By Franco Farudo on July 22, 2016.
Crowdsourcing seems like a product of the Internet age, but really it is much older. Compiling research from multiple sources was originally done using scientific journals, the oldest of which, Philosophical Transactions of the Royal Society, was first published in 1665. Granted, getting access to data owned by a large number of contributors got a lot easier once information could be effortlessly send around the globe. Now, entrepreneurs like Michael Mandel are bringing the concept to commercial real estate, and we all stand to gain.
Michael is the co-founder and CEO of CompStak. It’s innovative business model gives commercial real estate professionals access to detailed and verified lease comparables (comps). In return, they have to share other lease comps.
The reason that this model works so well in commercial real estate is that lease terms are not available to the general public. Prior to CompStak employing this crowdsourcing model, leasing data was generally collected in two ways. The first was through networks. Calling fellow brokers and asking for their data is time consuming and doesn’t transfer well to new markets. The second was scraping. An army of bots is constantly trolling listings and reports, trying to get as close to a statistically significant average as possible. The downfall of this method is that the inputs are highly suspect. An asking price on a listing are almost never the same as the agreed upon amount after negotiations take place.
Another reason crowdsourcing works so well in commercial real estate is due to the large number of organizations, such as lenders, landlords and investors, that are eager to get this valuable information. These industry players have nothing to add to the database…except money, of course. This allows CompStak to monetize crowdsourcing in a way that not even Wikipedia has been able to figure out.
After examining CompStak’s product offering, it came as no surprise to me that they have had quite a bit of interest from foreign markets. Last year, Michael and his company attended the MIPIM conference in Cannes. For those of you not familiar with the MIPIM (I wasn’t either if it makes you feel any better), is a huge international property event that with over 120,000 attendees from almost 100 countries. CompStak ended up winning a startup competition there and was selected, fittingly, by a crowdsourcing process to give a presentation of their model to the main audience. Winning these awards was proof that CompStak’s value proposition would be accepted in foreign markets and set the stage for its new adventure: London.
Michael had nothing but nice things to say about his reception in the U.K. “At times it felt easier to get a face to face in London than it was in New York.” He was happy to find such a large, robust market with no real competition. CompStak had already been implemented in every primary and secondary market in the U.S. While there is still room to grow in the US, focusing all their efforts on the American market would have resulted in diminishing returns from establishing themselves in smaller and smaller municipalities.
London is a huge market, it represents 64% of the U.K. £787 billion commercial property stock. But the challenge for technology companies trying to establish themselves there is the large number of firms. There are twelve major commercial property companies that control most of the city’s leasing. Most major American markets have three or four. Large scale adoption is especially important for companies like CompStak. “The more data gets inputed, the more powerful our output gets,” explained Michael. Luckily, several of the twelve major real estate agencies signed up early on, so a critical mass was reached quickly, making CompStak’s data robust and desirable.
Michael left London with a general feeling that the real estate corporate culture in the U.K. had a bit more focus on working together. Some of this, no doubt, is due to large teams that are used for leasing space. Another factor might be that the British have a more collectivist way of thinking. They have subsidized medicine and college, something that I don’t see happening any time soon in the U.S. (Sorry Berners).
Sharing information is one of the foundations of what makes us human. What I find interesting is how our relationship with it changes. Technology is one of the forces for change, but not the only one. But let’s not overlook society’s roll. Societies often decide to write laws that inhibit the dissemination of info. Patents, trademarks, and copyrights are all examples of this. Media conglomerates and patent trolls are a negative side effect of these decisions. Currently, tech companies promote themselves as liberating us from these maladies, but once they consolidate there is no guarantee they won’t engage in similar activities.
I hope that in the future, other data collection companies can look to CompStak’s model as a good example of how to add value to the collective good. All the while propelling CompStak to the forefront of the industry. As CompStak’s markets expand to London and beyond, I expect many more accolades to come.