Zillow has been quite successful with their Zestimate algorithm concerning residential values. Experienced brokers like myself have been doing this for years i.e. a Comparative Market Analysis (CMA) and Broker Price Opinions (BPO) however leave it to technology to update a practice around since real estate first transacted.
Thus it was only a matter of time before we would see similar algorithms designed for commercial spaces including office, retail, industrial and so forth. Commercial is much more complex; unlike residential there are other factors including free-rent, credits for build-out and so forth, however in theory such a system could be viable.
Office provider Knotel and leasing data specialist CompStak are collaborating to create an Automated Valuation Model for commercial real estate. Such a model according to the two firms would be a rough equivalent of Zillow’s Zestimate.
Unlike residential real estate; as commercial is usually investment oriented the model would be able to estimate the net operating income of a commercial property, especially office space, and thus come up with a valuation.
The company spearheading the development of the algorithm is Knotel (as mentioned above) a company which is considered a strong WeWork competitor. In addition to their partnership with CompStak, Knotel recently purchased 42Floors, a commercial real estate search engine and one assumes a collaboration to create their Automated Valuation Model.
CompStak recently rolled out its CompStak Analytics platform, which the company says comprises millions of lease comparable covering more than 10B SF of commercial real estate. Among other things, CompStak says its new platform allows subscribers to:
- Compare the effective rent performance of a portfolio of properties against those of competitors in real time.
- Identify investment opportunities by spotting properties that are performing above or below their peers.
- Track starting rents for tenants in different industries across submarkets.
As a broker who works in both the residential and commercial markets I am intrigued and will be sure to include their proprietary information in my quiver of information sources as an adjunct to personal qualitative and empirical research; an algorithm may be able to assess, analyze and forecast but human intuition and experience is still quite valuable.