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CoStar downplays employee attrition, readies resi war chest

Andy Florance pledges $300 million budget for residential real estate in 2022 on colorful earnings call


CoStar continues to grow and make money, and if you don’t like it – tough.

“Like any company we have people who decide the demands of the environment are not for them and that’s fine,” said Andy Florance, CoStar’s CEO, on the company’s earnings call Tuesday.  

Florance was alluding to a Business Insider article that claimed CoStar is overbearing in keeping tabs on employees who work remotely amid the Covid-19 pandemic. Also, company bosses have humiliated workers, the story reported. And: 37% of CoStar’s 4,200 workers left in 2021, per the story, a figure that Florance confirmed Tuesday.

However, the CEO said the attrition rate is in line with a real estate industry average of 32.8%. Florance then pivoted to discussing the COVID 19 vaccination rate of CoStar workers. “The key difference is that we have achieved a 99% employee vaccination rate,” Florance said.

“The staff has returned to the office,” he added. “We do have a tiny, vocal minority of employees who do not want to return to work.”

CoStar’s push to get employees back into the office comes as the real estate data company dramatically expands its own real estate. The company announced in December a $460 million office expansion at its Richmond, Virginia corporate campus.

It also comes as CoStar makes a rapid – and not totally clear – push into residential real estate.

For now, CoStar’s financial outlook is pretty rosy. Its net income was $292 million in 2021, a 29% leap from 2020. And the company reported $1.9 billion in revenue for 2021 a 17% year-over-year jump from 2020.

About 38% – or $722 million – of this revenue comes from subscriptions that developers, brokerages, attorneys, and other professionals pay to access CoStar’s picture-heavy database of commercial real estate.

The second biggest revenue source is $676 million from multifamily, which is largely comprised of the consumer-facing website Florance cheerfully announced that is growing its marketing budget in the coming months with five new ads starring “Big Chill” and “Jurassic Park” actor Jeff Goldblum.

Only $74.6 million – or 3.9% — of the company’s revenue came from residential real estate. The largest residential sub-slice is Homesnap Pro Plus, a subscription service agents use to generate leads and communicate with clients. The Homesnap division’s revenue grew 52% year-over-year, Chief Financial Officer Scott Wheeler said on the call, and there are now 68,000 paid users.

Florance announced that CoStar planned to spend about $300 million on residential real estate in 2022, or $200 million more than 2021. Analysts responded with pointed questions such as “Really concisely, investors want to know – What are you spending this money on?” and, “What is your strategy in residential real estate?”

As he told HousingWire in December, Florance said that CoStar has done voluminous market research, and that data shows a demand for more harmonious collaboration between listing agents and consumers. Zillow – the incumbent leader in the residential listings space has arguably alienated listings agents with pop-up ads potential buyer’s agents pay for.

“There is not a lot of original content being produced on these portals,” Florance added, given that Zillow and Redfin aggregate data from Multiple Listings Services. What Homesnap and might do different, Florance said, is take pictures of a home’s local school or provide information about the abode’s neighborhood that is not on the MLS listing.

This kind of information, Florance said, could make CoStar the search engine optimization king in residential real estate, supplanting Zillow. “It’s not rocket science. It might be science, but it’s not rocket science,” he said.

Florance also stressed CoStar is taking the long view on residential, though it may not bear fruit in 2022 financials. “We are going for the big win,” he said.

One change that should take place in 2022: Florance announced that CitySnap, the putative New York City listings competitor to Zillow’s StreetEasy, would launch in July.

None of the analysts touched on the story about employee attrition, or Florance’s response. The CEO also mentioned that many former employees benefit from the work ethic they learn at CoStar in future walks of life.

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