- Jun 17, 2013
Startups Aim to Change the Face of Online CRE Brokerage
By Dees Stribling, Contributing Editor
As an industry, commercial real estate is a notoriously slow adopter of new technology, but the creative energies of the Internet just will not be denied. With the recovery of commercial real estate from the worst of the Great Recession has come a new wave of online brokerage and commercial property marketing concepts out to change the way space is leased and sold—or at least the way tenants and landlords interact.
An earlier wave of Internet-based brokerage and marketing included CoStar Group and LoopNet Inc., which eventually became industry leaders and ultimately merged into a single entity. Technology does not stand still, however, especially when entrepreneurs see opportunity. Following are some of the recent wave of online commercial real estate specialists. This group features a variety of new approaches to the industry, including putting tenants and landlords together online for simple lease transactions and constructing a single Web site providing detailed video tours of properties.
■ 42Floors. San Francisco has long been a hotbed of technology startups, so it is no surprise that the real estate search engine 42Floors started there less than two years ago, expanding into New York more recently. The company summed up its reason for being—appropriately—on a message board, saying, “We discovered in our previous companies how much it sucks to search for office space. It’s effectively a data problem, and we believe passionately in the power of the Internet to bring transparency to rusty old industries.”
The company’s portal is designed to appeal to startups and other small operations with little experience in looking for office space, though more experienced office space consumers could use it as well, at least to scan what is available. Among other features, 42Floors offers potential tenants searches not only by location but also by space for “lease,” “sublease” or “coworking,” the last of which is a particularly contemporary touch. 42Floors also offers images in its search results. The company employs freelance photographers to capture as many images of the listed properties as possible, both exterior and interior.
According to company founder Jason Freeman, who had previously gone through the experience of looking for space for a startup, the response to the site has been strong. During the 12 months ending in February, he said, more than 1,000 companies used the search engine to find about 2 million square feet of space. “That’s enough to fill the Empire State Building with startups,” he noted.
As yet, 42Floors does not charge landlords or brokers to list space, instead making its money by offering related premium services to tenants through a site called Marketplace, including furniture, accessories, decor and services essential to commercial property tenants. A number of the larger U.S. landlords—such as Equity Office, Shorenstein, SL Green and Vornado—have started listing their properties on the search engine.
The company has also attracted a number of deep-pocketed believers. In January, it raised $12.3 million in a Series B round of financing led by New Enterprise Associates, with participation from Bessemer Venture Partners, Thrive Capital and new investor Columbus Nova Technology Partners.
■ SpaceList.ca. Another approach to creating a commercial real estate listing service/search engine is to find a neglected niche and run with it. In this case, the niche is the Canadian property markets, which neither CoStar nor LoopNet fully covers. SpaceList offers listings for office, industrial and retail space but does not specialize by property type.
The site is not quite as image intensive as 42 floors, but it does pull up useful information about each space: cost, amenities, availability and more. Users do not even need to register to use the search engine, which aims to make its money through paid premium listings, site advertising and other services.
And SpaceList makes it easy for brokers to list their properties. They can enter data themselves, manually, or use an application programming interface (API), which transfers data from the brokerage database.
■ Storefront. Another niche player in online commercial real estate is Storefront, founded in San Francisco and now also active in New York. It specializes in creating an online marketplace for leasing short-term retail space that, as the company puts it, is “simple enough to do over lunch.” Using the service, landlords with vacant space list it to attract tenants that want to establish a pop-up shop or other short-term retail experience.
In recent years, Internet-only retailers have used pop-up shops to establish a temporary offline presence, either as marketing for their online wares or to test the viability of a retail concept without going whole-hog and inking a long lease in a permanent location. Once a retailer books a space, Storefront handles the details of the lease—which, given the nature of the space and the short time-frame, is standardized.
■ PopUpInsider. A similar concept in using the Internet to move temporary space, New York-based PopUpInsider, founded by e-tail veteran Christina Norsig, is essentially a matchmaking Web site for landlords and short-term retailers, including larger retailers and restaurateurs striving to create buzz.
Indeed, the search criteria at PopUpInsider addresses retail, event and restaurant uses. Moreover, its database is nationwide in scope, so e-tailers seeking to roll out a product or create word of mouth through, say, a week’s worth of short-term retail do not need to confine themselves to the streets of New York or San Francisco.
■ View the Space. View the Space, which has something of a self-explanatory name, is an Internet-based service that allows brokers, landlords and potential tenants to tour space remotely as the first step in the leasing process. It has attracted a number of large owners, such as Boston Properties, Brookfield, Equity Office and Silverstein, as well as Jones Lang LaSalle and Cushman & Wakefield.
For would-be tenants, the video tours help narrow down the search. The tours are highly detailed, allowing the tenant to see every part of the space as if he or she were “flying” through it, the only difference being that “you can’t touch the walls,” according to company founder Nick Romito.
Landlords are also able to track exactly how a prospect interacts with a video tour—that is, how many times they might have watched it, and which parts seem to interest them the most. It is a considerable advance from sending out marketing materials and hoping someone takes a look at them.