When diving into the commercial real estate market, one of the most crucial steps is understanding property valuations through “comps” or comparable properties. Comps help investors, buyers, and brokers determine what properties in a given market are worth, based on recent sales or lease transactions of similar properties. This knowledge can lead to more informed decisions, sharper negotiations, and ultimately better deals.
This article will walk you through where to find commercial real estate comps, how to assess their reliability, and how to use these data points to refine your investment strategy.
What Are Commercial Real Estate Comps?
“Comps” are recent transactions of similar properties within a specified area and timeframe. They provide insight into what investors are willing to pay for properties with similar attributes, such as size, location, condition, and use type (e.g., retail, office, industrial). For commercial lease deals, comps offer information about market rental rates, lease terms, and concessions.
Unlike residential real estate, where MLS (Multiple Listing Service) databases provide abundant comps data, commercial real estate data can be more challenging to source. But with the right tools and strategies, you can gain valuable insight into your market.
1. Using Commercial Real Estate Databases
Commercial real estate databases are the most direct route to finding reliable and detailed comps. These databases compile transaction data from various sources and offer powerful search tools to filter by property type, size, location, and more.
Popular Databases for Commercial Real Estate Comps
- CoStar: CoStar is one of the most comprehensive resources for commercial real estate data. Its platform includes information on recent sale and lease transactions, building specs, tenant details, and more. While CoStar subscriptions can be costly, they provide detailed insights and robust analytics tools.
- LoopNet: Owned by CoStar, LoopNet caters to brokers, buyers, and tenants looking for lease and sale listings. While it doesn’t offer as much historical data as CoStar, it’s user-friendly and provides active listing details that can help inform your analysis.
- Crexi: Similar to LoopNet, Crexi offers property listings and some transaction data. Crexi is known for its ease of use and growing database, making it a solid choice for brokers and investors who want a streamlined platform.
- Reonomy: Reonomy focuses on off-market property data, aggregating public records and other sources to give users a unique perspective on comps. If you’re looking to assess property potential before it’s actively marketed, Reonomy can be a good source.
- CompStak: CompStak is specifically designed for commercial lease and sales comps. It sources its data through a crowdsourced model where brokers and appraisers exchange comps in a “give-to-get” model. This can be a valuable resource if you’re specifically interested in lease comps.
2. Using Public Records
In many cases, public records can be a reliable source for finding sales comps. County tax assessors, recorder’s offices, and property appraiser websites provide details on recent sales transactions, although the level of detail varies widely.
- Tax Assessor’s Office: Tax assessors maintain records of property valuations, sales transactions, and tax assessments. Many county websites now offer online access to these records, allowing you to view recent sales history and assessed values. However, lease data is usually not available here.
- Property Appraiser or Recorder’s Office: Recorder’s offices often provide recent transaction records, including the sale price and buyer information. Some counties provide more detail than others, and in many cases, you may need to visit the office in person.
Using public records is free but can be time-intensive. Additionally, it requires familiarity with the property search process and the specific data points that will help you draw a clear comparison between properties.
3. Working with a Commercial Real Estate Broker
Experienced commercial real estate brokers can be an invaluable resource when seeking commercial real estate comps. Brokers have access to proprietary data, industry databases, and insights that may not be publicly available. They can often provide:
- Market-specific insights and transaction data
- Context on any unique conditions influencing a transaction, such as a distressed sale
- Lease term specifics, such as incentives or build-out allowances
Additionally, brokers may have direct connections with landlords and other stakeholders, giving them access to non-public transactions. If you’re in an unfamiliar market or need highly specific information, working with a broker can save time and lead to more accurate comps.
4. Networking and Crowdsourcing Comps
Crowdsourcing is an underutilized but effective way to gather comps, especially for lease data, which is harder to find in public databases. Networking with other real estate professionals can provide you with “word-of-mouth” insights.
- Real Estate Investment Groups: Many real estate investor groups and online forums, such as BiggerPockets or LinkedIn groups, provide a platform to connect with other professionals. You can ask questions, share resources, and occasionally find comps data here.
- Real Estate Meetups and Industry Events: Attending real estate events can connect you with brokers, investors, and other stakeholders. Relationships built here may lead to shared data or information on local trends and recent transactions.
5. Analyzing Property Characteristics for Accurate Comps
Not all comps are created equal. When searching for comparables, you’ll want to account for the following factors to ensure the data is relevant:
- Location: Comparable properties should ideally be in the same neighborhood or submarket, as commercial real estate values can vary widely even within a few blocks.
- Size and Layout: A property’s square footage and layout (e.g., open-plan vs. segmented) can influence its appeal and market value, so focus on properties similar in size and structure.
- Condition and Age: The condition of a property significantly affects its value. Make sure to compare properties with a similar age and level of maintenance to avoid misleading conclusions.
- Tenant Quality: In a lease scenario, tenant quality can impact lease rates. Properties with national or creditworthy tenants often command higher rents, so be sure to consider tenant mix in your analysis.
6. Using Real Estate Market Reports
Many commercial real estate firms publish quarterly or annual market reports that include high-level comps data. While these reports might not provide the granular data of a paid database, they offer an overview of trends, vacancy rates, rental rates, and recent sales.
Some firms offering market reports include:
- CBRE
- JLL
- Cushman & Wakefield
- Marcus & Millichap
These reports can be especially useful for assessing broader market conditions and identifying trends, helping you determine if a particular comp aligns with current market dynamics.
Finding accurate commercial real estate comps requires time, strategy, and sometimes an investment in paid resources. From leveraging databases like CoStar and Reonomy to accessing public records and building a network of reliable contacts, a combination of methods will yield the best results.
Using comps correctly can mean the difference between a good deal and an overpay, so it’s well worth the effort. Make sure to cross-check data across sources, stay informed on market trends, and remember that each comp has its nuances. With these steps, you’ll be well-prepared to make informed decisions in commercial real estate.
