be CoStar hands down.
Thank you for the insight Matt!
I agree with the points raised in this excellent post. Costar has figured out that if enough brokers, appraisers, credit analysts, investors, etc. are either unwilling or unable to maintain a proprietary database, the rewards for doing it are highly lucrative. I think that needs to be frankly mentioned and as you suggest Rod, reflected upon. I also think another pitfall of not keeping a proprietary database is in the appraisal sector. I am alarmed by the chronically high number of appraisals on first and second tier properties especially by big name/high fee firms that are 90-100% based on third party market data! Is that really appraising or is it just merely producing clerical level work product that ignores local factors and nuances. Lastly, your reference to Bob Knakal highly resonated with me. If you know or know of Bob’s achievements you’ll agree he’s a CRE Hall of Famer with the track record to back it up. Again great post Rod and thanks for the excellent observations.
I do think there is some reconciling to do with the FTC’s conditions and how LoopNet was manhandled anyway. And I have found brokers retain control by leaving pricing and rent as “negotiable” or “call” (right or wrong).
Interesting post- especially relevant if you are in a tertiary market. We resisted Co-Star for some of the same reasons posted but came around after they started covering our market better. We monitor Co-Stars data and make sure it is correct and like the reports we can get back. Worth the dough- still not convinced but we are sticking with it for now. But it certainly does not replace boots on the ground knowledge of the local market and the deals reported by Co-Star and thankfully the brokerages that reach into our area from nearby secondary and major markets.
Great insight Bill. Thank you for sharing.
I opposed the Loopnet CoStar merger from the beginning as being monopolistic. Xceligent was supposed to come in and be their competition. If you can’t get into a large market like the Bay Area five years later, something is not going right with Xceligent. So it is monopolistic and way to expensive to buy CoStar for a small brokerage. CoStar doesn’t verify or keep accurate records on every Loopnet listing. There is supposed to be a data bridge between CoStar and Loopnet, further reducing competition in markets that Xceligent is not in. I hope Xceligent beats the lawsuit!
If CoStar would not punish you for being a small firm or individual many more would use them. It is frustrating to pay a premium against the bigger houses for the same data. I’m cheering for Xceligent.
As an add-on, if I can’t use Loopnet’s pictures, why are they using mine? Terms of conditions I know, whose favor does that work in? I wonder if my pictures are in CoStar?
Rod, excellent post. I had a couple of thoughts
First the CRE information industry is bigger than most people think. I recently completed a research project and located 42 firms serving the CRE industry. CoStar is the biggest, and in my opinion the best. They do research the old fashion way. They drive the roads.
Secondly, in was taught, and believe, that the CRE brokerage business to made up of two equally important parts: Information + Relationship.
Information without relationships is worthless. And relationships without information is also worthless. Successful brokers know how to manage both.
Bob Knakal business model is an excellent fit for multi-family investment market in New York. He assigned each broker to a specific geographical submarket, where they worked, becoming current and historical information expert, and simultaneously they create personal relationship with property owners and buyer within each submarket. Bingo!
I misspoke, there are 55 CRE information suppliers.