Will there be a "Zillow" to Disrupt Commercial Real Estate?
The big news lately is that Zillow has purchased Showingtime for $500m.  This has many residential realtors upset and panicked as they feel this is the beginning of Zillow cutting and pricing them out of the business now that they are a brokerage.  To them Zillow has been using their data for free and selling it to them for years while claiming to not want to compete against them.   Now they feel they have swept the rug from under them.

However, home flippers and ordinary people have been more receptive to it as they feel it will give them more options and lower the price.  There is no doubt that Zillow has had a huge impact on the residential real estate industry.

For Commercial we have the big player CoStar which is also a multi-billion dollar entity.  CoStar however charges a very hefty fee for access to its information directly (everybody can't just view it for free) and doesn't put other broker's info on another listing.  They seem more interested in getting as much data as possible and suing or buying competition out of business.  They are currently suing Crexi for a lot of money (to the tune of $500m) for copyright infringement.  They want about $50k per photo or for any content "taken" (they claim it's around 10,000).

Costar has also bought many companies for a lot of money including Homesnap and people feel it's trying to compete against Zillow directly.  One thing to note is that Costar employees can't do commercial brokerage transactions while there.  I asked an employee about this and they said they aren't allowed because it's a conflict of interest with all of the information they have (and they have a lot).  Zillow seems  to want to be the Amazon or Uber of residential real estate.  However they are currently losing money selling homes (and in general) while Costar is very profitable.

&amp;#x200B;

[https://www.macrotrends.net/stocks/charts/ZG/zillow/net-income](https://www.macrotrends.net/stocks/charts/ZG/zillow/net-income)

[https://www.macrotrends.net/stocks/charts/CSGP/costar/net-income](https://www.macrotrends.net/stocks/charts/CSGP/costar/net-income)

On one hand I think this is less likely or a long time in the making as commercial transactions are wildly different than residential.  They take much longer, are much bigger deals, and you are dealing with investors who have a lot of resources and want to have a broker connect them to great deals or great buyers.  They don't mind paying for it while the average residential homeowner might want to save a few thousand on commission.

There is also the issues of zoning and all of the other things that come up.  A computer system also can't determine what a good investment is or understand trends.  They can post information but a human needs to interpret them.

That said technology is always evolving so anything could happen.

What are your thoughts?  I think this industry is fine for the time being but do you disagree?

Let me know and thanks for any constructive feedback!
[{"id": "gn1quat", "text": "No. You're talking about too much complexity. At most you could get closer to it for a specific asset type. Like... Storage. Or cold storage. Or in a crazy world, single standing corner net lease buildings that fit the drive through bill for fast food or coffee. \n\nOne of the key aspects of real estate in general is location. Well people tend to know a lot more about where they want to live than where they want to work. Brokers provide so much value in the commercial space from finding a location with geographic analysis to negotiating the construction, providing legal teams to look over the leases, having access to private deal information to support a cost negotiation on behalf of the client, etc.", "replies": [{"id": "gn1vf53", "text": "I agree for the foreseeable future and I think this is the big difference.  I didn't want to sound arrogant and think \"we're beyond all of this\" as many have thought in different industries in the past (including residential agents).  They said this would never happen to them as people would always want guidance with the \"biggest investment of their lives\".\n\nThe thing is now that there is easy access to so much information and with Zillow buying things like Dotloop and Showingtime they are now in a position to know a lot about the market and cut realtors out of it  Residential agents have had higher commissions because of the risk of the job (deals fall out) but also because of the huge amount of information that couldn't be easily found elsewhere.\n\nWhat I foresee is that Residential Real Estate will be more of an employee model.  The superstar and older agents who have a ton of referrals will be fine for now but newer agents will find it harder to make a living.  Also part time agents, soccer mom agents, \"investor\" agents, and housewife agents will probably find this less desirable as well if there are a downward pressure on prices.   The flexibility of being an agent is what drives many of them into doing it.\n\nI think you will see something akin to Redfin where you get a base $25k salary plus a \"bonus\" on each closing which would vary on the home amount sold but you would get like $300 for a $250k home instead of $7,500.  So agents who would have made $150k on full commission would make like $50-$60k on this model if even that.\n\nThe funny thing is many agents like this as they hate prospecting and don't want to put in the work to get leads so they would rather have steady pay and benefits.  These are like the ones who work for huge discounts to flippers or work for Mark Spain and pay an \\*82%\\* cut in order to get steady work.  I personally wouldn't do my business that way but agents paying for leads helped lead them down this path by funding Zillow.\n\nThe long story short is that commercial is targeting a much more difficult and expensive market where people are willing to pay for the expertise and ability to actually \"broker\" deals between buyers and sellers.  In residential you put it on the MLS and that does most of the marketing for you after staging it.  In commercial you have to be actively looking for different investors all of the time and can't just sit and hope for a dream deal.\n\nGreat post!", "replies": [{"id": "gn3absx", "text": "Mark Spain lol", "replies": [{"id": "gn5npi9", "text": "He makes money from a lot of people who want consistent work without having to prospect.\n\nI wouldn't do it but he's doing something right.  Targeting people who don't really want to run their own business.