Don’t let CompStak’s small size fool you. The fledging startup has designs on transforming the $500-billion-a-year commercial real estate transaction business, and it’s starting with comps. After a big push in New York, its next stop is the Bay Area, including Silicon Valley.
Comps, short for “comparables,” are lease details that brokers have long traded among themselves in low-tech ways. Comps are crucial for understanding the state of the market on the landlord and tenant side. CompStak says it can provide a more efficient and accurate way of obtaining the information through the use of crowdsourcing, or the sharing of information. Companies like CoStar, the dominant player in CRE listings, which charges agents for access to comps, have not gotten much traction.
“Brokers, appraisers and researchers have been trading comps among different firms forever,” said CompStak founder and CEO Michael Mandel. “We’re just asking them to do what they do offline, online.”
Under the CompStak model, brokers provide comps to an online database to earn points, which they can trade for other comps. The more comps they input, the more trades they can get.
CompStak is free for brokers, but makes money by selling memberships to enterprise customers such as real estate investment trusts, banks and institutional investors. In New York City, those contracts cost $30,000 annually, Mandel said at the 500 Startups pitch session.
The New York City-based company says it has comps for 99 percent of the lease transactions completed in the last year in the Big Apple. It will launch within weeks in the broader Bay Area, though the company says brokers are already contributing information for Silicon Valley.
CompStak just hired Matthew Reilly, a startup vet and former director of capital markets for Marcus & Millichap Capital, to lead sales in San Francisco. And the company has raised $1.15 million and is currently raising another round.
Below is an interview with Mandel where he discussed the company’s plans. The interview has been edited for clarity and length.
Why San Francisco after New York?
From a technical standpoint, it was a little easier for us. Mapping the markets is very important to us, and we have to be careful. In New York, we tie every comp to the NYC Department of Buildings. It allows us to accurately verify primary and secondary addresses. It’s a similar process in San Francisco. In most suburban markets, counties don’t provide access to those databases. So we’ve had to build our own proprietary systems for validation of addresses and proper marking of addresses using latitude and longitude.
Next comes Silicon Valley?
Yes, because so much of the CRE transactions in the Bay Area happen outside of San Francisco proper. You can see that in our prelaunch comp inventory. We get brokers to contribute comps before we launch. And we have 4.5 times the number of comps cued up for the broader Bay Area than for San Francisco proper.
Talk to me about quality control.
It’s done in several ways. We test for anomalies in the data. If two comps in the same building vary wildly in rent, square footage, or concessions, the computer detects those and alerts analysts to review it. Also, every comp is reviewed by an analyst. Users will also be able to say, “This is wrong, this is the correct info.” The user will get points for updating the comp, and the user who was wrong will lose points.
How can landlords use the service?
We’ve had very strong interest so far from landlords. At this time, the only customer I can name is Tishman Speyer, but there are others. Landlords use it to compare the leases of competitive properties for their own, and to have a deeper understanding of what their space should be able to lease for. Investors are using CompStak to analyze prospective investments based on the income those properties produce.
What does that mean for researchers?
I think you’ll see a shift in what those researchers do. They’ll probably spend less time gathering data and more time analyzing data. Already, right now they’re spread too thin. They’re expected to be data-entry people, but also put out interesting complex reports for each broker they meet with. Now they can spend more time on really value-added things.