As I have mentioned in several previous blog entry's, at no point in my career in the real estate industry have I witnessed such an explosion of innovation. It seems like on daily basis I am discovering a new site that is focused on the industry, which has long been devoid of a significant amount of innovation. This is great news for our industry as a whole. Competition, innovation and new companies joining the industry means the tools will only get better and professionals more efficient which will lead to a crop of new leaders emerging.
One of the companies to really watch is 42Floors. They are an ambitious group that is taking on a very competitive sector of the commercial real estate sector... office space search. After a very successful launch in San Francisco they have just raised a significant amount of money and recently expanded in New York. I spoke with Darren Nix, Growth Hacker, of 42Floors to get some more insight into their strategy.
Michael: The commercial real estate listings market has a lot of competition. What makes 42Floors unique?
Darren: When we first started thinking about the commercial real estate market, back in late 2011, we spent a lot of time looking at the existing search sites and talking to their users. Users told us they had three primary complaints: 1. Listings being out of date and no longer available. In some cases, the listings were years old and just existed to "troll" for prospective tenant leads. 2. Poor descriptions and lack of photos. 3. Having to register and pay to search.
In short, users weren't happy. So what makes 42Floors unique is that we've been working to solve these problems from day one: our listings are frequently checked and expired to keep our inventory fresh; we gather as much detail about listings as we can and send out photographers to take photos of the spaces; we're completely free to search.
Michael: What's your revenue model?
Darren: With the funding we've received, we're focused on growth for the time being and delaying revenue. In the long term, there's a lot of different ways to bring in revenue but one thing we're committed to is keeping the site completely free to search forever.
Michael: What did you learn about the industry and your site from your very successful San Francisco launch?
Darren: Where to start... first off, the design of 42Floors.com has changed a lot in response to watching San Francisco office hunters use the site. For example, we now cluster all the listings by neighborhoods on the map so that it's easier to filter down to just the listings you want. And we've added a bunch of little things like the ability to see total price per month instead of the cost per square foot per year. We call this process of taking broker-speak and translating it into the way tenants think "humanizing" the data.
Another example: users really photos -- building photos, floor plans, interior photos, etc. When we launched in San Francisco, only 20% of our listings had photos, the rest just showed the Google Street View of the address (which was often the wrong building or a blocked view, etc.). For New York we made a huge push to get photos and 80% of our listings had photos at launch with more on the way.
We also changed a lot of stuff on the backend that isn't visible to our users but matters a lot -- like what happens when they request a building tour. After SF we realized we needed a way to make sure every tour request got to the right broker and that the tenant was contacted promptly so we’re building an email/text/phone queue to make sure every tour request gets served quickly.
Michael: What is your expansion strategy?
Darren: We're not going to start working on the next geographic market until we feel that we've captured the office space market in New York and San Francisco. The way we think about it is, we could quickly open up nationally with a little bit of inventory in a lot of markets. We'd reach a lot more users, maybe ten times as many, but their experience on our site would be pretty mediocre. So instead, we're going to be careful to have a very deep database of listings and great relationships with the property owners and brokers in a particular market before we expand into it.
Michael: How do you market the site?
Darren: Our traffic comes from a lot of places... word of mouth, search engines, news reports, advertising.
Michael: The commercial real industry hasn't historically been one that most people associate with technological innovation so why pick this industry?
Darren: Being able to bring new tech into an industry is a great thing, it just increases the size of our opportunity to be transformative. I like to think that we're bringing proven best practices from other industries, like the free listings photography concept that AirBnB pioneered, and applying it to make the commercial real estate industry better.