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gn1suzv", "text": "Any idiot can sell a residential property. That is why there is a residential agent on every corner and why Zillow is so successful. Residential real estate typically isn\u2019t complicated. Commercial is a different animal though. You may see some basic small time retail or single unit office properties sell using a Zillow like platform, but not the more complex stuff.", "replies": [{"id": "gn1z960", "text": "Yeah you hit on something real I've experienced in MF, which is that there are brokers who bring me properties and I know I can 100% trust their figures and underwriting/model. I know because I double check everything in my own DD and have done several deals with them (to be clear, I double check regardless, but I know going in that when these guys bring me something it's real). Then there are others where I check what's in the OM and it's like I'm looking at numbers for a completely different property.", "replies": [{"id": "gn22duy", "text": "Yeah with the good guys you just need to watch out for sneaky assumptions", "replies": [{"id": "gn233ge", "text": "Oh for sure. Pro-forma always makes me lol. I look at in-place cap rates (which is why accuracy is key) and then use my own understanding of the market to figure out what kind of value I can add/extract.", "replies": [], "depth": 4}], "depth": 3}, {"id": "gn37dcm", "text": "There is no doubt that commercial brokers are far more skilled, knowledgeable, and accurate.  The other benefit of commercial is that you don't have the whole \"part time\" appeal like you do in residential.\n\nWorking with resi agents who have another job and don't answer the phone for days on end is infuriating.   Brokers are generally 9-5 and Monday-Friday but they work their ass off in that time.", "replies": [{"id": "gn3fza3", "text": "Definitely.", "replies": [], "depth": 4}, {"id": "gnrdetc", "text": "You hit the nail on the head.", "replies": [{"id": "gns7cpx", "text": "Funny thing is I was going to make another topic on how many residential agents seem to have a disdain for commercial brokers.  I constantly hear about how commercial brokers are unprofessional, don't take good pictures, and are just a sexist boys club.\n\nIt's like commercial and residential brokers/agents live in two different worlds.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "gnrdcqq", "text": "MF is becoming the next housing where you have a bunch of people jumping into this arena (both brokers and owners).  The over-saturation in house flipping is bleeding into multifamily.  Wholesalers getting into the smaller non-institutional deals.  It's these newcomers that typically give you these crazy numbers that are all pie in the sky.", "replies": [{"id": "gnrkqsl", "text": "Yes and it's definitely one of the things contributing to cap rate compression.", "replies": [{"id": "gnrm8fp", "text": "I have always ridden the wave until it gets too high to be safe, so to speak.  I flipped so many houses I cannot count over the years but pretty much gave it up the last couple of years because the last deal I had under contract I had another investor contact me before closing and offer me a six figure profit which was the entire profit after rehabbed.  I sold it to him and have not looked at another house since because these are the people I compete with when buying.  Same thing with MF now.  A lot of flippers had success and now are moving into MF causing cap rate compression and other issues so I have already moved on to what's next.", "replies": [{"id": "gnrmnl2", "text": "I worked on Wall Street for years and one of my primary market signals was when the taxi drivers stopped asking me what to buy and started telling me what to buy.", "replies": [{"id": "gnrmur7", "text": "LMFAO", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "gn27f5p", "text": "This is a very strong point.\n\nThis is something I considered when I started out in real estate. I always had more of an interest in commercial real estate because I just found it more fascinating and I love business.  I didn't care as much about the \"emotional\" and the \"find a dream home\" aspect of residential real estate.\n\nMy main irritation with residential real estate was the low bar of entry and the lower quality of agents who did the bare minimum.  Clients were also more wishy washy.  I realized that I could make more money for my time and deal with more serious people who meant business.  I got tired of all of the realtors who just take a cheesy headshot and then slap things on the MLS.  The type agents who never answer phone calls or have no clue what they're doing.\n\nDon't misunderstand me- anybody who becomes massively successful in a field or industry gets my respect.  I know successful residential agents who work hard and are talented.  However when I focused more on commercial I started to get more annoyed when many would try to work on commercial deals and not understand the transaction and then pretty much ruin the whole deal in the process.\n\nI do my best to explain how agents do have to work hard but I can understand why many people get frustrated with them.  In commercial, this is not a problem.  People hire you based on your results and ability to get the job done and not just because you're friendly and smile.  These are serious people who have the money and don't have time for the bs.  I like this client base more.  I'm not a fan of the volume driven model of residential real estate.\n\nI have gotten to the point where I simply say I'm not a residential agent/realtor and that I'm a commercial broker and what I do is more difficult and takes more knowledge, time, and risk which is why I charge more money.  Speaking of money, residential realtors get these commercial listings and undercharge the commission because they don't know better.    We do 10% and sometimes 8% here for the most part unless the deals are mammoth (like high 8 figures).  You have residential agents listing them at 4-6% because they're \"multimillion dollar properties\".  \\*sigh\\*\n\nWith the changes that are going on, I think the bottom will fall out of residential and the part timer agents, soccer mom agents, and \"cash an easy check\" agents will give up and move on to something else.\n\nYou did make a good point about the difference in simple leases vs major sales.  I tend to focus on multimillion dollar sales which is more complex and lengthy which I think will take much longer to simply phase out.\n\nThanks for the great post!", "replies": [{"id": "gn27rnw", "text": "You put into words my exact feelings. I am 100% right there with you on every point you made.\n\nI most eloquently say \"Ditto\" to your post :D", "replies": [{"id": "gn28piv", "text": "I strongly appreciate it.  I just appreciate having these discussions and any like, constructive comment, or upvote is greatly regarded.  \n\n\nThanks.  \n\n\nI agree with you.  