UPDATED Oct. 27, 2021, 12:11 p.m.: CoStar Group’s profits ticked up in the third quarter as revenue returned to a double-digit growth rate.
However, with apartment hunting pushing vacancy rates to historic lows, demand for apartment advertising has weakened, generating headwinds for the company’s online market platform Apartments.com, the company said.
“This spike in occupancy levels is unprecedented,” CEO Andy Florance said on an earnings call. “I believe it begins to reconcile in the next two quarters. It could be one to four quarters, but I do not believe sophisticated operators of apartment communities are going to leave their occupancy levels so high and miss an opportunity to churn rents.”
The real estate data giant recorded $64 million in net income for the quarter, up 4.9 percent from $61 million in the second quarter, the company reported Tuesday afternoon. Third-quarter profits were up about 10 percent on a year-over-year basis.
CoStar generated $499 million in revenue, up 3.9 percent from the second quarter and up 17.1 percent from a year ago, boosted by high CoStar team sales. The company’s revenues have improved steadily in 2021 after recording four consecutive quarters of declining profits in 2020, as the pandemic set in.
Overall, traffic on CoStar’s real estate analytics and online marketplace platforms increased 17 percent year-over-year, the company said. Net new bookings totaled $47 million in the third quarter, down from $51 million in the second.
Increased web traffic, combined with the higher rents that apartments are commanding, “has positioned Apartments.com to begin initiating pricing adjustments to better capture the value of the lead flow we are delivering to our clients,” Florance said in a statement.
“We are just beginning to implement the new pricing, and I am encouraged by the initial results of the price changes,” he said.
Florance also took a shot at Zillow’s StreetEasy, whose dominance in New York City CoStar is targeting with its own listings portal Citysnap. “Blackmail is too strong a word for it,” Florance said of StreetEasy, offering “Zillow-mail” as an alternative, according to Inman.
CoStar shares traded up roughly 0.6 percent Tuesday, but dropped as much as 7 percent in after-hours trading before rebounding.
CoStar slightly lowered its revenue guidance for 2021 to a range of $1.935 billion to $1.94 billion from an earlier range of $1.94 billion to $1.95 billion, factoring in lower expected revenues from Apartments.com advertising.
As of Sept. 30, the company held $3.8 billion in cash and investments and had roughly $988 million in debt.
This story has been updated with a comment from CoStar CEO Andy Florance about StreetEasy.