CoStar Group, Inc. (CSGP) Q3 2020 Earnings Call Transcript

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CoStar Group, Inc. (CSGP -3.11%)
Q3 2020 Earnings Call
Oct 27, 2020, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2020 CoStar Group Earnings Conference Call. At this time all the participants are in a listen only mode [Operator Instructions] After the speakers presentation there will be a question-and-answer session. To ask your questions during the session, you need to press star one on your.

I would now like to hand the conference over to your speaker today, Ms. Sarah Spray. Please go ahead.

Sarah Spray -- Investor Relations

Thank you. Good evening, and thank you all for joining us to discuss the third quarter 2020 results of the CoStar Group. Before I turn the call over to Andy Florance, CoStar's CEO and Founder; and Scott Wheeler, our CFO, I would like to review our safe harbor statement. Certain portions of the discussion today may contain forward-looking statements, including expectations for the fourth quarter and full year 2020. Forward-looking statements involve many risks, uncertainties, assumptions, estimates and other factors that can cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include, but are not limited to, those stated in CoStar Group's press release issued earlier today and in our filings with the SEC, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q under the heading Risk Factors.

All forward-looking statements are based on information available to CoStar on the date of this call. CoStar assumes no obligation to update these statements whether as a result of new information, future events or otherwise. Reconciliation to the most directly comparable GAAP measure to the non-GAAP financial measures discussed on this call, including EBITDA, adjusted EBITDA, non-GAAP net income and forward-looking non-GAAP guidance, are shown in detail in our press release issued today along with definitions for those terms. The press release is available on our website located at costargroup.com under Press Room. As a reminder, today's conference call is being webcast, and the link is also available on our website under Investors. Please refer to today's press release on how to access the replay of this call.

And with that, I would like to turn over to our Founder and CEO, Andy Florance.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Good evening, and thank you for joining us today for CoStar Group's Third Quarter 2020 Earnings Call. Total third quarter revenue was $426 million, up 21% year-over-year. For 20 years, CoStar has grown revenue 20% plus on a compound annual basis. Our performance this quarter is no different and shows clear evidence that in the midst of this pandemic, our business is strong, resilient and countercyclical. In the third quarter of 2020, all of our businesses performed well and continued to be solid, resilient and showed the performance that we saw as we exited the second quarter. In the third quarter, we achieved $53 million in quarterly sales bookings, a 53% increase over Q2 sales bookings.

This was one of our strongest sales quarters ever despite the continued high levels of economic, social and public health uncertainty. Our marketplace businesses displayed very strong countercyclical growth with Apartments.com revenue up 23% in the third quarter 2020 over the third quarter of 2019. Similarly, LoopNet revenue was up 19% year-over-year in the third quarter. Our earnings in the third quarter were very strong with net income of $58 million and adjusted EBITDA of $134 million. Our sales team at Apartments.com turned in one of their best performances ever in the third quarter, with net new sales up a massive 59% versus the same quarter a year ago. Customers continue to invest in Apartments.com because of the strong and growing lead flow we delivered, driven by growing site traffic and engagement. During the quarter, we set yet another record for site traffic. According to comScore, for the third quarter, average unique visitors per month to the Apartments.com network of sites in the quarter was over 25 million, up 20% from the same quarter a year ago. The growth in lead flow was even stronger as total leads generated for our clients from the Apartments.com network of sites in the quarter was up 43% over the prior year quarter, beating the previous record by 16%. Our increased investment in marketing is driving these gains and allowing us to further distance ourselves from our competition. According to comScore, in the third quarter, Apartments.com had 2.3 times as many unique visitors as RentPath, 9 times as many as Zumper 12 times as many as Apartment List, and 22% more than the Zillow Rental Network. Third quarter over second quarter 2020, the Apartments.com network added 14.5 million visits sequentially, while RentPath went down 5.3 million visits. We believe that customers take notice of and care about the huge traffic and lead advantage Apartments.com offers them.

Our customers routinely tell us who they are marketing with, including whether they're marketing with RentPath. Since the beginning of 2020, we estimate that we have added $36 million in annualized revenue to Apartments.com for multifamily properties that were advertising on RentPath. We have added thousands of new properties as advertisers on Apartments.com this year. During the same time period, we do not believe that RentPath has grown their revenue. In fact, we can see from their advertised sales promotions, they're shifting their focus to reselling advertising solutions that, in fact, compete with Apartment Guide and Rent.com. RentPath offers services placing ads for apartment communities on Facebook, social media, Google SEM and the like. They may be doing this because their core sites are less and less attractive to advertisers. We believe that this shift in their business is shift to lower margin, less differentiated product. From when we entered into an agreement to acquire RentPath before any of us had ever heard of COVID, it seems like the world has changed.

While we continue to seek approval at the Federal Trade Commission to close on our acquisition of RentPath, right now, we're very focused on laying the groundwork for a very strong 2021 for Apartments.com. We believe that the total addressable for Apartments.com is huge and growing. In the U.S., 51% of the large apartment communities with at least 100 units are advertising on Apartments.com. Our penetration of the multifamily market continues to grow as we added 879 more of these 100-unit plus communities this quarter alone, with an overall average revenue per property of $1,060 per month.

The opportunity to grow our client base and the properties with less than 100 units is much more exciting. They're both exciting, but the smaller, midsized opportunities is really remarkable. Just 3% of the over 35 -- 350,000 apartment communities with five to 100 units currently advertise with us. That's 3% of the 350,000, five to 100 unit key units, are advertising. But that customer segment is growing at twice the rate of the larger 100-unit plus community advertisers. In the previous quarter alone, 820 communities with five to 100 units began new advertising relationships with us for overall average revenue per property per month of $536. The broadest opportunity of all is to provide marketing and leasing solutions to the 18 million properties with one to four units. So far this year, we've sold about 5,900 ads to the one to 4-unit properties, including almost 2,700 in the third quarter at an average price of $150 per month. We are successfully adding clients from large, medium and small rental properties. This quarter, we blew past the $600 million run rate in annualized revenue and yet we only sold advertising to less than 1% of the U.S. rental properties. We clearly have a huge opportunity here and intend to invest in growing our Apartments sales force into 2021 to capture more of this opportunity and the potential for high incremental margins. The Apartments.com brand is well positioned to capture this opportunity.

As I can argue, Apartments.com is becoming a household name and part of the culture. As many of you have seen, the proof point is the wonderful free advertising we received earlier this month from the writers at Saturday Night Live. In the VP fly debate cold open, Jim Carrey, playing Jeff Goldblum as a fly on Vice President Pence's head, delivers our slogan, "Apartments.com is the place to find a place," while the Apartments.com logo displays. Tens of millions of viewers watched that awesome free placement. This quarter, LoopNet was also able to prove resilient and countercyclical, recording a new all-time high in net new sales and year-over-year revenue growth of 19%. In the third quarter, LoopNet's record high in average monthly unique visitors at 8.3 million supported that revenue growth. That higher traffic drove a 70% increase in email and phone leads to our LoopNet advertisers in Q3 versus Q1 2020.