The more I did commercial, the more I could see why people treated residential \"realtors\" the way they do.  I am glad I chose something with a higher bar of entry and difficulty and worked my ass off.", "replies": [{"id": "gn2ajk8", "text": "I only own 1 SFH. I absolutely HATED the process and dealing with these real estate agents. I work in Finance for my day job and when I found out that commercial buildings were valued off their income statement and not their subjective finishes and quality non-sense, i cut the cord from SFH world and took a year off to learn commercial. That was 2020. I am now actively out there submitting LOIs and working with brokers to find deals. I much appreciate the intellectual difference with interacting with people in the commercial space vs single family. Im looking to hire a VA to do cold calling for me so I can keep my day job for now until I have a few commercial deals under my belt. I have multiple exits no matter what size property I get... close on smaller &lt;20 units. JV on 20-50 units, and I have a network now of people that can close 50+ units and I get a slice of the GP. \n\nI am so excited to be in this world and I truly enjoy it. I can't wait to do it full time. I've made my goal 2021 to quit my day job (cushy w2 job paying taxes through the nose) and go into CREI full time.", "replies": [{"id": "gn2olva", "text": "Yes.  I like looking at demographics, traffic count, price per square foot, cap rates, and things like that vs \"we want a pretty home near a school\".  Then you proceed to help them for 6 months and they change their mind.\n\nI got into commercial real estate later and I got more large deals faster than I got residential deals.  That's when it occurred to me that people met up with me right away and were ready to do business.  I would spend 6-8+ months talking to a residential client before they would want to sell and many times they would change their mind.\n\nI realized that it was taking me 6 months to a year anyways to close (from first contact to closing table) on both so why not make more money with less stupidity?  It's also refreshing to see commercial brokers be more knowledgeable and professional than the residential side.  I've had to deal with residential clients who wouldn't answer their phone for weeks, literally.  I posted about this and the deal was nearly lost until he was threatened with legal action.\n\nWhat always kills me is when you get these cheap residential flipper types who want you to work to death at a huge discount and act like they're doing you a favor.  It's like \"one of my deals could buy several of your flips so I don't need you\".  They act surprised when you don't want to work for free.  They have no problem buying a property and doing cheap cosmetic work and ignoring the internal problems to then sell it with a $100k markup.\n\nSuch a refreshing feeling to be done with the bs.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "hs4xikj", "text": "Literally couldn\u2019t agree more. My first sip into CRE was as a loan documentation specialist. Now I\u2019m in residential loan processing (wanted to get understanding of both sides) and the difference is wild.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gn1u4h7", "text": "CoStar definitely wants it. Whether or not they get it is an entirely different question. But I think you said it yourself - they \"seem\" more focused on a different strategy. Zillow said for years \"we're not planning on putting any agents out of business\" and then, boom, \"we lied.\" Resi appraisal business is already a shell of what it once was, because of the Zestimate. And it came like a thief in the night. \n\n\nThe fact that they're suing people out of business is telling. If you have the ability to do that routinely, you don't have to have the best product or user experience (say for an investor/developer). You just have to have a good enough experience that the next disruptor keeps their chips off the table for fear of the litigation.\n\n\nAs an agent, if CoStar did want to put us all out of business, they wouldn't tell us. We might just stop giving them data then. But it's like playing against a good chess player, or a fish taking bait. It will *seem* like something entirely different, right up until the hook comes through our lips.", "replies": [{"id": "gn5wrxs", "text": "I don't see any indication that CoStar wants to be a brokerage currently as they won't allow their employees to do transactions while working there due to a conflict of interest.\n\nThere is a possibility that it could be the case however.  The CEO of CoStar called Zillow \"unethical\" for their practices and bought Homesnap and it seems they want to compete with them.  Could be ironic since people complain about CoStar as well.  I will say CoStar's information does tend to be much better than what Zillow offers (despite ripping it from the MLS).\n\n  \nThe main difference comes down to how they get their information.  Zillow basically just gets it from the MLS and integrates it into their sites and used this information to charge agents for it and then took the rug from underneath them.  Now they are massive and aren't easy to get rid of.  It's actually brilliant from a business perspective if you think about it.\n\nCoStar spends a fortune gathering much more difficult to acquire information and then charges brokers and investors directly for it.  They are making a fortune from this model and it appears to be their specialty based on what they acquire.  Zillow is currently losing a lot of money in their \"housing\" endeavors and perhaps CoStar doesn't think they need to go down this route.\n\nCoStar is suing Crexi for copyright infringement.  They do have a lot of CoStar's content on their site and you can see it here.  People were hoping for Crexi to pull ahead but I'm not sure now.\n\n[https://www.valuationlegal.com/2020/10/if-you-love-costar-youll-love-this-lawsuit/](https://www.valuationlegal.com/2020/10/if-you-love-costar-youll-love-this-lawsuit/)\n\nIt is harsh and CoStar has a habit of doing this but I don't know what Crexi was thinking by taking their content and just adding their label on it.  Yikes!", "replies": [{"id": "gnjjgwm", "text": "ehh crexi and Costar get their content from the same places, thus the same written content.  CoStar's real beef with Crexi is using thier copywritten photos.\n\nAnd Andy talks smack about everyone. Calling the CEO of Zillow anything short of a ham sandwich is just him doing his thing.", "replies": [{"id": "gnmxayj", "text": "That seems to be the majority of the suit.  The photos.  Not sure why they did that.  \n\nCostar does have more accurate information in some areas and also they spend a fortune on gathering data on the \"who\" of the property as well.  Which is very important to brokers.