CompStak’s CEO Is Bullish on the Office — Just Look at CompStak’s

CompStak’s fourth-floor space at 675 Avenue of the Americas is a light, airy office in an old department store building on what became known more than 100 years ago as Ladies Mile. It is renting 26,000 square feet. Its old space at 36 Cooper Square in NoHo was 11,000 square feet.

Though the announcement was made in December, the lease was completed in September, said CEO and co-founder Michael Mandel in a recent interview with Commercial Observer. So CompStak is completely moved in. Its space has all the bells and whistles, including a lounge that is still under construction where parties are planned, a place for pingpong and foosball, and a place to play cornhole.

On a Tuesday in January, just about all the desks and computers were occupied, though Mandel allowed that Fridays are not so busy. The space, formerly home to the news site Quartz, is dominated by desks and computer screens.

The company, too, has gone national. It can tell you what is going on in any commercial market in the country, and now has offices in Atlanta, Los Angeles and Chicago and …. an office in Belgrade, Serbia, though that office is strictly for researchers who crunch numbers to tell the story of commercial real estate back in the U.S.

Mandel sat down in one of the conference rooms in 675 A of A to answer CO’s questions. 

His answers have been edited for length and clarity. 

Commercial Observer: Looks like most of your desks are full. Mondays and Fridays are supposedly the days where people tend to be scarce. How is that working out for CompStak?

Michael Mandel: Actually for us Mondays are relatively busy. Each team determines what their required three days in the week are. Our sales and client success teams require everybody to be in on Monday. They want to hit the ground strongly. Fridays are very quiet here, for sure.  

I’m a huge fan of being in the office. I think that’s really important from a cultural standpoint. We have more than doubled the size of the company in the last year; we hired about 100 people in 2022. I can’t even imagine the challenge of onboarding all those people remotely.

I think that being next to your colleagues allows you to tap somebody on the shoulder and ask a question, rather than struggling to try to figure it out for yourself for hours on end. I think that we were really, effectively, in an environment where other people weren’t back to the office, and that created a competitive advantage for ourselves. Hence we moved into a bigger office because we were packed in our last place.

There’s a lot of curiosity and uncertainty in the market about what happens next. And you are an example of a 21st century company that trades in information, the kind of company that helped keep the market afloat in the post-financial crisis era. You guys have found that being in the office works for you in a way that remote work doesn’t. Are you finding that true in the market as well?

I think we found that roughly half of tenants whose leases were expiring downsized, and roughly half expanded. Obviously, vacancies are way up and rents have been coming down, and fewer companies are finding the need to have space.  

Tech companies rely on technology themselves internally for communication. We are the exception, for sure. I would not say we are representative of what’s happening broadly, but I think we may be representative of a shift in mindset.

You look at companies like Salesforce, which said that they were going to go fully remote. And then Marc Benioff announced that all of their salespeople had to be in the office three days a week after they said that everybody could be fully remote. Disney just announced that everybody has to be back four days a week.

A lot of CEOs are recognizing that there’s been a loss in something, whether it’s productivity or culture or whatnot, from having people remote, and want to have people back in the office. To be clear, though, for us, it was not all about productivity. It was about culture.

But isn’t it like threading a needle? If you told people they had to be in the office five days a week, eight hours a day, people would respond negatively to that, right?

I don’t think anybody wants to be in five days a week now. We want people to be able to have quiet space where they can get work done, and also the collaborative space where they can work with others. There is a benefit to having a quiet space. We’re in an open floor plan environment, and from time to time you do need a room with quiet.

One thing that I think has been a bit overlooked in the age of Zoom is that Zoom causes you to need more space in the office. Because you can’t reasonably do a Zoom call in an open floor plan environment at your desk when someone’s sitting directly next to you and they’re also on a Zoom call, right? So you need to be able to have places where people can do Zoom calls and not be a distraction to everyone around them.

So let’s back up a little bit. Tell me in a nutshell what CompStak is and how it compares to its competitors.

We are a commercial real estate data company. What really sets us apart is we crowdsource commercial real estate data.

We have a network of somewhere around 35,000 commercial real estate brokers, appraisers and research people in real estate brokerage firms who share data on CompStak. They earn credits for sharing that data, which is like a virtual currency. And they can use those credits to get other data back out.

That gamified system incentivizes our members to share really valuable data with us that they wouldn’t otherwise share because they want to get valuable data in return. We then end up with a comprehensive database of all this information they’ve shared, which includes lease comp data, sales comp data and property information. Then we sell access to that data to commercial real estate investors and lenders.

I tend to think that the industry standard for commercial real estate data is CoStar. So how do you differ from CoStar?

We try not to talk about that too much. But, fundamentally, the main differentiator is around the crowdsourcing, and around the fact that we built this gamified system that incentivizes our members to share data.

