Cushman & Wakefield Rattled by CoStar Acquisition of Ten-X

CoStar is assembling everything it needs to disrupt the commercial real estate transaction model

by Dave McKenna, Editor CREB on June 19, 2020

Commercial real estate brokers are sweating a potential new competitor. The concern is not about some maverick broker from a major trading house taking her whole book of clients with her and founding her own brokerage. That happens every day. It’s the way the industry grows. That is playing by the rules.

The concern is CoStar. The massive marketing commercial real estate data provider recently acquired Ten-X a system that hosts real estate auctions, for $190 million. Is this a new business model that could threaten the comfortable world of chummy relationships, personal business networks, and fat commissions on super-expensive assets?

In a recent Walker & Dunlap webcast, Cushman & Wakefield CEO Brett White grumbled that CoStar is maneuvering itself into a competitive position.

“From the earliest days of CoStar, what I’ve always said to Andy (Andy Florence, CEO of CoStar) is, ‘So long as you are a noncompetitive utility for the industry, we are going to be fervent supporters,'” White said. “If you cross a line, either to go to non-utility pricing or to be competitive, you need to know that the industry at some point will respond in one form or another. And I think with the recent purchase CoStar has made, it feels like we may be getting closer to that inflection point.”

Andy Florence, CEO CoStar

Florence responded to the concern in a BizNow interview on June 18, remarking , “What Brett White ought to be feeling here is actually confident that, when CoStar buys a Ten-X, you have a partner, a client, a firm that pays you millions and has been a trusted partner for 35 years that has bought a company that, in someone else’s hands, might be competitive, but in CoStar’s hands is not going to be competitive and is going to support the brokers like we have for 35 years.” 

But herein lies the real issue. This “trusted partner” is handing over millions of dollars for a service than can be done by machines. Eventually the property owners and corporate occupiers will decide to keeps their millions rather than fork it over in commission. Though they will continue to accept golf invitations to the Byron if the former broker can still get tickets.

CoStar is building a virtual monopoly on commercial space data. It acquisition defunct marketing platform RentPath for $588 million is an example of its data land-grab. The SEC intervened in 2012 to prevent CoStar from acquiring Xceligent, a CoStar competitor that had acquired LoopNet.

Despite Florence’s assurances to the contrary, CoStar is assembling the data inventory and the matching platform that automates two of the three defining characteristics of any brokered transaction; product insight, trading environment, and relationships with the interested parties.

CoStar will soon be able to provide the product insight and the trading environment. As for relationships – there is always someone willing to take you golfing if your pockets are deep enough.

Photo Credit: Bianca Ackermann on Unsplash