Behind ‘Big Data’: Start-ups gear up to fill real estate’s information needs
Mayor Michael Bloomberg will no doubt go down in history as the city’s numbers-cruncher-in-chief. “In God we trust. Everyone else, bring data,” he once tweeted.
But he is far from alone. Big Data — the ability to analyze massive amounts of information in a high-tech and sophisticated way — has become a new buzz phrase. Indeed, it’s being touted as a game changer in politics, healthcare and every industry in between.
Both Bloomberg and President Barack Obama poured extensive resources (and cash) into creating number-crunching operations that helped them target voters. Now experts say it’s time for the real estate industry to tap into Big Data.
Just last month, New York University’s Schack Institute of Real Estate held a conference focusing on the phenomenon. The title of the symposium: “Big Data and Disruptive Innovation: Is the Real Estate Industry Next?”
But already, Big Data has begun to shape New York’s real estate industry. On the public side, for example, the Bloomberg Administration has brought a host of dusty tomes of public real estate records online and made them easily searchable for brokers, developers and private real estate companies. In the private sector, Trulia and Zillow have sprouted up to fill the information void for real estate agents. Their online databases provide a treasure trove of knowledge — everything from information about whether consumers are prequalified for mortgages to home-purchasing intent gauged by analyzing online search patterns, said Stephen Rossi, Trulia’s director of agent marketing.
For Stan Humphries, Zillow’s chief economist, the rise of Big Data means brokers are no longer the gatekeepers of information.
“The ubiquity of what we’ve introduced,” Humphries said, “does mean that consumers are coming to agents with a lot,” including knowledge of average home prices in a market and an understanding of long-term future value.
Now a new crop of real estate start-ups is following their lead. Companies such as CompStak, a commercial leasing database, and BlockAvenue, which collects lifestyle data on micro-neighborhoods, are finding enough interest in what they’re doing to attract investors.
This month, The Real Deal looked at industry players testing the potential between the spreadsheets.
The information mother lode: City Hall
Bloomberg’s fervor for quantifying information has translated into increased transparency for the real estate community, Michael Flowers, the city’s chief data analytics officer, told TRD.
And while the data has clear public policy consequences, it also provides a wealth of insight for private-sector real estate players, he said.
Flowers, whose position was only created in 2009, singled out the year-old Local Law 4, which requires a lender to file an electronic report with the city within 15 days of initiating a foreclosure. Foreclosure data is key for helping the city flag properties that might be in violation of health and safety laws, Flowers said.
Another key metric, he said, was “illegal conversions,” properties that landlords break into smaller-than-allowable spaces and illegally pack in tenants (the city receives 25,000 such complaints every year). By cross-tabulating those complaints with fire department incident reports, the city found that these properties had higher rates of fire-related injuries and deaths.
“We go back to the DOB (Department of Buildings), and we prioritize inspections,” Flowers said, adding that the system has helped the DOB improve its rate of finding high-risk conditions from 13 percent to 82 percent. “They’re very happy, because they save a lot of man hours.”
And the city has plans to eventually use the data as a catalyst for updating “archaic laws,”such as the ban on the use of residential apartments as short-term rentals (offered by companies such as Airbnb and Smart Apartments), data team member Chris Corcoran said at the Schack conference.
Now it’s time for the private sector to follow the Bloomberg Administration’s lead on big data, Flowers said.
“It’s all about cross-checking outcomes with whatever intelligence you can collect,” he said. “If I’m in construction, I want to gather as much as I can about where I can build.”
The compliance police: SiteCompli
Jason Griffith and Ross Goldenberg are among the clutch of entrepreneurs who have seized on the white space in the real estate data universe.
In 2008, the two launched SiteCompli, which allows property managers to track their compliance with city laws, and today have several high-profile real estate clients.
The company aggregates data from more than a dozen city agencies, including the Department Of Buildings, Department of Sanitation and the Environmental Control Board. It’s handling a portfolio that includes major commercial and residential firms such as Vornado Realty Trust, Silverstein Properties, Tishman Speyer, Related Companies and CooperSquare Management, Griffith said.
SiteCompli emails landlords about city violations on their properties, and landlords can also log on to the site and track violations across their building portfolios.
“It really doesn’t matter what type of owner you are,” Griffith said, noting that tightening regulations and stiffer penalties affect all owners. Until now, he said, landlords spent much of their time tracking down violations rather than addressing them.
The company, Griffith said, had been “profitable from very early on.” Clients are charged $1 per month for each residential apartment in their portfolios, with discounts for owners of larger portfolios. Since the company monitors nearly half a million residential units, TRD estimates its annual revenue from its residential business to be $3 million.
Commercial landlords are charged $1 per month per 1,000 square feet, with larger portfolios paying a lower rate. Since SiteCompli claims to cater to more than half of the city’s office buildings, or roughly 225 million square feet of office space, TRD estimates its annual revenue from commercial clients could be up to $2.2 million.
Griffith declined to disclose specific numbers, but said the estimate isn’t far off. He added the company is rapidly growing, with its team of 20 employees expected to double by the end of the year.
The neighborhood newbie: BlockAvenue
BlockAvenue takes Big Data and gives out information about little areas.
The company assigns a letter grade to every 300-square-foot space in the country based on publicly available and crowdsourced information about parks, restaurants, pubs, schools, transit stops, crime and other lifestyle indicators. Though the service is free, founder Tony Longo envisions revenue from premium memberships as well as data licensing and advertising income in the near future.
Longo said the service, which rolled out in beta in September but will officially launch this month, gives developers detailed information about potential customers in a given area, which can help them decide where to locate a project.