\n\nYes Andy does like to talk.  I just found it a bit funny is all.", "replies": [{"id": "gnok8ur", "text": "CoStar spends *buckets* of money on photos. It is the primary goal of the field researchers to take pictures,  not gather in market data. Plus, for legal purposes it's low hanging fruit. Even if the metadata and logo are stripped side by sides will reveal changes in post-production unique to that image.\n\nIm interested to see if the research quality changes now that they are also responsible for training users? We'll see.", "replies": [{"id": "gnotu5l", "text": "I meant I'm not sure why Crexi took them.  Knowing CoStar's reputation and the fact that it's an easy lawsuit I'm surprised they did it at all.  This could be the end of them.\n\nI use CoStar and Crexi myself so I was just looking at it down the middle.  CoStar spends a fortune period.  Commercial data is definitely not easy to get.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gn1w9kn", "text": "I guess I don\u2019t think the general public has any need for intel on CRE listings or sales.  Whereas the public has curiosity and eventual need for residential housing- so Zillow.  \nMy second thought is CRE is an industry of professionals doing professional work with other professionals: B2B.  Residential is a different flavor and for many, a hobby or simply meeting personal/family need in a transaction: B2C. \nIn a B2B environment- the buyers have capacity to pay for services that add value or allow access to info.", "replies": [{"id": "gn5syr5", "text": "This also reflects the difference in their business model.  Zillow is free for the public to view but they charge agents for advertisements.  They are also branching into services that appeal to the average person like the iBuyer program where they do quick lower priced flips for people in need.  \n\n\nCommercial real estate is similar to when very large investors use more specialized banking to fit their needs and not discount brokers or \"free\" apps.\n\nA large number of commercial deals (the majority it seems) are done off market because the sellers don't want to disclose anything to the public that isn't necessary for them (or their competition) to know.  They also have tremendously more money and don't mind paying for someone to put it together and do the legwork.\n\nWealthier people value their time and know that they make much more money focusing on their business.  They do their numbers and calculate the value before they initiate the transaction.  Residential is more  emotional and not based on \"the numbers\" except price.  \n\n\nThis is why CoStar doesn't need to be \"free\".  The pool of people who use it are smaller and they have the funds to pay for the highly specialized information.  It's worth it to them.    \n\n\nCoStar also makes large profits while Zillow loses money.  Two different business models entirely so that's why they don't feel the need to be brokers.   You can't do CRE transactions while working at CoStar because of the conflict of interest.\n\nThe bottom line is if the service is \"free\" then you aren't the customer, you're the \\*PRODUCT\\*.    \nThanks for the post.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gn1yojy", "text": "Check out TenantBase.com pretty cool approach to commercial real estate.", "replies": [], "depth": 1}, {"id": "gn1zltv", "text": "A slightly different bend - imagine CoStar buys Zillow...\n\nSome commercial is v complicated, and some commercial is single tenant retail in a small town with no TIs.", "replies": [{"id": "gn6032u", "text": "What would they call it?   Collow?  Or Zillostar?\n\nI jest.\n\nOn a serious note it does seem they are competing with Zillow more and more now.\n\n[https://therealdeal.com/national/2020/11/25/watch-out-zillow-here-comes-costar/](https://therealdeal.com/national/2020/11/25/watch-out-zillow-here-comes-costar/)\n\n[https://www.inman.com/2021/02/10/is-costar-a-zillow-competitor-of-course-it-is/](https://www.inman.com/2021/02/10/is-costar-a-zillow-competitor-of-course-it-is/)\n\nWho knows?  You might just be right.  That would be one hell of a juggernaut.\n\nIn terms of small town commercial, it tends to be done by residential agents in the area who do a bit of everything since the zoning is much more lax and there isn't enough out there to bother specializing in commercial there compared to metropolitan areas.  The closer you are near the city the more you tend to specialize and do commercial full time.\n\nI don't think it will be a big impact in the more complex transactions.\n\nThanks for the post!", "replies": [{"id": "gn86cqf", "text": "Ohh it's be like the acquisition of Apartments.com - the name is too valuable. But I like Collow!!\n\nI agree the small town transactions are typically handed by Resimercial and residential agents, so are smaller spaces in Tier 2 &amp; 3 markets as well as tertiary areas of Tier1 markets. While not institutional sales transactions, assuming they have no impact might be shortsighted; rent is rent.  After all, CoStars acquisition of Cozy.com and TenX indicates they place some value in properties and transactions that are not part of institutional or more complex transactions. Besides, they have that market on a hook already - need to find new fish.\n\nCoreLogics acquisition of MetroScan would be another indicator of the consolidation. Did for no other reason than CoreLogics feeds being the single largest data source for CoStar.", "replies": [{"id": "gndhdz5", "text": "Oh definitely, but I was just making a joke.\n\n  \nWhere do you see the residential real estate industry in the next 5 years?", "replies": [{"id": "gnjnhvj", "text": "My focus on the Residential market is pretty limited. I carried on for years 'what goes up must come down', and then just gave up.  My MSA ingests the equivalent of a city's worth of people every year.  The largest jurisdiction has decided they want MF towers and cottages, but nothing inbetween - or so it appears by recent zoning changes. Thus the continual drive up in rent and housing prices (aside from the SF cash deal investors...) have made a 500sf loft adjacent to downtown $2200 a month. This opens up the entire MSA to build build build as supply keeps showing up, and transit was designed for my city circa 1990.  It's madness. not that i have thoughts. /s\n\nResTech? Res has two constituents with two different needs: the SF volume investors, and the average buyer.  SF investors are often more DIY and sophisticated. The product for them is more like [Pellego](https://www.pellego.com/), which does calcs and overlays that with what's on market, or similar products.  