How do CRE data companies (CoStar, Yardi, Axio, etc) collect their data?

The_RE_Dude's picture
Rank: Baboon | 107

As a debt professional, I'm sure I share common grievances among others here with having to rely on real estate data that often is not entirely accurate. My experience with "CRE Data Providers" is typically through CoStar, Axio, REIS, and the other common ones. My experience is also obtaining rental, vacancy, absorption, and related data.

I don't know how much my company pays for CoStar, but I assume it's a ton of money. And I cannot believe how complacent this industry is with data that - at best - is like a "solid ballpark estimate" of actual data points. Often, I've found that we underwrite a deal using CoStar/others and the rent/vacancy/etc information is 5-15% within actuals. That's crazy!

I'm really curious about thinking about a business model that has the objective of getting this information more accurately and cheaper than the competition (in addition to other services).

Since I haven't worked on the principal side or at one of the data providers, does anyone have ANY information how these companies get their data?

  • Do they employ staff that literally calls and inquires about properties?
  • Does Apartments.com (CoStar) actually have real signed leases that they report?
  • Do property management companies like Yardi sell their data back to the CoStars of the world?

Any and all information would be super interesting to hear.

Comments (14)

Jan 31, 2019

Answering what I can:

Do they employ staff that literally calls and inquires about properties?

Yes. I regularly get calls/voicemails along the lines of, "Hi this is [name] calling from [aggregator] and I need price per square, foot vacancy rate, and any other data at [property I'm connected to]." I've never called them back.

Does Apartments.com (CoStar) actually have real signed leases that they report?

In my experience, no, and no one I know has ever provided aggregators with paperwork. Not saying there aren't people out there who would, but most professionals I know see no upside to sharing their clients' data with a third party who exists to sell it back to them.

    • 1
Jan 31, 2019

Thanks for your response. Since you sound like you're from the principal side, where would these aggregators obtain this kind of information from? From my research I've found that it's mostly obtain by employees calling brokers/owners/etc like you suggested.

but most professionals I know see no upside to sharing their clients' data with a third party who exists to sell it back to them.

I want to expand on this. It's definitely accurate to say owners (or incumbents) have an advantage when they take advantage of asymmetric information. I would also say the sensitivity of information changes between product type (i.e. multifamily rents are not as valuable when secretive compared to commercial leases).

There are models where the intermediary offers such a competitive advantage to customers that buyers/sellers on the other side have incentives that outweigh the loss of asymmetric information. For instance, sellers go to Amazon to sell their goods knowing they'll reach more customers more efficiently, but Amazon is effectively "selling" the data of these merchants by building their own Amazon basic products off that data.

I'm trying to mentally think around in what ways would multifamily owners benefit in this similar manner?

Here's a thought exercise: You're a owner who owns 1,000 units in a market. You seek cash flow but you're not fighting among sharks to get the highest return.

  • Are you willing to give access to actual rental information? If so, if the information is more accurate and much less costly that other products (CoStar), is that an advantage?
  • What additional services would you need to have access to be comfortable with that loss of information advantage?
  • Would having accurate rental and demographic analytics be more worthy than needing the additional staff and hours to conduct your own analysis be a trade off worth taking?
  • Real Estate involves multiple parties. At what point do lenders, investment partners, appraisers, government entities, researches, etc. value the access to rental information in a more accurate and efficient manner? Do they require you to use this service? (I imagine a scenario where I have a loan on a property and instead of receiving rent rolls (that are 30-days old) in PDF that take an hour to break down and don't provide any analytics, it would be SO MUCH EASIER if there was a solution that the owner gave access to the rent roll, which I could pull it on a daily basis if I wanted to. And it spit out all the information I needed with no further work).

I think there's definitely upside with existing owner's data. My thesis is that CRE professionals don't come from software backgrounds, so people aren't aware of ways in which this data can benefit them.

Feb 5, 2019

I think for CoStar....they used to have an option where people could post comps to trade for other comps.

Feb 5, 2019

They have giant call centers, teams that go out to properties and talk to the managers, people scraping websites for availability.
They estimate stats based on similiar buildings nearby. They pull data from sales documents, they call brokers and ask about available space. It's a very time consuming proccess, and still doesn't produce great data.

That's kind of the interesting thing about Real Estate, versus other asset classes. The data about real estate is opaque and hard to gather so there is a lot more opportunity than more transparent markets.

Feb 5, 2019

just use CREFC data from intex

Learn More

Side-by-side comparison of top modeling training courses + exclusive discount through WSO here.

Feb 5, 2019

They cold call me and keep rephrasing their question after I say no comment.

Feb 5, 2019

.

Most Helpful
Feb 5, 2019

Co-Star is good to get supporting data when you sort of already know what you want to prove (comps for an IC memo, OM, etc.) but when we really want market comps that are accurate and can be acted upon/underwritten into a model we still have to go out and either hire brokers or leverage our own relationships in the industry to garner the info we can.

And no, we never share that with Co-Star. That info is more or less viewed as proprietary insights. Makes me laugh that everyone shits on Co-Star for having inaccurate data but no one is willing to provide it. I kind of appreciate that in PERE there is an opportunity to get an informational advantage and everything isn't priced to perfection like a F500, publicly listed company. I don't know if I want our competitors to be able to simply go to Co-Star and see the information we've worked hard to get from tenants/brokers/poached employees etc.

    • 3
Feb 5, 2019

Exactly. If I am selling my building, and the person on the other side of the table knows all your lease information, basis, etc, then it would be like playing poker while showing the other guy your hand. In my opinion, information asymmetry and being able to see what everyone else misses is what creates such great opportunities in real estate.

Feb 5, 2019

If the building is securitized, everybody knows your performing metrics, unless you are filing false information to CREFC

Feb 6, 2019

we contribute our own records/data to Yardi, NCREIF, MSCI, etc in exhange to be able to see all the market data as an aggregate. For example, at the end of every quarter we submit returns across our funds and other data to MSCI and they give us quarterly reports across the indexes

Feb 5, 2019

And NCREIF and MSCI both have pretty good query tools to get very granular data.

Feb 20, 2019
Comment
    • 1