Commercial Portal War Hots Up

Introduction

 

On the 23rd June 2017, yet another business launched into the UK market for commercial property portals. These businesses aim to make the search for commercial properties easier. A quick look at the space tells you how congested the sector has become:

  • Zoopla
  • Rightmove
  • NovaLoca
  • Harness
  • Realla
  • EG PropertyLink
  • Movehut
  • PropertyWorks
  • Showcase

This doesn’t take into account the multitude of commercial property agents who run their own extensive websites. This article takes a look at how this sector is likely to evolve and why the mindset of the entrepreneurs involved will be crucial in the rush for the prize of creating the “Rightmove for commercial property.”

 

Background of Commercial Property Portals

 

Commercial property classified advertising has never taken off online to the same extent seen in the residential sector. Many theories abound as to why, with a lack of focus by Rightmove and Zoopla, plus a widespread desire by commercial agents to retain the pricing power that their residential peers have forsaken to portals, seen as two of the most credible.

There is a lack of focus by Rightmove and Zoopla in commercial property, plus a widespread desire by agents to retain the pricing powerClick To Tweet

Nonetheless, the recent rise of PropTech has given new vigour to those pursuing this opportunity.

The sector can be grouped into three broad categories:

 

The Establishment firms have always offered commercial property search and have very strong search ranking and brand reputation. However, in all cases, commercial property classified advertising has always been an appendage to their core businesses.

In this context, it is perhaps unsurprising that the Challengers have hung on to the Establishment coat-tails for years. However, it is surprising that none of them have ever gained significant traction or establishment of market leadership and they certainly haven’t built a brand reputation amongst consumers. Their tech looks and feels outdated and this is unlikely to appeal to property searchers in an ever improving environment for customer experience. As a CoStar product, Showcase perhaps ought to be in the Establishment category but the product is so outdated that it seems unfair to put it there.

It is this dynamic that has given rise to the three Startup businesses mentioned plus a dozen copycats with variations on a theme.

These Startups have received significant press attention and build their tech primarily with the customer in mind. They don’t have the resource of the Establishment businesses but nor are they handicapped by the legacy issues facing the Challengers.

 

Market Dynamics of commercial property portals

 

We recently saw Zoopla move into the market for short term office space through a Facebook retargeting campaign and Rightmove transition its platform to one which enables better separation of residential search from commercial. Both of these moves appear designed to position each firm for a sustained attack on this space. Where Rightmove may struggle to adequately resource such an attack, given they are hobbled by the Innovators’ Dilemma, Zoopla are not constrained by the same issues. They both have enormous brand capital on their side, but commercial search remains a sideline to the main residential businesses.

To date EG PropertyLink has done nothing overt to respond to the rise of the Startups. They have a lot of brand equity with commercial property agents but the service is simply part of a wider portfolio owned by the same company.

Similarly, the Challengers seem caught between two barrels – well enough known by commercial property agents to be a little complacent but not funded adequately to take on the Establishment.

Meanwhile we see the Startups adopting innovative approaches to distributing their product. Realla offer a suite of marketing tools, Harness is focusing on building a team with a clear skillset in data while PropertyWorks looks like a pure-play portal.

Beyond the total sq ft of space listed on PropertyWorks and Realla, not much data is available to demonstrate the traction of these Startups.

 

Dilution Risk

 

The primary risk for the Startups is that they cannot create a value proposition distinct enough from each other and, even if they reach that point, cannot raise enough money to compete with the budgets of the Establishment or, to a lesser extent, the Challengers.

This means that they are highly vulnerable to a well-funded move into the space by any of the Establishment or to a significant capital raise and marketing campaign by the Challengers.

The primary risk for the Commercial Property Portal Startups is that they cannot create a value proposition distinct enough from each otherClick To Tweet

What the Startups do have on their side is human capital and a modern approach to building technology businesses. However, if they simply dilute each other the best outcome they can realistically expect is an acquisition by the Establishment businesses at a valuation much lower than they would dream of in an IPO. Do they all truly believe the prize is big enough for all of them to win a meaningful market share?

If not then then perhaps they should work together to create the strength and critical mass required to be a viable, long term, standalone business with the clout to take on the Establishment and the Challengers. This is a decision that will face many entrepreneurs across multiple subsections of PropTech over the next couple of years.

Let’s watch this (commercial) space.

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