BUT the first-time buyer, the regular family-type buyer who's not trying to lean-FIRE... they still need/should have a person even if they might buy a duplex or triplex. For them, a platform doesn't have to be fancy, but it should have those creature touches to close a deal with said client. Being able to virturally stip out the current display furniture and drop in representations of their own furniture or change wall color, the ability to see the neighborhood at different times of day without looking like  a stalker, a list of local handy people/contractors... more service tools to help a less experienced buyer. A company that harnesses THAT will be a thing.  Sooner is better too. If residential brokers don't find a way to justify their fees, they'll be salary or in a call center right quick.  The res buyer is a mountain more sophisticated than they were 20 or 30 years ago, and the consumer protection laws have changed as well. If res brokers don't figure out how to better define their place in the world, buying a house will continue to follow the same path as buying a car.\n\n&amp;#x200B;\n\ntl;dr - Res is crazy town because their clients and regulatory landscape has changed but they've not found a way to change with it. Tech can help them, or make them salary under one of the major brokerage umbrellas like Windermere. Good grief that was a lot... apparently i need another cup of tea. /s", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gn21fie", "text": "Yardi, VTS, liquid space, and others are trying. CoStar isn\u2019t incredibly accurate but it\u2019s by far the best tool we\u2019ve got. \nThe new VTS marketplace is cumbersome and the interface isn\u2019t particularly great. And they make owners pay for it so that prospects can search it for free vs CoStar which just makes everybody who wants access to pay for it. \n\nIt\u2019s such a huge start-up cost but I think it would be worth it for one of the big players to build a platform up to compete. \n\nAndy\u2019s a sharp guy and a really forward thinker. He doesn\u2019t want to compete with brokerage shops and doesn\u2019t really need to. Look at CoStar\u2019s market cap compared to the biggest brokerage shops. He\u2019s doing just fine sticking to research.", "replies": [{"id": "gndh7ad", "text": "It definitely is the best.  I've found a lot of great information on there but like anything there does need to be some updating.  You can't have everything always up to date (like contact info) due to it changing so much.\n\nCoStar is making a huge profit doing what it does while Zillow is losing money.  The crazy thing is, they can burn through billions for years and receive VC money whereas most businesses can't do that.\n\nMust be nice being in tech.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gn2fyvg", "text": "I'm going to take a different track than the others here. Commercial brokers will get wiped out eventually but not due to a Zillow like movement. It will be from someone who opens a brokerage on a flat fee model that actually gets good traction. We all hear about the guys that do this, but 9/10 times its a shitty broker who couldn't make it in the real game that tries that method to make enough to pay their mortgage. Eventually someone will try it with some serious financial backing and they will slaughter it. I don't broker much anymore, went the legal side, but I have done two deals in the last year where total broker compensation was over $500k and they literally didn't do a damn thing. Didn't put the buyer and seller together, didn't put the deal structure together, didn't negotiate the contracts, didn't handle any due diligence, didn't involve themselves with major title issues, basically showed up for a walkthrough. This shift happened in law in the 80's and 90's, it will come for CRE, just a question of when.", "replies": [{"id": "gn2rx6p", "text": "I don't think they will get wiped out completely as even the discount places charge a percentage, they just pay their realtor employees a small salary plus a bonus for each close.  This is appealing to agents who aren't good enough or not willing to prospect to get their own work.  \n\n\nI do think technology will change some things as commercial is much more old fashioned than even residential real estate.  However the deals are much longer and more complex.  I wonder how they would do a deal like that?  Would people be willing to pay ongoing for an unsure thing that could tie up for years?  Business to business investors know that commercial real estate is lucrative and are wiling to pay for the speed, convenience, and connections.  They would rather be making money than try to handle it themselves.  \n\n\nUnfortunately there are bad people in all industries, medicine, law, real estate, construction, and even landscaping.  I don't know how that broker got paid and didn't do anything or even connect both parties unless it was just a friend in the middle.  That does happen occasionally but not as much as it does in residential.  Commercial deals tend to have a lot that goes on and takes a very long time that people don't see.  Could that broker be part of a team where he was a senior broker and had other brokers working with him?  That might also be why.\n\n  \nThanks for the post.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gn2jtbd", "text": "A lot of commercial offers must be presented by commercial realtors who belong to a different association(1000s exist). Those with a state broker license can present an offer but likely not getting paid. Sometimes they claim sellers only pay to listing agent.\n\nTo penetrate into a commercial market membership and contact matters. Lately NAR has instructed all associations to have black out internet syndication tool such they will not get on other 3rd party sites. Z happens to be one of them.", "replies": [{"id": "gn2rtbk", "text": "Dealing with this now in residential leasing. My MLS decreed that we\u2019re required to put resi rental units in the system, when before it was optional. Which was great when it syndicated to Zillow/etc, but now with Z\u2019s pay-to-play I\u2019m completely off those sites. Thankfully the rental market is fairly tight in my area, so I get more return on my time by directly posting to Craigslist than Zillow. Which is *insane* but I do it because it\u2019s working.", "replies": [{"id": "gn2u5rq", "text": "Do what it works.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gn2tj7j", "text": "VTS is going to make a strong run at this. I don't think CRE brokers will get wiped out completely, however, in these times clients are more clearly realizing what they need, while brokers are adapting with technology to remain relevant and/or up their game.", "replies": [], "depth": 1}, {"id": "gn3amrx", "text": "There is a company called Hubble doing it in the UK. They are focussed on flexible offices, i.e. offices like WeWork, that are just one stop shop solutions that don't need all of the nuts and bolts of a typical fit out etc.