Andy Florance modernizes the commercial real estate market while growing his DC-based global business.
Andy Florance, seen here at CoStar’s downtown headquarters, parlayed his love for programming and economics into a multimillion-dollar business.
Andy Florance has an easy, infectious laugh. It’s the laugh of a man who knows the funny side of life when he sees it. And Florance has a lot to be jovial about. At 51, he is the founder and chief executive of the CoStar Group, a company that provides online information, analytics, and marketing services to the multifamily and commercial real estate industry. CoStar transformed the way commercial real estate brokers do business: replacing haphazard old practices and dragging the industry into the 21st century.
“We created a significant evolution in commercial real estate with high-quality data and better technology—and at a much lower cost,” says Florance, who founded CoStar’s predecessor 28 years ago in his Princeton dorm. “The industry had no data.”
Interviewed recently at the company’s platinum LEED-certified headquarters downtown, Florance had as much background information about this reporter as I had about him, and he was quick to show it. Information is what CoStar collects and peddles in a multi billion dollar industry, which, until his company came along, Florance argues, frequently based its trading on wrong assumptions.
Andy Florance and members of the CoStar Group ring the opening bell for the NASDAQ Stock Market.
For example, in Washington, the rule of thumb in commercial real estate had been that when an office building became vacant, it remained empty for six months before it was leased again. But CoStar produced data to show that the average vacancy is actually 420 days, and that had a different set of implications for investors. “I love looking at a market that has operated in a certain way for 100 years and then finding ways to organize it better,” he says. The commercial real estate market is one he’s been looking at since his days as an economics major at Princeton in the 1980s.
As an early computer whiz, he was bitten by the cyber bug at his prep school, where he first got into writing software. The two interests converged when he decided to create a go-to service for brokers and developers that made available, in one place, the relevant data on individual buildings—occupancy history, vacancy rates, rents—so they could more accurately assess what the property was worth.
But how to locate the information? Major brokerage houses had their own jealously guarded research departments, but the smaller companies had to fend for themselves. Florance’s solution was cumbersome, time-consuming—but available. He scoured the DC government tax rolls, among other sources, for commercial buildings and force-fed the mass of information into a program of his own design. His concept was ahead of its time; computers weren’t prevalent enough to warrant the purchase of such a program, so he opted instead for print. The book was Cornerstone, a monthly tome containing the information Florance had processed, and DC was the starting point because Florance is a native Washingtonian. (His father, Colden “Coke” Florance, is one of Washington’s leading architects and building preservationists.)
Florance accepts the Public Company Trendsetter of the Year Award by Transwestern.
When technology caught up with Florance’s scheme, he sold Cornerstone and started the CoStar Group, which began life as the Realty Information Group. The reception in the brokerage business was mixed, at best. “Each time we go into a city, be it DC, New York, Glasgow, or London, at first half the market regards us with real suspicion and aversion, and half the market embraces us,” Florance admits.
“Some of the big houses reacted very poorly—shouting, screaming; there was even discussion of cement shoes in [New York’s] East River,” he chuckles. “But many thought it was great.”
And it was. Today, CoStar has more than four million properties in its database, roughly $500 million in revenue, and 2,400 employees across North America, the UK, and France. In addition to its preeminence in commercial real estate listings, CoStar has expanded into the apartment market, and is the leader in buying and selling US farms, ranches, and timberlands, a bonus for the country appeal surrounding the DC metropolitan area.
Yet the greatest achievement of CoStar is how it compiles complex and seemingly infinite data into its comprehensive commercial real estate database—the largest of its kind—which clients can use to interpret the market like never before.
And Florance’s other great achievement? Perhaps founding CoStar while managing to stay out of the East River—or the Potomac, for that matter.