We have implemented a comprehensive retargeting program this year, which we believe is instrumental to achieving both this growth in traffic and leads. LoopNet's strong traffic is driving strong sales of Diamond ads, our most prominent level, which reached a price point of $11,000 per month and averaged $3,260 per month in the quarter. It's a bargain price point when compared to the hundreds of millions of dollars of potential lease route that these ads are marketing. At the same time, it's a huge number compared to the average price point of only $10 to $20 a month that LoopNet was getting when we purchased LoopNet a little more than eight years ago. I'm convinced that the LoopNet opportunity is just as big as Apartments.com. As we begin making plans for LoopNet in 2021, we intend to invest in growing both our sales force and our marketing with an eye to accelerating our revenue growth even faster. We are working with our advertising agency to build a powerful LoopNet marketing campaign for 2021 that will encourage both owners and brokers to unleash their digital potential by being in the know, by being in the loop. It's a bit of a retro campaign in that getting in the loop was one of the first campaigns for LoopNet back at its founding. But since we acquired LoopNet, the platform has certainly transformed from a slow-growing website offering ads, cheap ads on lower Class B properties to the premier marketplace for world-class commercial real estate.

We believe that now is the time to bring the LoopNet image and marketing up to the top level. You will know when we have achieved our goal when you hear the LoopNet slogan used in a future Saturday Night Live cold open, Pence-Harris presidential debate, four years from now. As LoopNet grows, we are adjusting our organizational structure to continue to facilitate that growth. Going forward, LoopNet's organizational structure will more mirror the Apartments.com organization, which we believe will allow it to focus fully on developing the growth potential of LoopNet. Where LoopNet in the past has shared leadership across product design, sales, customer service and marketing with CoStar, going forward, we'll have a dedicated management team within CoStar Group focused just on LoopNet growth. While the CoStar sales team will continue to sell CoStar for the foreseeable future, we have named James Moon, a veteran Apartments.com leadership team, to Senior Vice President leading LoopNet sales. Over the next 12 to 18 months, we plan to build out a dedicated LoopNet sales team with an incremental 100 to 200 sales professionals. We intend to announce a President of the LoopNet organization within the next month.

We plan to place additional LoopNet leadership positions over the next few months. I want to highlight that all of our marketplaces are growing traffic. BizBuySell hit a new record in average monthly unique visitors this quarter. The Lands of America network also set a record this quarter and is now growing so fast, it's approaching LoopNet's traffic level with 6.8 million monthly unique visitors. The Lands network monthly unique visitor count soared 80% year-over-year. We completed our acquisition of Ten-X at the end of the second quarter this year. And after only three months with the business, I'm more excited than ever about its potential. One of the first steps we've taken is to put any property going to auction on Ten-X to the top of LoopNet and CoStar and present them as upgraded Diamond placements with enhanced retargeting. This is dramatically increasing their exposure to potential bidders.

The benefit was immediate and dramatic. On the auctions that took place following this upgrade exposure, we saw the number of qualified bidders coming to Ten-X jump by 47%. We also observed a 19 percentage point increase in trade rate to 68% versus prior year. The trade rate is a percentage of the successful sales at auction divided by total number of properties brought to that auction. This trade rate of 68% is groundbreaking. Based on CoStar and LoopNet data on sales transactions over the past three years or even longer, the trade rate on traditional offline commercial real estate sales transactions is only 36%. 64% do not sell on their first listing. The minority that did sell were on the market for an average of 500 days before they sold.

Obviously, specific properties vary widely, but those are pretty depressing numbers. Properties selling the traditional method took 5 times as long to sell on average compared to the 90 days it takes to sell a property on Ten-X. On Ten-X, both sellers and brokers have a higher probability of closing the sale at a much faster pace. Hypothetically, a broker utilizing Ten-X can sell twice as many properties in a quarter as an offline broker can sell in a year. We believe that, that is a major game changer. A potentially apt comparison for traditional commercial real estate sales market is back to the days of the OTC pink sheets, which is a slow, expensive, illiquid and not very transparent market. We believe that Ten-X could be comparable to the advent of NASDAQ in the '90s, which dramatically increased price transparency, volume and liquidity in the OTC markets. The upside potential for every player in the commercial real estate market is tremendous and good. We are prioritizing the integration of Ten-X technology with both CoStar and LoopNet to be ready for what could be a significant wave of distressed properties coming to the market in the next 12 to 24 months.

We will soon have real-time information on properties coming to auction fed directly to CoStar and LoopNet, creating additional exposure and interest from our 150,000-plus CoStar users and 7.8 million monthly LoopNet visitors. The full merger of the two back-ends is expected to be achieved during 2021. Ten-X is an exciting space to watch even from an operational perspective. I think that once we get those real-time feeds going, everyone will be glued to their screens as the auctions take place. CoStar has continued to grow through the pandemic despite the pandemic's negative impact on commercial real estate. CoStar revenue grew 6% in Q3 over the same quarter a year ago. Net sales bookings surged back from a soft second quarter, growing 146% third quarter over second quarter 2020. Considering the scale of disruption to commercial real estate this year, I'm very impressed with our team's ability to maintain a strong renewal rate as we have. The vast majority of cancellations from the second quarter occurred among small, 1- and 2-agent broker shops.

Over the past six months, only six firms with five or more brokers have canceled their contracts, clearly demonstrating that the information analytics that CoStar provides are truly mission-critical. I'm very optimistic about CoStar's potential moving into 2021. Just one of our headline product enhancements in the pipeline for CoStar is the integration of robust CMBS data into CoStar. The CMBS data includes deep information on over 100,000 commercial real estate loans, with 90,000 tenant lease expiration dates, 40,000 detailed operating statements and details on -- of thousands of distressed loans. CoStar customers will be able to search for properties based on loan maturity date and payment status. They will have access to detailed operating statements at a property level and tenant lease expiration dates. We'll build income and expense models that customers can use to build their assumptions on acquisitions, valuations or developments. We will be able to use this data to inform our forecast models and analytics and to enhance our overall research efforts.

I'm also excited about the multitude of major enhancements we have in the work as we integrate hospitality information into CoStar. We are close to integrating all of STR's properties into the CoStar database. We are building a suite of hospitality analytic tools into CoStar that we believe will be the best-in-class. We have designed the next phase of developments to migrate the STR benchmarking capabilities from emailed worksheets to a fully digitized, end-to-end SaaS benchmarking solution for the hospitality industry all integrated with CoStar. We aim to offer a broad range of functionalities, including a dashboard view of traditional benchmarks, such as RevPAR and all the STAR reports and also the P&L metrics and forward booking data. The tool will have enhanced portfolio analytics. I believe that this is a potential killer app in the hospitality segment.

