About six years ago, I had the opportunity to meet Simon Sinek. It was just a few months from Simon’s famous Ted Talk, now viewed over 25 million times. In it, Simon argues that great companies aren’t driven by WHAT they do, but in WHY they do it. A couple years later, as we began to build CompStak (then known internally as SquaredFT), we used this model to think about why we wanted to build this company. For us, it wasn’t about building a lease comp platform, or crowdsourcing data. The “why” for CompStak, was about creating transparency, to make deal making faster, and more fair in the CRE industry.
A few years later, it feels like transparency in the commercial real estate industry is truly taking place, and in pockets where it’s not, it will inevitably happen. As transparency increases in CRE, some commercial real estate professionals will have to adapt the way they do business. Others, will find that they’re not well equipped in to this new world, and still others will find that their existing skill set will allow them to thrive in the new environment of commercial real estate information transparency.
Here are my predictions on the impact of transparency in CRE:
Creativity - Access to information will be table stakes. Brokers, investors, lenders and other deal makers will come into a deal with the same information. This means that information arbitrage will no longer be a competitive advantage. Nearly 100% of deals will get done based off how you interpret the data, what you do with the data, and how creative you are. As a result, there will be fewer core asset investors, and more value add/opportunistic investors.
Efficiency - Transparency creates a reduced spread between bid/ask. Just think about the stock market. The gap between the asking price on a stock and a bid price on a stock is miniscule. The market sets the price, and transparency creates a more efficient market. In the context of CRE, this means that deals will take place much more quickly for both sales and leases. This stands to benefit everyone. There's a mantra in the industry that TIME KILLS ALL DEALS. Landlords lose money when space or buildings sit on the market. Brokers lose money when deals that have dragged on too long get killed, or waste too much of their time. Tenants lose money as they try to accommodate the needs of their company as deals drag out (holdover rent, wasted time, temp space, etc.).
Fairness - As the spread between bid and ask is reduced, and deals get done at the true market price, the market becomes more fair for everyone. At the end of the day, sophisticated buyers, sellers and landlords don't succeed by gouging the other party on a transaction. This industry is a long-term game. Doing fair deals leads to more deals in the future and staying power is where real money is made.
Accountability - Transparency is not just limited to deal information, but also in the process for doing those deals. New technologies have helped the commercial real estate industry become more transparent. Platforms like Hightower and VTS make sure that landlords are on top of every tour, offer, RFP, and activity that their brokers are pursuing. It's very clear if your brokers are putting in the work to get the deal done. Honest Buildings ensures that property managers are getting sufficient bids for construction projects and managing that process in a seamless fashion.
At CompStak, we’re doing our part to bring transparency to commercial real estate with our lease comp platform used across the CRE industry. We started in Manhattan in 2012, expanding to 17 markets across the United States over the past 3 years. With each market launch, we create a one-stop shop of lease comp information for industry professionals - providing commercial real estate brokers, appraisers, researchers, investors and lenders with the information they need to prospect for business, close deals and underwrite investments.