\n\nI don't know how well they are doing, but I think it's gaining momentum here.", "replies": [{"id": "gn60u9w", "text": "Based on what I've read and what others have told me, the real estate industry in the UK is salary based and not commission based.  If that's the case I'm not surprised they do it that way.\n\nI think we will have outliers here where people do salary plus a small bonus.  I think residential is heading there first however before commercial.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gn3l7wg", "text": "CRE data scientist here. Though CoStar is eating the world I don't think it will become similar to Zillow. Particularly with Zillow's new model of buying/selling. \n\nI think CoStar is in a different space. Not only is their data more difficult to collect but they have vastly more of it (in terms of width, not breadth).  Zillow relies on brokers and homeowners handing over information so they can get a listing. They get paid to put together a comprehensive database. All they have to worry about is ETL and creating pricing models. Because of that difficulty as well as utter necessity of Costar data to CRE it doesn't make sense for them to give anything away from free. And while Zillow provided some services for cheap they don't even sell their data, much less give it away. They provided itty bitty pieces of it for free to people they didn't deem threats (I still haven't gotten API access which is very narrow). There are Compstacks and Reonomys to challenge CoStar but Compstak is really just leasing data for office and Reonomy just isn't as comprehensive (although one could argue their data veracity is better). Costar is an insurmountable lead and protect it with litigation and constantly making their data better.\n\nAs to CoStar or anyone else becoming a Zillow in CRE, there have been two different Zillows recently. The first depended on revenue from people putting homes on their website. The current Zillow is moving into buying and selling homes. The reason there's a former and current Zillow is because the former one just wasn't profitable enough despite being the 800lb gorilla in the room. Loopnet is the closest CoStar is going to come to Zillow. \n\nThis also will never be a matter of technology. Some data can only be generated with great difficulty. Costar calls building owners and brokers and has cars similar to Google's riding around major metros taking pictures... in addition to using public data (which I can tell you is much more difficult than it sounds). My old boss once got a higher level costar rep to divulge what their data budget was and while I forget the number I can tell you it was absolutely eyewatering.  \n\nBut as a final note on Zillow, they're not nearly as disruptive as they could be. There are other players, Zillow is just the most convenient and most fun for house porn. And from what my ex who used to work there told me, they could be doing much more with their data. I would be using machine vision on their pictures to determine much more sophisticated models which they could then sell. Flippers would absolutely pay $1k to know precisely what changes to make to maximize resale value. They could be doing that with machine vision, or even NLP. Where they really have the market by the balls is with Streeteasy in NY. You basically can't lease an apartment in the Big Apple without putting it on Streeteasy. There is no competitor.", "replies": [{"id": "gn3srkv", "text": "You touch on a lot of good points with the business model difference between Zillow and CoStar.  CoStar can afford to charge for what they have as it is so valuable.  I didn't use it at first and went for another site for information and it just simply wasn't as good.  They truly have a stranglehold on the marketplace in regards to the data.  I'm sure that getting all of that information can't be cheap.\n\nIf I had to guess do they spend billions on it?\n\n  \nIt's funny because the CEO Andrew Florance was calling Zillow unethical for their actions and many speculate them competing at some point.  People like to give CoStar a  hard time due to the pricing (it isn't cheap) and because of them buying other companies out but they do have an extreme amount of information.   \n\nI think the main takeaway is that CoStar and Zillow have two business models.  Many of these tech companies have tons of VC money thrown at them so they can operate at a loss against competition for years at the tune of billions until they eventually take over which is what Zillow seems to be doing.\n\nUltimately I think the market for commercial (especially large commercial sales) is just vastly different for there to be a takeover anytime soon.\n\n  \nThanks for the excellent post!", "replies": [], "depth": 2}], "depth": 1}, {"id": "gn3tz4v", "text": "Clearly Zillow can\u2019t figure out how to make a model work in which it does take over as a universal listing service for residential properties. If Zillow could it would have taken over already. So would Redfin. Opendoor is loosing money, too. All they have been able to accomplish is dipping their toes in the water while continuing to loose money\u2014hence the need to buy revenue streams like DotLoop and ShowingTime. They can barely stay afloat. There\u2019s a flow of money in residential agent commissions that internet based companies have tried for two decades to scoop up, but can\u2019t. All that brain power and all that VC money and they still can\u2019t do it.", "replies": [], "depth": 1}, {"id": "gn42ti1", "text": "Ten-x (I apologize if it has been mentioned as I didn\u2019t have time to read every single word in previous posts) has been around For a bit to sort of create an auction for commercial properties. I would suspect the fees are lower and the properties get blasted out but I can\u2019t imagine you get the same value that a knowledgeable commercial broker can provide.  I would guess that someone somewhere is trying to put a tech spin on brokering commercial deals.  Maybe closer to happening on the debt broker side vs investment sales at this point.", "replies": [], "depth": 1}, {"id": "gn46xos", "text": "I think this will happen for leasing. Investment sales is mostly safe, as nobody wants to disclose financials unless they have to. Most deals happen off-market for a reason.", "replies": [{"id": "gndhwlx", "text": "Privacy and the fact that the broker is literally brokering-they bring two parties together for the deal vs just listing it on the MLS.\n\nThis is the big difference with commercial and residential.  Residential agents can just list something and sit back.  Commercial brokers have to be more active and build relationships with investors and sellers.  