While the analytics and benchmarking we are building here are specific to hospitality, I think it's particularly exciting because it creates a proof of concept for CoStar's ability to deliver robust benchmarking across other commercial real estate asset classes in the future. In addition, we have made excellent progress and are on track to deliver a full-featured, internationalized and polyglot version of CoStar in 2021. If you think CRE analytics are cool, both of you, then you would love seeing our new capabilities to generate on-the-fly, real-time, aggregated comparative analytics from multiple countries, multiple languages and multiple currencies all presented in the currency localization and language of the user's choice. So exciting. Given the progress on international CoStar, it's timely that we're announcing today the closing of our purchase of Emporis, a German-based international commercial real estate data provider. Acquiring Emporis allows us to integrate their 700,000 building records and over 600,000 images across 100 countries into CoStar, providing a jump-start to our international data collection efforts. In 2021, we plan to integrate and enhance the international data we have from our existing operations in Spain and Germany into CoStar. Beyond this, we've identified additional 50 international cities that we plan to add to Costar with cost-efficient data collection efforts initiated over the course of the next 24 months.

We believe the market opportunity for us internationally is more than twice the market opportunity in North America. If you've noticed, over the past six months, we've increased our cash reserves through a combination of equity and debt funding to almost $4 billion in cash. I expect that the questions at the end of this call will be similar to every prior call and that someone will rightfully ask where are you with merger and acquisitions. Given that I cannot discuss specific targets or potential transactions, I thought it helpful to clarify what we look for and the criteria we apply when we're evaluating acquisition opportunities. So let me answer the question in advance, but likely, the question will be asked anyhow during Q&A just slightly differently, but nuance is fun. We're a disciplined acquirer.

Our strong balance sheet and stated intention to deploy our cash for M&A have attracted attention from practically anybody considering selling their business in the proptech space. It's a big group. There are currently 7,000 proptech companies trying to create value by digitizing real estate. It's our practice to be open-minded and talk to everyone and consider carefully all potential acquisition opportunities, the vast majority of which we don't pursue. For the ones that we do not pursue, it could be because they're too far afield, too far from what we do, overvalued, not strategically valuable, too small, throw red flags and due diligence or have no clear path to accelerate growth, among other reasons. One common theme for us has been to use acquisitions to enter a new, closely related real estate segment. For example, we acquired national retail bureau to jump-start our retail entry. We acquired Apartments.com to enter the apartment sector. We acquired STR to enter hospitality.

We acquired Lands of America to enter the real land space. In these cases, 75% of the technology and processes are identical to what we already do, maybe more than 75%. Placing a point on map with geo query, presenting acres and square feet, property photos and videos, property characteristics, marketplaces, aggregate analytics and more are the same from one property type to another. Our expertise in one sector enable us to innovate quickly into a new segment. We believe that each time we add a new property segment, our solutions become more valuable to many of our clients because we offer them a more comprehensive solution to their needs. Banks almost always lend money across many property types. Appraisers often value, almost always, more than just one property type. Brokers transact across multiple property types, local government deals with all kinds of property types. Owners often own more than just one property type. Giving these clients consistent, convenient information solutions in one integrated offering is invaluable to them. Another theme for us is to target entering closely related solutions in the same property segment.

For example, CoStar is and was a strong commercial real estate information solutions provider with a lot of data. And by acquiring LoopNet, we added commercial real estate market expertise and revenue. The commercial real estate information resources we already had allowed us to quickly innovate the marketplace solutions LoopNet offered, making them more valuable to searchers. Once we integrate the data behind LoopNet and CoStar, each product essentially generate free data for the other as a byproduct, making each more valuable. We sometimes acquire companies with complementary geographic footprints with similar segment coverage and solutions in order to accelerate our geographic expansion efforts. We built out much of our U.S. coverage 10 to 15 years ago this way and some of the European coverage about 10 years ago, five years ago. We often prefer to buy companies that are slow-growing, where we believe we see strategies to accelerate their growth rate.

We have a strong track record of buying slow-growing companies and accelerating their growth rates. Today, Apartments.com is 6 times the size it was when we acquired it, LoopNet is over 4 times, Real Estate Manager is almost 6 times as big, and COMPS.com is over 8 times as big. Most of these companies were growing in the low single digits, if at all, when we acquired them, and we then accelerated them to a strong, consistent double-digit growth. We jump when we see a chance to acquire a larger company that is a similar product with redundant cost structures. Our acquisition of ForRent is a good example of acquiring a company, eliminating most of the cost structure while maintaining most of the revenue. It's great when you can do a deal where you're converting revenue into EBITDA.

We prefer to acquire larger companies to obtain scale results for relatively the same effort. It's called the Frank Carchedi theory. Since acquiring small or large companies seem to take about the same amount of effort to do right, it makes sense to acquire larger ones. We generally invest in smaller companies only to obtain strategic new product solutions or for the purpose of research and development. Each of the acquisitions we consider must have multiple opportunities to create significant growth and profit for the business. Otherwise, we typically pass on the deal. With this approach, it only takes one of multiple possible investment theses to pan out in order for the acquisition to succeed. Historically, we've taken a balanced to conservative approach to financing acquisitions. Over the past 10 years, we've deployed approximately $6 billion for acquisitions and have leveraged operating cash, equity raises and short-term debt in roughly equal parts to fund these deals.

We anticipate continuing this balanced funding approach in the future with one additional criteria as a result of our debt offering. Going forward, we're absolutely committed to protecting and maintaining our investment-grade credit rating. Finally, I'm going to wrap up with some observations about the real estate economy. Looking to the economy and the current state of the commercial real estate, we see a labor market recovery that is noticeably slowing. Furloughed workers continue to be rehired as the economy reopens but at slower and slower pace each month. The hardest hit sectors of the economy, like restaurants, hospitality, entertainment, are struggling to try and reopen safely as the colder months of the year approach and what appears to be a third wave of infections is beginning to ramp up or as Dr. Fauci says the first wave. But an interesting thing is happening. Even if the possibility of new stimulus seems to be fading, measures of household and business confidence have been rising recently, and census data of new business formation shows that growth in new companies is up nearly 40% from a year ago, more than triple the growth rate at this time in 2019. This isn't what we normally see during recessions. New business formations fell 15% in 2008 and were 0 in 2009. Commercial real estate weathered a tough second quarter and showed resilience in Q3 2020, even the hardest hit sectors of the market.

Hotel occupancy continued its slow grind higher, reaching 50% by quarter end. Parts of the retail landscape clearly remained challenged by reduced traffic and social distancing mandates, but I should note that leasing volumes recovered strongly for retail assets in the third quarter. Retail properties leased to essential credit tenants have been a bright spot as well as discounters and grocery-anchored properties. We've seen grocers taking over previously challenged spaces vacated by home good retailers and even booksellers. This is maybe a good sign to note-good time to note that Amazon opened its first physical grocery store during the third quarter called Amazon Fresh. There is still plenty of distress to work out in retail and hospitality, and we're continuing to see increased usage of the product from our clients and asset management, credit and especially valuation departments. We've heard from clients that -CoStar's clients that CoStar's services are more mission-critical now than ever before, and I think that shows in CoStar's resilience. On the other hand, I hardly need to tell you that the industrial sector has enjoyed great tailwinds in the current e-commerce-driven environment. CoStar data tells us that the third quarter 2020 was actually a new record for industrial leasing volume.

