It’s a commercial version of David vs. Goliath
CAR making MLS improvement while trying to battle the giants
A national commercial real estate conglomerate has entered the West Michigan market and the local Commercial Alliance of Realtors is out to defend its turf.
The CoStar Group bills itself as one of the largest providers of information and marketing services to commercial real estate professionals across the nation and in the United Kingdom. The company has been around since 1987, has its headquarters in Washington, D.C., and is listed on NASDAQ. A share of its stock was selling for $160.70 last week.
In contrast, CAR surfaced as an independent entity operated by local commercial realtors just a few years ago after a lengthy affiliation with the Grand Rapids Association of Realtors. CAR began as a subcommittee of GRAR and even had its office in the home of the residential real estate organization. Now an autonomous CAR operates from its own office on Front St. NW.
Although not a large group like CoStar, CAR does offer its members something the vast majority of like organizations only dream of —a Multiple Listing Service for the region’s commercial market.
“We are an anomaly. We are different. We are unique,” said John Francis, CAR president and an associate broker at Prime Development.
Francis isn’t exaggerating. Commercial real estate professionals in such large markets as Chicago, Detroit and New York don’t have a MLS at their fingertips. In fact, CAR Executive Director Shari Veldman told the Business Journal there are only five other multiple listing services throughout the country. So the CAR MLS is a very rare offering and that makes the organization itself a rarity.
“There are entities that are chipping away at our periphery to basically compete or, quite frankly, destroy what we have; our cooperation and our MLS. For example, you have an organization called CoStar. They are a national real estate information company and what they do is buy information from brokerage houses and try to be a one-stop information provider,” said Francis.
“CoStar has entered the West Michigan market and we need to be relevant to our members,” he added.
So Francis made it clear that CAR needs to offer its members the best information platform available through its MLS. By doing that he felt the organization has a good chance of stopping CoStar, and other groups like it, in its tracks.
Francis said CAR members, like his firm Prime Development, are required to submit every listing to the MLS. Members also have an agreement with their clients that requires them to list the commission they will pay for a completed transaction.
That published contract is vital to brokers because it spells out how they will be paid for their work. It may come as a surprise to those not in the field, but that certainty isn’t a standard throughout the commercial industry.
“When you go to Detroit, the first question out of your mouth if you’re a broker is, how do I get paid? You have to negotiate that. To me, that’s so inefficient,” said Francis.
“You’re spending time and energy on how you get paid instead of focusing all your energies on finding the best properties for your clients and having all that information at your fingertips.”
Subscription rates cover the cost of the MLS. Currently, members pay $38 a month for access to it. The goal for CAR, though, isn’t just to have a platform its members can rely on. The organization also needs to have one that is cost effective; one its rates can support, if CAR is to successfully fend off challenges from larger and wealthier groups like CoStar.
Another large group that CAR is very familiar with is Xceligent. Xceligent describes itself as a research firm that provides verified commercial real estate information to the nation from its home base in Independence, Missouri. It’s also a company that CAR’s software vendor for its MLS platform, eProperty Data, merged with in May 2012 and that action created a problem locally.
Francis said officials at Xceligent have made it known they want their company to become the next CoStar. But he added most of Xceligent’s clients, like CoStar’s, are primarily interested in securing and selling industry information and aren’t realtors.
“So their technology platform is not necessarily geared toward a MLS platform, where there is a compensation piece to it. So our current provider, in my opinion, is more interested in breaking into into markets like Washington, D.C., Los Angeles, Chicago, and New York, and they’re less focused on the Grand Rapids of the world and MLS-centered associations,” said Francis.
Francis said CAR’s platform is an older model that eProperty Data wants to phase out and the vendor’s latest version is more geared toward what Xceligent needs. The difficulty in changing providers, though, is there aren’t that many to choose from because there are only six MLSs in the country, so there isn’t a lot of interest in designing the software.
But CAR found a provider and not too far from home. Catylist, an Ann Arbor firm that creates technology products for the commercial real estate field, will become the organization’s new platform provider.
“Catylist has a tremendous amount of experience in the MLS-type of technology platform,” said Francis. “We’ve signed a contract and we’re hoping to be up and running in 60 to 90 days.”
Catylist also is a technology provider for the Michigan Commercial Board of Realtors, a statewide group that offers commercial real estate information. And the switch from eProperty Data to Catylist will not raise the MLS subscription rate.
Francis estimated that about 90 percent of the area’s professionals belong to CAR, while Veldman added that the membership has grown by 5 percent over the past year.
Another factoid those not in the industry might not know: just because someone has a real estate license that doesn’t make him or her a “realtor.”
“You’re only a realtor if you join your local association. By joining your local association you’re automatically part of your state’s board and then you’re part of a national association of realtors. You’re also part of a code of conduct,” said Francis.
“We have a really good thing. We are trying to maintain that and trying to make ourselves better.”