And BlockAvenue helps brokers better target homebuyers and renters. For example, a broker armed with information about school enrollment and ratings can better sell to homeowners looking to move into a top school district.
Longo, who sold his Boston-based online brokerage CondoDomain to Better Homes Realty last year for an undisclosed amount, has already signed on New York–based clients such as apartment ratings start-up Rentenna. He also counts Stephen Kliegerman, president of Halstead’s development marketing division, among his advisers.
“Not like Tribeca versus the Upper East Side — that’s two different cities. More like Murray [Street] and Greenwich [Street] versus Murray and West Broadway.”
The company will soon be able to harness data from social networks such as Twitter and Facebook, Longo said, to give users an even more granular picture of the perks and pitfalls of living in a particular micro-neighborhood.
The commercial cloud: View the Space
Since launching in 2011, View the Space has signed on commercial behemoths such as SL Green Realty, Vornado and Silverstein Properties.
“If a prospective tenant shares a link between three to five times, 95 percent of the time the tenant will end up coming to the building,” said founder Nick Romito, a professional surfboarder-turned-commercial broker who worked at Murray Hill Properties and Titan Global Advisors.
“We can show brokers that it takes you exactly these many tours and calls to get to a tour, to get to a proposal, to get to a lease,” he said.
A large number of Manhattan’s Class A and B buildings are signed up for the service, and Romito expects to hit the 50 percent mark by the end of June.
Romito said firms such as his are “trying to put commercial real estate in the cloud,” where the leasing game shifts from broker intuition about potential tenants to actual real-time interest in a building.
Also, a single report shows a landlord’s entire building portfolio, which can help an owner make decisions about how best to position available office space, he added.
“We can show the landlord, let’s say, that 61 percent of people look at spaces below 10,000 square feet, and only 1 percent look at spaces above 50,000 square feet,” he said. “This is helpful to say, ‘maybe we should divide the floor.’”
Landlords pay $500 a month per building, which includes unlimited access to analytics and a video for every vacancy in the space.
Since its launch, View the Space has earned revenues in the “low single millions,” though Romito declined to give specifics. He said the company plans to seek its first round of venture capital funding soon.
The comp creator: CompStak
Commercial leasing database CompStak is using the “it takes a village” model to bring greater transparency to the Manhattan commercial leasing market.
The company, launched in January 2012, has created an online database of rent prices, square footage, building income, tenants and other information that had been scattered across several online (and offline) sources or clandestinely traded among brokers.
Founded by former Grubb & Ellis broker Michael Mandel and programmer Vadim Belobrovka, the company gives access to information when brokers and landlords give up their own data.
“We want to encourage our community of users to participate as much as possible,” Danny Shachar, CompStak’s director of operations and marketing, told TRD. “Sometimes it’s easier for people to pay for information, but that would mean we’d have less comps to work with.”
The twist has already attracted investors. So far, the company has received roughly $1.25 million from companies such as Expansion VC, the venture-capital arm of the Melohn family; Ryan Slack, co-founder of PropertyShark; and 500 Startups, a start-up incubator.
The company’s revenue, projected by Mandel at roughly $1 million this year, comes primarily from enterprise licenses — a license to access proprietary information — for private equity firms and institutional investors that use the comps data to make investment decisions, Mandel said.
The data that CompStak is providing has been historically hard to get, Peter Kozel, chief economist at Colliers International Tri-State, said: “Landlords and tenants are protective of what they have,” he said.
Mandel claims to have comps on roughly half of Manhattan’s commercial leases over the past decade and 99 percent of comps from the past year. However, a TRD analysis of 2012’s deals (based on CoStar Group data) from some of the city’s biggest brokerages shows a large number of deals that are not represented in CompStak’s database.
Mandel responded that CompStak’s record of total deals closed for the year is greater in terms of square footage than the total square footage estimated by the major commercial brokerages, though he believed that some smaller deals were missing.
Mandel said he has clients who are brokers at top firms, including Cushman & Wakefield and Newmark Grubb Knight Frank, as well as several prominent office landlords, though he would name only Tishman Speyer.
A Brokerage by the Numbers: MNS
MNS is a residential brokerage marketing itself as not just data-savvy, but capable of crunching valuable numbers for developers.
The biggest financial opportunity, said CEO Andrew Barrocas, lies in being involved from the pre-construction stage.
“A developer will ask us what to build, how big it should be, all before there is even a shovel in the ground,” he said. Depending on the size and scope of the project, the developer would pay MNS a consulting fee beginning in the tens of thousands of dollars, though Barrocas said that for regular clients the pre-construction consulting was just “part of the deal.”
Through an internal database (aggregated from public and proprietary sources), MNS analyzes metrics such as price per square foot, unit mix and average time on market to determine what kind of project would work best in a given area.
“For example, right now you bring a large project to the Brooklyn Heights markets, it’s hungry for that,” Barrocas said.
Clients include RAL Companies’ Robert Levine, the developer of One Brooklyn Bridge Park, and Jeffrey Levine of Douglaston Development.
“Most of the companies that we compete with,” Barrocas said, “will tell the developer, ‘you give me this, you’ll get this.’ We can tell him a 950-square-foot two-bedroom in a rental may yield him $55 per square foot, but I can show him that we could get $65 dollars per square foot if we build studios.”
Correction: A previously published version of this story incorrectly stated that Halstead Property was a client of BlockAvenue. While Stephen Kliegerman, president of Halstead’s development marketing division, is an adviser to BlockAvenue and uses the service, the brokerage is not a client.