Amazon obviously led the way, but a deep roster of firms are looking to expand their distribution footprints to catch up. Walmart and Target have been especially active this year, along with third-party logistics firms, home good retailers and a long list of others. The surge in leasing demand is coming at the perfect time as there's a record amount of space set to deliver in the near term, much of which remains available. The office market has been inundated with headlines for months now with competing stories of this company shifting toward permanent remote work while another company is starting to move toward a return to office. It seems inevitable there will be increased adoption of flexible work schedules to some degree, but there'll also be demand for more space for social distancing. It's interesting to note that one of the biggest office deals during the third quarter was Facebook's purchase of a brand-new, 400,000-square-foot office campus in Bellevue, Washington, with a price tag of over $350 million. That sure is a lot of money to spend in a lot of office space.

They aren't the only big-tech companies buying or leasing office space in the third quarter. The likes of Google, Apple, Amazon, Microsoft and others have been very active acquiring office space. The multifamily sector has been one of the most fascinating to track over the last seven months. There isn't a lot of high-frequency data in the commercial estate market, but Apartments.com provides us with millions of data points each day on rents and availabilities, giving us real-time views of the market. A large supply wave of 4- and 5-star properties in downtown, CBD locations has continued to push those rents lower. After the second quarter produced the lowest net absorption in eight years, there are fears of a lost leasing season for 2020, but Q3 absorption rocketed back. It was the largest third quarter ever recorded at CoStar, showing that apartment demand has simply been pent up during the first few months of the quarantine. The 2020 leasing season has simply been delayed, and higher vacancies and expensive, newly delivered product are an expanded opportunity set for Apartments.com to help owners to fill those units. The real estate capital markets have begun to show some stabilization. Third quarter deal volume was down 40% from last year, but a closer look shows that each month of the quarter got better. September deal volume was only $4 billion short of the average September over the last five years, only $4 billion.

A selling of the lending markets has certainly helped as CMBS spreads have come back down from their widest levels and new issuance has picked up. Looking at pricing, our same-store price indices indicate valuations have largely plateaued and are yet showing year-over-year declines or broadly higher cap rates. This flattening of prices around pre-COVID levels is consistent with what we're hearing from clients. There's still plenty of demand for good assets, and those that trade aren't going for meaningful discounts. More challenged assets are simply not trading if they don't have to. It seems that fewer being forced to trade today as underwriting standards and leverage were more conservative going into this downturn than the last.

We know from CMBS delinquency and special servicing rates that a wave of distressed assets in hospitality and retail is coming, and the Ten-X platform is expected to give us insight in the investor demand for those properties. We believe a mountain of dry powder waiting on distressed properties is large, which will make an interesting space as we look into 2021 and beyond. This quarter has again demonstrated that our data and information are mission-critical to our customers and that our marketing business are countercyclical. We're extremely pleased with our strong third quarter results, and we're very excited about a strong finish to the year and a great 2021 around the quarter. So -- and to talk more about the growth, I'm going to ask our CFO, Scott Wheeler, to please wear a mask when he's shopping in our store, and then he can deliver his report for the quarter.

Scott Wheeler -- Chief Financial Officer

Thank you, Andy. I have now removed my mask for all those wondering while Andy coughs nearby. Actually, it's our first earnings call since, what, February where we're actually together in the same room.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Isn't it great?

Scott Wheeler -- Chief Financial Officer

Although the room now has these massive, huge air-purifying fans and we're sitting at least eight feet apart, we're at about the safest place you could be.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Yes.

Scott Wheeler -- Chief Financial Officer

It's quite cleanly in here. In fact, my skin is drying out. There's so much...

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

We could also -- while Scott's delivering his section, I'm going to manufacture integrated circuits.

Scott Wheeler -- Chief Financial Officer

All right. What was I talking about? That's right, the recovery. We experienced a great third quarter, improved off the second quarter, and our momentum is building nicely. $53 million in net new bookings for the third quarter, we think, is an outstanding result, the second highest ever, and it was in the midst of our global pandemic. With these strong sales, our third quarter revenue of $426 million came in $6 million above the high end of our guidance range, resulting in 21% year-over-year growth in the third quarter, which was over 200 basis points above our forecast.

That makes 14 quarters in a row with growth at or above 15%, and we have now crossed $1.7 billion in revenue run rate for the business. We now expect consolidated revenue growth of approximately 18% for the full year of 2020. Looking at our revenue performance by services. CoStar Suite revenue growth was 6% year-over-year in the third quarter, slightly ahead of our forecast. The sales of CoStar Suite improved sequentially in the third quarter by over 2 times the level of CoStar Suite sales in the second quarter. Accordingly, we expect revenue growth for Costar of approximately 7% for the year and approximately 4% in the fourth quarter of 2020 compared to prior year. Revenue in information services grew 70% year-over-year in the third quarter of 2020 to $33 million, as expected.

The revenue growth expectation for the full year remains unchanged at approximately 45%, with revenue growth of around 14% in the fourth quarter as we begin to lap the acquisition of STR that occurred in late October of 2019. Without STR, we expect information services revenue in the fourth quarter to be approximately the same as the fourth quarter of 2019. Multifamily revenue growth for the third quarter was outstanding, improving to 23% over the third quarter of 2019. The number of properties advertising with us increased around 10%, while the average revenue per property increased by approximately 12%. We expect revenue growth of around 23% to continue in the fourth quarter, results in approximately 22% revenue growth for the full year of 2020. Multifamily is now at a run rate of over $600 million in revenue and on an annual basis is adding approximately $120 million in revenue growth in a year's time. Clearly, our Apartments.com operating model is delivering fantastic results. And as Andy mentioned, we're looking forward to replicating that same model for similar results with LoopNet. Commercial property and land revenues grew 38% year-over-year in the third quarter of 2020, slightly ahead of our expectations.

And this sector now includes Ten-X for the first time this quarter. LoopNet marketplace revenue grew 19% year-over-year in the third quarter of 2020, sequentially up a bit from the 18% in the second quarter. LoopNet had the highest sales quarter ever in the third quarter as a result of all-time high traffic, improved marketing efforts and a strong effort by our combined CoStar-LoopNet sales team. Including Ten-X, we expect full year revenue growth for commercial property and land of approximately 25% to 28%. Organically, we expect full year revenue growth for commercial property and land to be approximately 15%, with LoopNet growing 20% for the full year. Our gross margins came in at 82% in the third quarter of 2020, slightly increasing from the 81% gross margin we achieved in the second quarter. We expect overall gross margins of approximately 81% for the full year 2020. Profitability was strong in the third quarter with net income, adjusted EBITDA and non-GAAP EPS results all ahead of the guidance we issued in July of this year. Our third quarter adjusted EBITDA of $134 million was approximately $9 million above the top end of our guidance range. Most of the improvement came from our higher revenue with some additional benefit in lower G&A costs than expected.

The resulting adjusted EBITDA margin of 31% is 200 basis points above the midpoint of our guidance range. We increased marketing spend, as planned, in the third quarter compared to the second quarter, making the third quarter our highest marketing spend quarter of the year for the first time since we've acquired Apartments.com. Cash and investment balances were approximately $3.9 billion as of September 30, 2020, up over $300 million since the last quarter. The cash increase reflects the closing of our investment-grade bond offering in early July and repayment of our outstanding revolver balance. Our net cash balance at quarter end was approximately $2.9 billion, and our gross leverage ratio is 1.9 times based on $1 billion debt outstanding and the midpoint of our guidance range for adjusted EBITDA for the year. We're pleased to see that our bonds have consistently traded at a premium to the initial offer price, and we remain strongly committed to our investment-grade rating as we pursue our M&A objectives. Now we'll look at some of our performance metrics for the quarter.

