The Co-Star of the game.

What's most unusual about the CoStar Group, according to Steve Coutts, the company's regional vice president, is "its proactive research approach and broker-centered model of operation." What Coutts refers to with those terms are two very simple concepts. First of all, CoStar, unlike some of the other real estate data providers, has its own extensive staff of researchers to gather, analyze, and confirm its information on a regular basis. And, perhaps more importantly, the company has a vested interest in maintaining a close relationship with the brokers and making sure that they are happy.

As Coutts puts it, "When you create a system that cuts real estate professionals out of the deal, you are doomed for failure. They control a large percentage of information in the market. Without them, the information our company would get would be minimal, and our data quality would decrease. But just the opposite is true at CoStar -- we get more information because we get more brokers to sign with us.

The CoStar Group, currently just about the hottest company in the business, began its life 13 years ago in Washington, D.C. Its founder, Andy Florance, was then just another Princeton grad, whose most significant connection to real estate was the fact that his father was a commercial architect. But Florance had the right idea and a lot of energy, so that within a few years the CoStar Group grew from a 15-man regional operation into a national firm, with hundreds of employees.

Florance's idea was simple, but at the time unique: gather all the data pertaining to the sales and leasing of real estate properties, and offer it to subscribers for a small fee. Most brokerage firms were already doing their own research, but CoStar could make the process a lot more efficient. "When you imagine professionals at 50 firms calling each other for information, you realize that there was a lot of duplicate information floating around," Coutts said. "Why should they go to all that trouble to gather data that was not that reliable anyway, when instead they could get all they needed from one source?"

But above all, CoStar would bring transparency to what were usually very secretive operations. "Many of the deals in real estate are done under the table. Our data is available to anyone."

Concerned about the accuracy of the databases they purchased from professional real estate companies, CoStar's founders hired a staff of 700 researchers and established the practice of checking CoStar's information for accuracy every 30 days. "People have to take us seriously enough to participate," Courts said.

The company also has a shrewd business policy. The executives at CoStar are smart enough to realize when another firm has something to offer that they don't, and they work very hard to improve the range and quality of their services. Starting in the early 1990's, CoStar began acquiring some of its competitors in the field, with the goal of implementing their services and databases into the CoStar model. In July of 1998, CoStar bought R-resource, thus moving into the Chicago market, and a little later on two other acquisitions, Jamison and Lease Trend, allowed the company to take over the South and Midwest regions. I

But the greatest deal yet, according to the energetic vice president, was completed just a few months ago, when CoStar bought Comps.com, an Internet firm which specialized in generating confirmed sales reports. By adding the sales reports data to the already existing tenant and owner information, the visionaries at CoStar felt that they had created the most valuable database in the market. "The Comps' product serviced the banking and appraisal industry," Coutts said, "and that was the one group that was left out of the puzzle at CoStar. By combining all of these aspects, the tenant information, the owner information, and the sales information, we were able to come out with the CoStar Exchange Product, which targets investment professionals. The truth is, that without all three of these pieces, you cannot provide any investment information that has any real depths."

At the present moment, Coutts and others are concentrating on making CoStar completely Internet-based. In the past, the company's data was placed on floppy disks, and customers could access it by using their PCs, but at a time when technology tools are developing rather rapidly, CoStar doesn't want to be left behind. "There is definitely a push to go Internet-based with our products," Coutts said, "although we are using the Internet 75% of the time anyway. By the year's end, we are planning to offer all of our services there. There are people who prefer that kind of delivery, so we'll have it."

Of course, CoStar already has a very impressive list of clients. These include such giants as Cushman & Wakefield, CB Richard Ellis, Insignia/ESG, Newmark & Co., and GVA Williams. Coutts proudly tells the story of how Cushman & Wakefield came to use The CoStar Group. "They had one of the best databases in the business," -- he explains, "and RealtyIQ [CoStar's primary competitor] went out and bought it. Within approximately 45 days of the sale, Cushman & Wakefield came back to us and bought every one of our products. They sold an asset that they had for hard cash, but the bottom line was that they realized that they wanted to rely on CoStar as their chief source of information."

With such a resume, what other goals are there for CoStar to accomplish? "Well, we feel that we've achieved the Bloomberg status for the real estate industry," Coutts said. "Our next goal is to become the Nasdaq for it, and we believe that the CoStar Exchange product is the first major step in that direction."