CoStar Group, the commercial real estate giant that is making a hard push into residential and rentals, saw revenue rise 13% year-over-year to $584 million in Q1, driven by growth in residential and multifamily as the company starts off 2023 on the right foot.
“I’m very pleased with the performance of our business in the first quarter. CoStar continues to grow and remain resilient despite industry headwinds elsewhere,” CoStar CEO Andy Florance said on a conference call.
CoStar Group stock was up sharply to start the day Wednesday, gaining around 4% in early trading.
With $13.1 million in revenue from residential (including Homes.com) and $30.6 million from its “other marketplaces, Florance touted the growth of these non-commercial businesses while also teasing an expansion of its commercial data business into Europe.
Additionally, Florance was bullish on the rest of the year, with an outlook of 13% to 14% full-year revenue growth—despite the fact that the outlook for commercial real estate remains dour.
“The office sector continues to show real weakness with vacancy rates reaching almost 13% in the first quarter,” Florence said. “And it’s matching the all-time peak seen after the great financial crisis.”
CRE transactions were down 51% year-over-year, Florance added, while saying the company plans to focus on European markets and smaller domestic brokers to increase its customer base. “Over the next few years,” CoStar plans to document all commercial properties larger than 1,000 square meters in 36 European cities across 15 countries.
“We have done this before in the U.S., Canada and the UK, and in each instance, these massive efforts have resulted in a profitable and very valuable information asset,” he said.
But in the near term, it was residential that helped push the company ahead in what Florance called a “constrained” market. He highlighted increased traffic to Homes.com (up 153% in March), comparing that to other large consumer-focused residential portals, claiming Zillow lost 5% unique visitors in that time period and realtor.com® lost 20%.
“Alongside our increase in consumer traffic engagement, agent engagement continues to improve,” Florance noted. “We now have approximately 1.1 million agents registered in (the) Homes.com network, up 37% for the first quarter of 2022. Active users, or those who visit the site monthly, have increased 64% versus last year.”
Florance also briefly addressed the planned $3 billion acquisition of realtor.com® parent Move.com, which ended up not happening. Asked about how the company might use its $5 billion-plus in cash on hand, Florance said CoStar is still on the lookout for potential acquisition opportunities.
“We continue to have conversations. You probably have read in the media about a number of conversations we have had that were substantive,” he said. “We did take a four-week holiday…after the latest round of media reports, but there’s still a lot out there. And I have meetings this week, but you won’t know where.”
Acquiring Apartments.com in 2014 and Homes.com in 2021, CoStar has promised to make residential a major part of its business, planning to monetize Homes.com by the end of the year.
Responding to an investor question, Florance said plans for the remainder of this year in residential remain “fairly predictable,” but that he is personally very invested in that sector.
“(W)e’re the underdog as we were in the early days of Apartments.com. And so you have to be coming up with some unique ideas and different strategies. And I think I feel pretty good about what we’ve got going on,” he said.
