The Business of Lease Comps

by CoyDavidson on April 9, 2012

Their seems to be a new technology offering for commercial real estate almost weekly these days and one I have been watching as of late is Compstak. The entrepreneurs behind Compstak are certain to get more attention from the industry after being featured in the Wall Street Journal today.

This start-up is tackling the common industry practice among office leasing professionals of trading details of completed lease transactions. Since companies are not required to report details of lease transactions except in the case of public companies and in those instances you are only likely to see no more than the size and expiration date of the lease, this is considered valuable data to both tenant and landlord representatives.

The challenge as I see it is that historically office leasing professionals have operated under an unwritten code of being selective as to who they are willing to share these “lease comps” with. Most brokers are only willing to reciprocate with other professionals they know, like and trust, as the practice is very fraternal in nature. Office leasing professional won’t typically share lease comps with some residential real estate agent or even commercial brokers from different disciplines. The key to their success will be providing sufficient incentive to the professionals involved in these transactions to share the data.

Lease comps are a segment of the leasing market whose time for disruption may have come. I have seen CoStar Group try and get a handle on this data for several years only to find most leasing brokers unwilling to share accurate data to the general industry. In this case it appears the entrepreneurs behind this service understand the historical dynamics of this industry practice. I certainly agree with one of the founders quotes in the Wall Street Journal article, “If you think that [lease comps are] your only advantage, you’re probably not a very good broker,” but in my opinion therein lies the issue, “if you give an unqualified broker a few lease comps, many think they are.”

CompStak

  • Chris

    If lease comps are confidential, what is an agent doing selling them to a data aggregator?  And maybe it’s the markets, but the brokerage I work with doesn’t give lease comps to anyone outside of the company with the exception of qualified/trusted appraisers.  What is it about the word confidential that people don’t understand?

  • http://www.coydavidson.com/ Coy Davidson

    Chris, that is the challenge for any tech offerings for CRE. The technology can be good or great on the surface but if they don’t get users to change their ways of doing biz, they won’t be successful.

  • Frankwaltman MAI

    I review commercial appraisals of complex properties for underwriting purposes. It is very apparent when good information is incorrectly applied by those who are less competent. Let the info flow.

  • Michael Mandel

    Coy, thanks for the article, and Chris thanks for the comment!  Our users don’t sell lease comps to us (CompStak), and they aren’t giving them out of the kindness of their hearts either.  They trade the comps in exchange for other lease comps.  Trading comps is something brokers have done forever.  Perhaps in theory these comps are confidential, but in practice they are not. Lease comps are widely shared in the industry.  CompStak has a strict policy of not allowing comps that a user is bound from providing due to confidentiality agreements.  We receive our comps from users that have heard about them from other sources (market meetings, emails, phone calls, etc.).  Most of our comps we receive several times, which allows us to further validate and update them.

  • GilWhiteCRE

    Hmmm . . . I watched the Compstak Overview video and quickly realized, I have that same database, but I call it “hard work.”  And, it doesn’t come in an app. 

  • Frank Jutras

    Arm yourself
    with information and your investments will be successful!  Tools that save time are the most powerful in
    REIs, and lately so many tools are being designed. I hope this is a trend that
    continues and that we see innovation across the board. 

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