Our members aren’t giving us information out of the kindness of their hearts. They’re doing it because they get really, really valuable information in return. And that allows us to capture information that other commercial real estate data companies don’t have. But, in fairness, look, most of our customers are also CoStar customers. They’ll use CoStar for listings, and they’ll use us for comps.

So you signed up for this space for five years. Why did you choose five as opposed to two or 10? It’s not a long-term commitment, it’s not a short-term commitment; it’s sort of in the middle.

We’re growing quickly, so it’s hard to know what our needs are five years from now as a company. We’ve been around now about, I guess, 11 years. We’ve been in office space of some sort for really a little over 10 years. Five years is already 50 percent of our existence, so it feels like somewhat of a long time to us.

We weren’t eager to make that long of a commitment. And that obviously meant that, in looking for space, we weren’t going to do a massive buildout where in order to make it work you need to amortize the cost of that work over 10 years. We had to find a space that was at least kind of mostly built out and ready to go, so that the work that we did do could be amortized over a shorter period of time.

There’s nothing around that screams CompStak. It’s people sitting at desks peering into monitors. This could be an insurance company, this could be an engineering company, this could be an architectural company if you add a few models. Was that deliberate on your part?

I think the culture of CompStak isn’t really about what we do, it’s about who we are. For instance, when you walked in the door, you were greeted by my dog Squeakers. We negotiated the right to bring dogs into the office because key to our culture is work-life integration and encouraging our team members to kind of bring their whole selves to work. Sometimes there’s three or four dogs.

You’ll note, also, we pulled out a bunch of desks in the back, and we built that lounge space with the couch and the foosball table and pingpong, encouraging people to be able to hang out at work. I don’t know if you noticed in the kitchen, but we’re putting in beer taps and we have a beer fridge and creating an environment where people want to hang out, where you want to be in the office. That’s not unique to commercial real estate data by any stretch, but not all companies provide that.

Walk me through the origins of the company versus where you are today. I noticed that you expanded to Belgrade, Serbia. So it looks like you’re going global.

I was a commercial real estate broker. I was trading data with other brokers all the time, over the phone and via email, and in our weekly market meeting, and realized that we were all sharing data with each other. And no one was compiling this information in any sort of comprehensive way. So the idea for CompStak just came from that: We’re sharing information in the industry; let’s take that offline exchange and move it online. I met  my co-founder, Vadim (Belobrovka, still chief technology officer), at a meet a co-founder event, actually, back in 2011. And we decided to embark on this together.

I think our second market was San Francisco because we were actually out in Silicon Valley for a startup accelerator. And then we did the greater Bay Area, and L.A. and D.C. and then Chicago, Atlanta, etc. We kept going and going. Now we cover the whole country, and we expanded from office to industrial and retail and other asset classes. We expanded from lease comps to sales comps. And now we do multifamily as well, through our partnership with Real Page.

That office in Belgrade that you mentioned — we don’t gather data in Belgrade. But we have a team there. I think we have close to 50 people there. They’re not collecting data, but they’re processing data. We also have researchers there who are proactively researching deals, and clearing up discrepancies and trying to make sure that our database is clean.

CompStak was saying that some 42 percent of companies in New York were moving into smaller spaces as opposed to larger spaces. How unusual is that?

I’m not sure what those stats would have looked like a couple years ago in relation to today. I think what was actually a little surprising to me was how many companies seemingly were also expanding, despite the fact that many were contracting. And it seemed like it was a bit like both things were happening.

I believe that more companies will be getting back into the office. Leaders of companies are realizing that their companies work better when people are in the office. I think that there will be some element of remote that’s here to stay. And I think that was going to happen regardless because of the advent of technologies like Zoom and Slack and things like that, where, as it has become easier to work remotely, that was going to happen. COVID just escalated that.

We’ve become much more of a global workforce, as you can see with CompStak. I think what that means is that you’re going to see more companies employing people globally. I think that long term that actually means that that’s going to raise wages overseas, and eventually it will put some pressure on lowering wages in the U.S. because there’s more of a flat labor market across the world. But, ultimately, I’m not bearish on office. I think that if I were an investor, I’d be thinking about what kind of distress is out there that I could take advantage of.

For most of our time at CompStak, the story has been that cap rate compression, particularly for core office assets, has gotten so extreme that real estate investors who used to only invest in core office started expanding into secondary and tertiary markets and to secondary and tertiary asset classes because they were priced out. I think a lot of that money is going to come back as deals are there to be had.

Everything balances out in some regard. What I mean by that is e-commerce took over and grew. And so some shopping malls got converted into distribution centers, and Amazon bought Whole Foods, and then put Amazon lockers in there, and things like that. I think you’re going to see office buildings that are converted into residential, which is then going to constrain the office supply a bit, which will then help bring the office rates back up. 

It might take some time. But, ultimately, as one area becomes stronger, changes will be made through adaptive reuse.