A competitor would have to come along and disrupt this or offer a phenomenally lower cost to compete.\n\nThe problem is the lower the price, the lower the margins.  Deals in commercial take a long time and are riskier, it's not like residential at all.  It might not be worth it anymore after a certain point.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gn4a8v4", "text": "Pretty much costar", "replies": [], "depth": 1}, {"id": "gn4hm09", "text": "Residential real estate is ripe for disruption on both the ownership and brokerage side. Paying a couple of clowns 6% for showing houses and sending you standard docs?  Someone is going to disrupt that model. \n\nCRE has a number of barriers to entry that single family housing doesn\u2019t including capital requirements and complexity of all facets of the deal - of both development and existing assets.", "replies": [{"id": "gn6c45k", "text": "I agree with the large picture of it.  Residential real estate is a more simple process.  They can be disrupted much easier and won't be able to lobby forever.  Also the flipping industry is going to get disrupted too.  People buying homes and putting down cheap paint and carpet to raise the price by $100k 6 weeks later is going to be driven down in price by large entities as well.\n\nI do understand that both parties take a lot of risk of not being paid and deal with other issues along the way.  However if a large entity can do it on mass scale and reduce the price then this will happen.  I think residential real estate agents are going to eventually become a salary model with a small bonus along the line of Redfin.  It won't happen overnight though.\n\nCommercial is more complicated.  Like some said simple leases in small town areas might be able to be done online more easily.  I don't know if that's enough for an industry takeover however.\n\nAlso I couldn't help but chuckle about the clowns comment.  I guess I just envisioned realtors in makeup on unicycles honking their rubber nose while doing deals lol.\n\nThanks for the post.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gn4ri5e", "text": "Well, in a sense, CoStar is the \u201cZillow\u201d of CRE. It has a market cap of $33B and that revenue comes from brokers. They\u2019re worth more than the top 3 publicly traded brokerages combined and if they take us out they loose their main customer.\n\nThe overhead for a \u2018large\u2019 commercial firm is massive and no one is going to pay more for CoStar\u2019s (or any competitor\u2019s) services than us. From Bob the CPA to Amazon, why would you pay for these services when you can just work with a reputable brokerage who will work for $0 from you and negotiate their own commission? On the other hand, if they offered the data for free and tried to cut us out 1) they would loose their largest customers (see above $33B market cap) 2) they would loose their data, which comes from large brokerages 3) they would have pretty unhappy clients, see below.\n\nReal estate is the second largest budget line item for most businesses after pay roll. There is a lot on the line and it\u2019s complicated. If you work with some flat fee contractor, they will not be as incentivized to really dive into the muck and make sure your company is doing the right thing. Will they ask the right questions, will they have the right strategies and will they offer good analysis instead of a pile of data? This is your business, you have investors and stakeholders and you need to look them in the eye and say \u201cwe made the right decision on our second largest budget item, your money is safe with us.\u201d and be 100% confident.\n\nNo fucking \u2018Zillow\u2019 broker, or any other discount adviser, will ever offer you the type of certainty you need if you care about running your business professionally.", "replies": [], "depth": 1}, {"id": "gn4s9kp", "text": "I don\u2019t know the details of the Crexi suit but will look. 10,000 photos huh? I\u2019m a real estate photographer and I can tell you that the hundreds-thousands of images that I shot for clients over the years are still on costar/LoopNet and Zillow...etc. I don\u2019t think that I signed away any copyright by having a realtor order images from me, so 50k per image as a lawsuit, wouldn\u2019t that imply that Costar had the rights to the images in the first place? I will look into it...and yes, I do believe that there will be a Zillow for CRE because no one likes paying the exorbitant prices to costar and giving away their data. Name me one broker who likes it and gives all of their actual real info to costar....", "replies": [{"id": "gn6dduk", "text": "Here is the lawsuit with some photos:\n\n[https://www.valuationlegal.com/2020/10/if-you-love-costar-youll-love-this-lawsuit/](https://www.valuationlegal.com/2020/10/if-you-love-costar-youll-love-this-lawsuit/)\n\nFrom what I understand based on what employees at CoStar told me, they hire people to take photos for their site which is okay.  Crexi is accused of ripping them directly from CoStar and putting them on their site, which you can see in the link above.\n\nYikes on their end.\n\nI meant more on the brokerage side when it came to disruption.  People in commercial do hate CoStar's high prices.  However they are currently the best source of information so they tend to see it as a necessary evil.  If something comes along better and cheaper that doesn't get bought out by CoStar we might have just that.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gn4zns6", "text": "IMHO A big strategic part here is the bidding war for Corelogic... data is king and corelogic provides a lot of that foundation cre information.", "replies": [], "depth": 1}, {"id": "gnen8ah", "text": "No idea. All I know is that Zillow took a previously fragmented market and made it available online to anyone.\n\nI guess do they want to make commercial real estate market public?\n\nPeople can decide if they want to publicly market a property or work with a brokerage in another way or form. There are plenty of ways to shield personal info and create privacy if that's a concern, like 155 main street llc owns 155 main street if you want a specific example.\n\nWhat I also know is that I work in real estate and I like to browse loopnet every now and then along with my normal MLS access. It's easy if I can go somewhere to see what's available.", "replies": [], "depth": 1}, {"id": "gnnsouf", "text": "Funny enough, my colleagues and I working on a new platform that is specifically for commercial real estate, but in addition to commercial listings, we're creating broker profiles, so users can also see portfolios of brokers and choose who they want to work with when buying / selling commercial. We're still in beta but if there is anyone interested in trying it out, we'll be rolling out our first demo in the next few weeks and we can add you to the platform for free (for now).", "replies": [{"id": "gnntozx", "text": "Is it more specifically a listing service/site?  