At the end of the third quarter, our sales force totaled approximately 860 people, in line with the last quarter. Excluding the acquired sales teams from STR and Ten-X, which we included in our sales force numbers last quarter, our sales force has declined about 6% in 2020 overall. We recently began hiring sales team members to support growth across all our businesses, which is a good sign, and we'll soon start building the LoopNet sales force that Andy mentioned. Renewal rate on annual contracts for the third quarter of 2020 was 89%, in line with the second quarter, slightly better than we expected. We're encouraged that the renewal rate has stabilized after only one quarter of downward pressure from the disruption in Q2. Renewal rate for the quarter for customers who've been subscribers for five years or longer remained strong and steady, in line with the 95% renewal rate from the second quarter of 2020. Again, the stability in the renewal rate is encouraging, reinforcing the value of our platforms to our customers especially during periods of disruption in the market. Subscription revenue on annual contracts accounts for 79% of our revenue in the third quarter, which is down from the 82% this time last year and last quarter.

The decline of 3% is a result of including Ten-X revenue in the calculation for the first time. Ten-X revenue is based on a percentage of the sales value for transactions completed using the Ten-X platform. In total, when we include all subscription contracts regardless of contract length, approximately 94% of our revenue is subscription-based after including the Ten-X revenue in our calculation. I'll now discuss our outlook for the year and for the fourth quarter of 2020. We currently expect revenue for the full year in the range of $1.644 billion to $1.65 billion, which represents a growth rate of 18% at the midpoint of the range compared to 2019. This revenue outlook represents an increase of $12 million at the midpoint compared to our prior guidance.

We expect revenue for the fourth quarter in the range of $429 million to $435 million, representing growth of around 15% at the midpoint compared to the fourth quarter of 2019. We expect adjusted EBITDA for the full year 2020 to be in the range of $525 million to $530 million, which is an increase of approximately $8 million at the midpoint of the range from our prior full year guidance. With this increased forecast for adjusted EBITDA, we are now slightly above the midpoint of the full year EBITDA guidance that we provided for 2020 back in February before the pandemic. It certainly wasn't a straight line from there to here, but we're very pleased that our team was able to deliver the profit numbers that we guided to at the start of the year despite all of the disruption and dislocation. For the fourth quarter of 2020, we expect adjusted EBITDA in the range of $139 million to $144 million.

With strong traffic growth and record sales levels for LoopNet in the third quarter, we increased marketing spend for LoopNet and Ten-X in the latter part of Q3. We expect to continue this marketing spend level in the fourth quarter of 2020 and beyond in support of the expected growth in both of these businesses. This is why our adjusted EBITDA guidance increase is less than the increase in our revenue guidance. Our outlook for the year currently includes a year-over-year increase in our marketing spend of approximately $90 million. Apartments.com represents approximately $70 million to $75 million of the increase, with the rest attributable to LoopNet and recently the addition of Ten-X to our business. The success of our marketing campaign is evident in our outstanding traffic, sales and revenue results. We expect full year non-GAAP net income per share in the range of $9.39 to $9.49 per share based on 38.3 million weighted average shares.

This is an increase of $0.12 per share from the midpoint of our prior guidance. For the fourth quarter of 2020, we expect non-GAAP net income per share in the range of $2.34 to $2.44 per share based on 39.5 million shares. While I know some of you undoubtedly are curious about our outlook for 2021, and we're not planning to provide 2021 guidance until after the end of this year, we're currently working through our planning and budget process and the many great growth opportunities we have, but we'd like to have the benefit of four more months of results under our belt before we finalize and communicate our plans for 2021. Overall, we remain committed to our long-term objectives of $3 billion in run rate revenue and 40% adjusted EBITDA margins in 2023. In summary, we've certainly had an impressive third quarter. Sales rebounded strongly from the early phase of the pandemic, and our momentum continues into the fourth quarter.

We expect to exit the year with strong double-digit revenue growth both in total and organic revenue growth despite the continuing global pandemic and uncertain economic environment. Our balance sheet is rock-solid and ready to support significant acquisition-driven expansion, while we remain committed to maintaining our fresh brand-new, investment-grade credit rating. So thank you for your time and your support. I look forward to updating you on this year's results and discussing our 2021 operating plans in February 2021.

With that, operator, we can now open up the call for questions.

Questions and Answers:

Operator

Your first question will come from the line of Pete Christiansen of Citi. Please go ahead.

Peter Corwin Christiansen -- Citigroup Inc. -- Analyst

Good evening, thanks for the question gentlemen. I wanted to dig into the growth that you're seeing in multifamily bookings a bit. There's this notion that you have a bifurcation in the market between metro and suburban areas, vacancies growing in metro areas, higher competition in suburban areas. Can you talk about what you're seeing from a sales perspective? Where is the platform really winning today?

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

I don't think we have our sales results broken down by urban and suburban, but my sense of it is that we are seeing -- we're going to be seeing strong sales in the CBDs because these -- there are a lot of properties in the central business districts that are in lease-up. There's been a high supply there and those folks would have -- well ahead of any disruption, would have allocated significant investment for marketing for lease-up, but at the same time, we haven't heard anything to indicate that suburban properties aren't also accelerating their investment in Apartments.com. So, it's across the board that we're seeing this. I think one of the more exciting things is when you look at that number for accelerated sales in the one to four units, which is both suburban and CBD, you can see that -- I mean year-to-date, I think the number is 5700 or 5900 and half of those sales occurred in the last quarter and that's that mid-market sales team, and they're basically geographically dependent. They're covering suburban, urban, rural, the whole nine yards, so good pacing on that across the board there.

Operator

Next question will come from the line of Mayank Tandon of Needham. Please go ahead.

