Choice for CoStar Group: expand in D.C. or across the country

CoStar Group, the homegrown real estate data provider based in the District, has run out of space for its central research facilities and is considering creating a network of regional research hubs across the United States.

The company made a splash locally when, with the aid of incentives from the D.C. government, it relocated its corporate headquarters from Bethesda to L Street and made a $60 million profit when it sold the building and leased it back a year later. Since then it acquired rival LoopNet, and the firm now has 7 million registered members who rely on it for information about commercial real estate in the United States and Europe. Its stock has been on a steady five-year march upwards, closing Tuesday at $176.29

CoStar is expanding so quickly that it is mulling how to proceed as it continues to grow. It could add researchers to its three main hubs or begin adding regional hubs so its teams of researchers—who constantly update sales and lease data — can be closer to the markets they cover.

When its L Street headquarters filled up it began leasing temporary space at 555 12th St. NW and that space is already nearly filled, said Mark Klionsky, senior vice president. “Right now we don’t have space for 20 new people in D.C. I don’t think,” he said.

Already the firm has submitted a proposal along with developer Jim Abdo to acquire and rehabilitate the historic Franklin School building, a stately but decaying 168,000-square-foot brick building that the District government is seeking private partners for. But even if CoStar is awarded the property it will provide little relief. “It would be great space for software developers or conference facilities but it doesn’t answer the question of where do we house our different research operations,” Klionsky said.

The situation is not much at CoStar’s other main regional hubs, in Columbia locally and San Diego. “We’re busting at the seams in all our major centers right now,” Klionsky said.

So although CoStar’s research has been traditionally centralized, the company is considering creating regional hubs that would serve their respective areas. “One of the things that we’re looking at is how to get our research closer to our customers with research centers in major metropolitan areas like Chicago or Atlanta or Dallas,” Klionsky said.

If CoStar opts to take more space locally it would provide a glimmer of hope for a very flat office market in the city where Andrew C. Florance, CoStar’s president and chief executive, grew up.

Follow Jonathan O’Connell on Twitter: @oconnellpostbiz

Jonathan O'Connell has covered land use and development in the Washington area for more than five years.
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