Will it have a lot of information on properties, financing, and demographics like CoStar?\n\nThanks for your feedback.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gnr920r", "text": "Real estate agents have been fearing technology since it was introduced in the business. When I first got into the business I started at a residential/commercial office and was one of the youngest. This was before everything was on computers though it had started shifting in that direction.  The old agents were still using the old listing books and there was not GIS so if you wanted to research land you had to go down to the county courthouse and pull the property maps.  \n\nAnyway I was quick to adopt technology and became the top producing agent within the first year.  Two of the older top producing agents actually moved to another brokerage because it hurt their pride and accused the broker of giving me special treatment so I moved into commercial which I liked better anyway.  My whole point is technology has been slowly removing the need for residential agents though I don't think they will totally go away because there is some value for buyers agents as well as people who don't want to deal with selling their own home.  \n\nAs for commercial RE, this is a much different ballgame than residential.  Technology may cut out some of the lower end mom and pop type business or property owners, but there is a lot that goes into a commercial listing.  And with properties that take vision like raw land, a good broker can pay for themselves plus some.", "replies": [{"id": "gnrazpv", "text": "Was this around the 90's when the internet just started becoming more and more mainstream?  I still remember Netscape Communicator.\n\nShame the other agents left instead of adopting to the newer times.  I guess that's why they say a lot of agents are like dinosaurs.  I prefer the term crocodile as they've been around forever and don't really change. XD\n\nI definitely think it will change the marketplace for sure.  I foresee it as agents being around but they will do salary work at high volume instead of the 6% commission structure you see now.  The top agents and older agents will stick it out for a while longer but prices will drop and you will have more of the tech based model where younger agents just have work given to them and they will do a ton of transactions for a small bonus per transaction.  The funny thing is many people like that as they get steady pay with benefits.  I think luxury agents will still be around perhaps as they don't mind paying for a personal agent like many don't mind paying for a personal banker.\n\nThe prediction is that online will be used for lower end simple leases but for large investments where deals take a long time and there is more work for those and people in commercial are doing business to business and are willing to pay for the expertise.\n\nThanks for the post!", "replies": [{"id": "gnrcxu0", "text": "In the late 90's/early 2000's.  Most older agents did not adopt widespread internet use until probably the mid to 2000's (at least in my neck of the woods here in the South) which is hard to believe by today's standards.  \n\nI agree.  Luxury market agents will be around for a while. A lot of my business now is private equity investment/development deals and these guys don't like interfacing with the public for the most part. One was selling a multimillion vacation home in Colorado and remarked he could have saved  probably saved closed to a half million in commission by selling himself, but it was worth it just to pay the agent to do it.  It's like capital managers that get paid just to pay peoples bills, send them their monthly stipend, pay taxes, etc...  People could do it themselves easily with technology today, but they would rather pay someone to deal with it.", "replies": [{"id": "gns762x", "text": "Where in the south are you?  I'm in Georgia.  It's crazy because from what I read, metro Atlanta had the highest concentration of agents in the country per capita.\n\nLuxury people are definitely wiling to pay for more.  As you said businesses want professional service and they're busy producing things to try to cheap out by looking everything up themselves.  People also want quiet and privacy.  They don't want to disclose anything they don't have to.\n\nThe deals also take a very long time so it's not like residential where you just put it on the MLS and it sells itself (outside of ultra luxury markets).\n\nEverything you said was spot on.  People can save money doing all kinds of things but successful people value time.  For people who think a couple of grand is a huge amount of money (most people) they will find other alternatives as technology marches on and residential will feel it first.\n\nThanks again.", "replies": [{"id": "gnsge02", "text": "I'm in Georgia as well and I would agree metro Atlanta probably has the highest concentration of agents as well. I blame that on the \"educational\" industry behind the licensing though.  The sales pitch is you can make six figures working part time, hence the reason every Tom, Dick and Jane get a license and the average agent is only in the business a year or so before going inactive until a friend or relative needs to buy or sell a place.", "replies": [{"id": "gnva56c", "text": "Yep.  That's the reason for the high failure rate.  Everybody wants to be an agent.  They see it as walking around and cashing commission checks for showing houses and nothing else.  On one of my early transactions I had to deal with an agent who had a day job but was hired by his friends and didn't know what he was doing and I had to correct everything.   *sigh*\n\nI've had family members try to get their license and fail and then try to tell me about how to be a commercial broker.  Very annoying.  The business is loaded with soccer moms and part timers and it makes the field look bad.\n\nIf you're in GA we should network as I might have properties your clients might want and vice versa.\n\nAnyways thanks for the post!", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gq66h8t", "text": "My company has 65 commercial real estate offices in the US with over 1000 agents. Costar is not going anywhere and there is no foreseeable competitor in the near future. There have been some markets that have held out but the cost for a competitor to come in and invest what costar has is just about impossible. I was one of their first customers and paid 9 dollars a share their IPO. It\u2019s now gotten close to 900", "replies": [], "depth": 1}]