Mayank Tandon -- Needham & Company -- Analyst

Thank you. Andy, you mentioned the international opportunity two times domestic. I just want to get your thoughts on sort of how you go about building it out. Is it still market by market? I think you launched Madrid like several years ago, and then you did that deal in U.K., Realla, I believe, and then you got this deal announced today. I just want to get your thoughts on inorganic versus organic to take advantage of the opportunity internationally, thank you.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Sure, so Sarah Spray is holding up her hand saying it's three times. The global opportunity is three times U.S. opportunity. I, in editing the script, sandbagged it down to two times the opportunity. So, we could debate the semantics of potential there, but we can all agree it's large and the nice thing about is it's also -- it continues to differentiate us as a particularly valuable vendor to folks who are flowing capital cross-border, so when you look at some of the bigger markets, London, New York, often, more than half, as much as 70% of the capital going into investment-grade properties, is crossing borders. So, building a good international solution is particularly valuable to a lot of our best clients. I don't think we have the same opportunity to acquire in the traditional commercial real estate space internationally, like we're just well ahead of any other solutions out there around the world. I mean there are a couple of little players here and there, but not quite the same opportunity we had here in the United States. We are -- the new international CoStar really looks quite impressive when you see it. You'll think, OK, that's really nice, it's very elegant, and our thought is, is that our clients who subscribe to national data in their countries will just be able to see properties around the world and the addition of Emporis allows us to really crank up what they're going to see when we integrate that in. So you know, as soon as we finish that, someone in New York will be able to see thousands of properties in Sao Paulo or in Buenos Aires or in Tokyo. Now, we won't have the same level of detail that we have on CoStar properties in London or New York or Richmond, but it will still be a decent content. Our plan is to focus first on integrating in Germany and Spain, where we already have a wealth of content, get that in there and then we've identified, on a crazy number of parameters that I won't go into, a target set of countries and a pacing for those countries based on liquidity, transparency, availability of data, a bunch of other things and we're going to start with a light model. We might put a team of five or ten folks into a -- into Portugal and focus on comparable sales news, market analytics, comparable sale research and then scraping a lot of the availability content and user data and we're going to treat it a little bit like we treat the United States, where we did flights of cities. We didn't do one at a time, we did five at a time, ten at a time. So, we'll flight cities and we'll just keep working at it until we've gotten through our initial hit list of about 50, and we'll put one or two salespeople in each one of these markets. Again, these are -- these investments are not nearly as large as the investments we've made when we went into the United Kingdom. We'll be relying more on scraping and user entry, which has become bigger and bigger for us, and then also uploading -- digitally uploading user content. So, the -- it's an odd time to do it when you can't cross an international border. By the time we're -- but by the time we've -- got guys and ready to go, we anticipate that we will be able to cross borders again.

Operator

Next question will come from the line of Ryan Tomasello of KBW. Please go ahead.

Ryan John Tomasello -- Keefe, Bruyette -- Analyst

Good evening everyone, thanks for taking the question. The for-sale housing market is clearly seeing an acceleration in demand, which I think has a lot of people wondering if this represents a secular shift in homeownership preferences. So, my question, Andy, is with that as a backdrop, is there any desire to expand CoStar's footprint in housing beyond the rental market? You know, what types of areas of that sector can make more sense and be most complementary, you know, for example, anything on the marketplace side or perhaps on the construction data side, that would be an interesting area for CoStar?

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Yes, so, I mean there are a lot of different subsectors. Just like there are a lot of different sectors in the commercial real estate information and marketplace area, there are a lot of sectors in the residential side. I think that -- it's good to note that CoStar Group actually began life as a residential information business. So, when I first started up, I was doing assessor or recorder of deeds and downloading MLS data. So actually, we started residential. We focused on commercial, obviously. The -- looking at some of the areas you're talking about, the construction data area is interesting, historically not terribly interesting, for a number of different reasons. There's -- there are information services, there are lending services, there are marketplaces. I would note one of the things that really stands out for me is that the United States is an oddly underdeveloped country when it comes to residential marketplaces. If I look at a mature residential marketplace provider like REA Group in Australia and I take the relative size of U.S. and Australia on a GDP basis, it would imply that you'd create a market cap of about $200 billion in the U.S. on a residential marketplace.

You'd create $1 billion-plus of EBITDA in that area and yet no one's really doing a good job, but the same thing with Rightmove in the United Kingdom. If you just take their 50%-plus margins -- I think they're 60%, 70% margins but they're huge, and you just scale them to the U.S., there's clearly a lot of opportunities in the U.S. that are underdeveloped while people are moving in -- away from really pure digital models and getting into actually becoming players in brokerage and flipping and mortgages, and so I think there's some big opportunities out there, nothing to talk about today but very focused on it. and it's an area we feel very comfortable with because we've been working with that space for a while. You can see we're selling a lot of product that, what -- in essence, are houses for Apartments.com recently. So, it's interesting we're keeping an eye on it. And we're -- there's nothing remarkably different about the picture of a house, a dot on a map for a house, a dot on a map for a building, assessor parcel record for an industrial building or a house or a walk-up, so all very similar. But again, the whole space of digital real estate is just massive and unlimited amount of opportunity.

Operator

Your next question will come from the line of Mario Cortellacci of Jefferies. Please go ahead.

Mario J. Cortellacci -- Jefferies LLC, Research -- Analyst

Hi, thanks for the time. I'm just curious about Q3 new bookings. And I know that Q2, a majority of it was in June. And I'm assuming that, that pent-up demand carried over into Q3. So I just wanted to get a sense for what the cadence of the net new bookings were throughout the quarter. And then maybe you can even go a level deeper and maybe give us a sense for what the cadence was for CoStar Suite and LoopNet and Apartments.com just to get a sense for which ones may have accelerated versus which may have just had that pent-up demand and had maybe the first month be the largest. Sure. Let me take a shot at helping you with that one, Mario. The phenomenon we saw in the second quarter was clearly one of significant disruption early in the quarter and then with strong rebound, particularly led by Apartments.com in the marketplaces. I think when I look at the pattern that we saw in the third quarter, it was really pretty well distributed. There wasn't a slowing in the first month and then a big acceleration to the end. It was pretty evenly balanced. I think that pent-up demand that came out of April and possibly May, a lot of that came into June. Then it sustained itself pretty strongly in the third quarter across all of the months. Typically, the third quarter of -- or the third month of any quarter is our strongest from a sales perspective, and that's as much just with the sales pacing and making the quarter closings that the sales force is focused on. But I think if you look at each of the businesses, the marketplaces were very steady sequentially in the quarters. Multifamily tends to come off in the third quarter versus its second quarter numbers. That's seasonally same thing this year, but it was still very strong versus last year, as Andy mentioned. And then LoopNet performed strongly across all the months. Information services is the same with probably some slight growth as STR continues to just, month-to-month, do well with its customers. And CoStar, I think, had a very solid pattern across the quarter as well with no major real cycles to point out. So I think it was pretty evenly balanced and more so than actually some other quarters. So it's encouraging that we've seen that and that, hopefully, we'll see those same -- the same strength carried into the fourth quarter.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

I think the stick out -- the standout was probably LoopNet really. The CoStar sales force, I felt, became pretty positive about the LoopNet product and the potential for that as the quarter went on.

Operator

Your next question will come from the line of Sterling Auty of JPMorgan. Please go ahead.

Sterling Auty -- JPMorgan Chase -- Analyst

Yeah, thanks. Hi guys, I missed it but you said it -- but can you guys give us some more detail on the acquisition that you made? You gave some of the properties, but what is the price paid for an asset like that? And how much does that jump-start your ability to really get kicked off in that region?

