Although the lawsuit does not target Homes.com, it emerged as CoStar dug deeper into home and new construction data.
CoStar Group is facing a proposed class action lawsuit accusing the real estate data giant of helping major commercial brokerages exchange non-public rental information for allegedly inflating rents for office, industrial and retail tenants, according to a complaint filed on behalf of commercial tenant FitFactariDC LLC.
The lawsuit, filed June 12 in the U.S. District Court for the Northern District of Illinois, names CoStar, CBRE, JLL, Cushman & Wakefield, Colliers and Newmark as defendants. FitFactariDC alleges that it paid artificially inflated rent after leasing commercial space in Denver during the proposed class period.
The complaint does not target Homes.com or CoStar’s housing business, but comes after CoStar faced months of pressure from activist investors over spending on the housing portal. It also comes after CoStar announced plans to acquire new construction data company Zonda for $800 million, and after the company entered Zillow-Compass-MRED’s antitrust battle over access to residential properties.
The new lawsuit focuses on CoStar’s commercial lease data business, alleging that the company acted as a hub for a “hub-and-spoke” conspiracy by collecting and redistributing non-public commercial lease transaction data through its lease compensation platform. That data included effective rents, concessions, tenant improvement allowances, lease terms and other lease economics, and the intermediaries allegedly submitted confidential lease data to CoStar in exchange for access to competitors’ data.
“Armed with near real-time visibility into competitors’ final lease terms, Defendants were able to adjust asking rents, reduce concessions, and resist tenant negotiations without fear of being devalued,” the complaint alleges.
The complaint alleges that the alleged conduct began at least on June 12, 2022 and continued until the present day. We are seeking class action status on behalf of commercial tenants who have leased industrial, office and retail space in dozens of local markets across the country.
The co-stars strongly deny the allegations.
“This ill-advised complaint, riddled with fundamental inaccuracies, shows a significant lack of knowledge about our products, our customers, and our industry as a whole,” Gene Boxer, CoStar Group’s general counsel, said in a statement shared with Inman. “The allegation that CoStar Group is participating in a ‘conspiracy’ to increase rents for commercial tenants is contrary to common sense, lacking in facts and frankly frivolous.”
Boxer said Coster’s products reduce “information asymmetry” by providing brokers, landlords, tenants, property owners and investors with accurate and comprehensive real estate and market information. “We look forward to a swift and complete victory in court,” he said.
CoStar has long been one of the most powerful information companies in the commercial real estate space. But in recent years, the company has expanded aggressively into the housing space with Homes.com, Matterport, and now Zonda.
CoStar announced in May that it had agreed to acquire Zonda, a provider of new home construction data and construction software, for $800 million in cash. The agreement gives CoStar access to Zonda’s lot-level database, builder workflow software, and new home marketplaces NewHomeSource and Livabl. KoStar is positioning the transaction with Zonda as an expansion into a major new area of the real estate industry.
Zonda’s announcement comes after months of pressure from investors over CoStar’s spending on Homes.com. Activist investors Third Point and DE Shaw urged CoStar to reconsider its housing portal strategy earlier this year, arguing that the company’s investment in Homes.com was hurting profit margins and shareholder returns. Koster defended the strategy, saying the heaviest phase of Homes.com spending is over.
CoStar recently entered one of the most high-profile listing battles in the residential real estate industry. The company filed a court brief this month defending MRED and Compass in Zillow’s antitrust lawsuit over access to listed properties in the Chicago area, arguing that Zillow’s request for a preliminary injunction unfairly benefits Zillow’s business interests. A judge last week denied Koster’s request to join the lawsuit.
Unlike that dispute, the new proposed class action lawsuit targets CoStar’s own data practices. The case also comes amid broader antitrust scrutiny over real estate data and pricing tools, including litigation and regulatory action involving RealPage’s rent-setting software in the multifamily housing industry. The new lawsuit against CoStar does not allege a similar algorithmic pricing system, but alleges that CoStar and the broker defendants used nonpublic trading data to reduce uncertainty about competitors’ pricing.
FitFactariDC’s complaint seeks damages, injunctive relief, and a jury trial.
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