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Yes. So I'll let Scott comment on the price. I think he'll say de minimis. I think it's in line with the coffee budget. And lately, we haven't been using much coffee here because but -- though I did buy my own milk for the headquarters today. So the yes. So it's a relatively small purchase price, small revenue stream. It's a company I've known the founders and the principles for a number of years. It's recently been acquired a couple of years ago. I think I've known this company for 10 -I think I went over to visit them 15 years ago or 12, 15 years ago. They have a network of photographers and researchers who are volunteer, sort of like wiki around the world, who go around to take pictures of buildings and collect data about who the architects are, the construction company. They focus -- they initially focused intensely on skyscrapers. They gave an annual award for the best skyscraper in the world. But as time went on, they started focusing on smaller and smaller buildings. In some cities where they've got good volunteers out there, they'll have great coverage, whether it be Sao Paulo or Buenos Aires or whether they'll Tokyo. They don't have the current availability and comparable sale data we might have. They don't have the news. But it's a great sort of grid for us to use to start to bring content in these markets and it has tremendous branding benefits. So the first time next year when a customer a longtime customer in New York who actually has cross-border investment, turns on their CoStar terminal and can browse different beautiful buildings in different cities around the world, I think people are going to waste a bunch of time looking at buildings all over the world from their CoStar terminal.

And I think it's a great branding event. I don't when I look at a London broker, they often sort of look at CoStar as a London company, or a Chicago broker often looks at CoStar as a Chicago company. I think this sort of expands our brand and have them view us a little bit more like a Bloomberg, a global player, really moving away from what started life as an outsourcing function for these broker terms or owners to becoming more of a unique, completely different animal that's a vast global network of valuable commercial real estate data. So it's a teeny company but it's a fun one. It's exciting. It's got some great field researchers. We can't wait until we can travel and we can host these photographers for a global conference, and we'll end up taking a number of these volunteers and hiring them and making them full-time photographer researchers in South Africa or in Kyoto or in Sydney or in Moscow or in Bogota, wherever they might be.

Operator

Your next question will come from Andrew Jeffrey of Truist Securities. Please go ahead.

Andrew William Jeffrey -- Truist Securities, Inc. -- Analyst

Hey, good evening.I appreciate you taking the question. Andy, I like the description of some of the customer characteristics, the property characteristics and the partners. I wonder if you can talk a little bit about sort of how you'd frame up the -- I don't know if there's an average or a template kind of customer. But when you talk about the average spend especially in your -- in bigger customers but also down market, can you kind of frame up how much more spend do you think you can take and what the average revenue per property might look like by segment at maturity? It's a wallet share question.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Sure. So if I just take the -- and I think that there's some noise in that one to four category. But at the 100-unit plus category, we're at $1,000-some per month per property. I think that as the value propositions of digital marketing continue to grow for these owners, I think that number can -- there's room to grow there overall pretty significantly. I think that the -- when you look at the five to 100, the $500-some, that's an impressive amount initially. Those are often being sold by relatively junior, new people to the sales world for us in our mid-market group.

So as they gain experience and as people become familiar with the value proposition of Apartments.com, I think that people bid for more exposure and drive some of those price points up. In particular in the middle, it might move up closer to the $1,000 mark. And then -- sorry. Google Maps wants me to go somewhere. So the -- and then at that lower end, that number is really quite impressive to me. This is our first year really focusing on that area and to add a sales team of about 30 folks focusing on the mid-market and the smaller properties and come up with 5,700 properties at $150 per month. And that number may be a little rough because they can extend. The time period is a little flexible, but many of them usually lease their property up within the month. They can go a little bit further than that but roughly $150 per month. If you think about it, the per-unit cost is higher and higher as you get smaller. So the folks over 100 units are getting a real bargain at $1,000 and the folks -- the thousands of people beginning to buy from us from single-family homes and condos and townhouses, they're willing to pay real premium at that $150 price point. That's probably 10 times the price point or more that a Greystar is paying for 100-unit plus committee. So I think we'll get -- we've had five years of continued appreciation in our average price point in all these areas. I think that trend will continue as we continue to build out a stronger and stronger product offering. And then the thing that I'm very focused on -- I hope you're listening to me, Paige Forrest, is we need to build a bigger boat because everyone wants to ride. So we need more salespeople but we can do that. We can build that team out. It's a great ROI, it's real straightforward, and we have a great team to grow with. Paige Forest is our Head of Sales for Apartments.com, by the way.

Operator

Your next question will come from the line of George Tong of Goldman Sachs. Please go ahead.

Keen Fai Tong -- Goldman Sachs Group -- Analyst

All right thanks, good afternoon. You're building on a dedicated sales force for LoopNet with 100 to 200 sales professionals. Can you discuss the timing of when the sales team will be built out by, how you plan to transition the sales process away from CoStar Suite sales, and what the implications are for margins?

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Sure. So -- gosh.

Scott Wheeler -- Chief Financial Officer

Really, are you supposed to go somewhere?

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Nowhere. Really, it wants me to -- it really wants to do that. Screw it, I'm going to kill Siri. Here we go. I just killed Siri.

Scott Wheeler -- Chief Financial Officer

Sorry, George.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

So yes. The happening there. So yes. So LoopNet separate sales force. I believe we already have hired the first 15 to 20 people. We've also reassigned maybe five or six people already, 15 to 20 folks in that group. For the foreseeable future, the Apartments -- the CoStar sales team is doing a great job selling LoopNet, and we'll continue to do so. They get the hang of it. They're doing a great job. But we just have so much opportunity on the LoopNet side and so much opportunity on the CoStar side. We really want to give folks the ability to focus on their core areas and make sure that all the good prospects are getting covered in any given year and that we are pursuing best practices on retaining and renewing those folks that do begin buying.

So what we'll do is as we have both the CoStar team selling LoopNet and the new LoopNet team selling LoopNet, we will do cross-commissioning, which means that if I'm the primary lead on account and I'm a CoStar rep, when a LoopNet rep comes in and sells that account, I will get some referral commission and I get higher rates on my CoStar so that everyone's on the same team. The more they're selling LoopNet in the market, both the CoStar and the LoopNet people will get escalation in their commission rates. We do it so that it's still very high margin. I think that the ramp-up period for CoStar has historically been six months. As we bring people in and if they focus on the more entry-level LoopNet buyers, that ramp-up period is typically two months. And then as they go to higher-end properties, that might be six months. So I don't think there's a huge sag as we invest in bringing these people on board. I think they'll get productive pretty quickly. So ultimately, our fixed costs are really the research, the software and -- or in the margin. As you add these salespeople, they are incredibly high-margin incremental adds after the first six months of onboarding.

So I think it will just allow us to accelerate revenue growth, and I think it will enhance margin and allow us to invest more in the product while maintaining a high margin over time. And the one thing that's just obvious to me is that the market opportunity is just larger than our current sales force. And our current sales force is doing a great job. On a one-by-one basis, these folks are productive. They're selling but -- they're profitable, but we just need more resources, and we'll be doing that over the next year or so. So one of the things I've done with all of our sales forces is I've asked them to give me a 5-year plan and a 1-year plan as to how many salespeople they think they need and to base that on how many high-quality prospects we have, what's best practice for keeping contact with those high-quality prospects and then the customers we have in each of these sales areas and what is best practice on onboarding and ongoing maintenance or relationship with those folks. And so it's just sort of a mechanical calculation. We'll have a 1-year goal for staffing gains and a 5-year goal for staffing gains. So that's where we are.

Operator

Your next question will come from the line of Stephen Sheldon of William Blair. Please go ahead.

Stephen Hardy Sheldon -- William Blair & Company -- Analyst

All right, thanks. On the multifamily side with solid levels of supply being in the market recently and over the next year and with some forecasting vacancy rates to trend higher, including, I believe, the forecast from your research group, what could that mean in terms of the ad sales environment for Apartments.com and the other multifamily marketplaces next year? Could it become an even more favorable environment than what you've seen this year as owners try to compete for tenants and to fill vacant units?

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Yes. So historically, the conventional wisdom has been and then the empirical experience this year is that the higher the vacancy rate goes, the greater the demand for lead generation with an online marketplace like Apartments.com. So we had heard -- operating Apartments.com for the last five years prior to the pandemic, we had heard that when the market goes south and the vacancy rates rise, demand goes up for these ads. And then the pandemic hit. And in fact, that's what we observed. If we do get a continued secular shift to housing -- and obviously, you know new home construction now is through the roof, lumber prices are through the roof, numbers are huge, there could be more competition for renters and that would bode very well for Apartments.com. I was on the phone with a friend last night, who's looking at running out their New York City flat, and they're having a tough time. And I sold my life-long friend $159 ad. That's how good a friend I am.

Scott Wheeler -- Chief Financial Officer

Always there to help.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Yes, always there to help. And now you can't use my pickup truck to move. I'm sorry.

Operator

Your next question will come from the line of David Chu of Bank of America. Please go ahead.

Jitaek Chu -- BofA Merrill Lynch -- Analyst

All right, thanks. So can you just discuss the LoopNet marketing plans? So it sounds like maybe about $15 million to $20 million in '20 -- or the fourth quarter. Just how much should we think about incremental in 2021? Just wondering if this is going to be something large, similar to Apartments?

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Do you want to talk about it?

Scott Wheeler -- Chief Financial Officer

Yes, yes. So what we saw, obviously, as we got into the third quarter and the strong response with LoopNet that both from paid traffic and retargeting, we found that, that was generating great leads and really helping our sales teams grow and grow the revenue. So to keep it in perspective, obviously, the Apartments business is a direct-to-consumer business, which you have to cover an awful broad territory in your marketing scope to generate the consumer traffic that we need. When we talk about advertising for LoopNet, it's going to be toward the owners and the brokers involved in property transactions. So it's a much more direct approach and it's not as broad as the consumer side. So fundamentally, it's not going to be as large as Apartments. Now when you look at our overall spend in marketing, Apartments is 80% of what we spend every year. LoopNet's only about 10%. And so when we ratchet LoopNet up by three or four more percentage points of that in the second half of the year, it's not a whole big number. So if you annualize what we're spending in the second half of this year, you might get another $10 million to $15 million of marketing spend next year for LoopNet. So now that our marketing budgets are significant as they are, that's not a whole lot. But we haven't set our plans for 2021 yet. We'll still be working on those for the rest of the fourth quarter. And as the marketplace for LoopNet continues to perform, we build that sales force, then we'll definitely want to give them the marketing support they need. But the growth will pay for all of this very easily in LoopNet just like it has for Apartments.com.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Right. So it is increased investment in SEM. We're having great success with our retargeting initiatives for both LoopNet and for Ten-X. That is giving -- providing real value to our Diamond, Platinum advertisers, great results. The fact that we know who's in market -- uniquely know who's in market searching for office space or investments or industrial or retail, once we discover who's in market, we can dramatically drive the frequency with retargeting, and that's working well. So we want to continue that. And then also, since we have a good sense of who's in market to invest in properties with Ten-X, we're investing in increasing the retargeting there. The metrics are great and the results we're getting there. And then we want to do general branding to elevate the image of LoopNet from what had in the distant past been more of a Craigslist for commercial real estate to more of a higher-end marketing platform like Apartments.com. So we will invest but we're investing at a lower level in Apartments.com, significantly lower levels at Apartments.com, but with a view to the fact that we can achieve the same sort of revenue numbers in LoopNet as we can at Apartments.com.

Operator

Your next question will come from the line of Jeff Meuler from Baird. Please go ahead.

Jeffrey P. Meuler -- Robert W. Baird -- Analyst

Yeah, thank you. Good evening. With the build-out of the dedicated LoopNet sales team, I wanted to ask about the plans for, I guess, the suite sales team capacity and prioritization. So just first, are you planning to maintain or grow that capacity instead of reallocate it? And then just from a timing perspective, given, I guess, some CRE end market challenges, is this just that the size of the opportunity with banks, lenders, investors, owners, et cetera, is so big and kind of those cool, new CRE analytics you have in the product development pipeline? But just if you could address just, first, the reallocation or growth in capacity and, second, the timing of when you're doing it. Thanks.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Yes. So we're -- the opportunity for the CoStar team. So we've seen them going more and more into selling LoopNet in the last quarter or 2, which is great news. I mean that's giving us great results from LoopNet, gave us our best sales quarter ever, LoopNet. But that means there's just not enough people left to sell to banks, owners, all the different folks, corporations who are buying CoStar. And as I look forward to 2021, and we've got a very robust, rich product pipeline that is transformative, we got to make sure we have a sales team ready to carry that out to all the opportunities we've got. So our -- we'll be pacing 10, 15 new hires, something in that neighborhood, each month going into the LoopNet side. We might be doing a little bit of growth in the CoStar side. And so just incrementally, as we -- and we're setting up the commission structure so that the CoStar salesperson benefits by making the introduction for a LoopNet person to do the work in selling into one of their accounts, freeing them up to go sell something else but still being able to make money by selling LoopNet into the -- facilitating the sale of LoopNet into their accounts. So it will be intenser ramp-up of both sales forces as we free up capacity in CoStar over the next 12 months, but it will probably be a growth rate of about two years. Most of the growth is in the LoopNet side, but that's freeing up resources on the CoStar side. And there'll be some growth in the CoStar side because just -- we can see we're unable to reach and prospect all the good targets we've got on either CoStar or LoopNet. I hope that answers the question, but the overall message is we've got a good product. We're investing into high margin, and we have a huge market opportunity. We're kind of bullish and we want to grow.

Operator

Your next question will come from the line of Joe Goodwin of JMP Securities. Please go ahead.

Joseph P. Goodwin -- JMP Securities LLC -- Analyst

Thank you for taking the question. Just a quick one on Ten-X. How did it perform in the quarter from a revenue standpoint? Did it beat expectations? And then as far as what that asset will contribute for the remainder of 2020, is that still in line with what you previously provided? Thank you.

Scott Wheeler -- Chief Financial Officer

Yes. We're pretty much in line with what we talked about last quarter. I think we said $25 million to $30 million contribution for the year. We're still right in that range, and it seems to be doing just as expected. Our focus on Ten-X right now is it's integrating the platforms. It's connecting to the LoopNet Diamond ads that Andy talked about. And really, until we get that platforms connected sometime into 2021, we don't expect Ten-X to perform really any differently than where it is today even though we have more interest. But until we can start elevating both the supply and the demand side with that back-end put together, we expect it to be about where it is until two things: we see the integration and then we see the advent of the distressed properties start to come through, which we expect really later next year.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

And I would add another element to that. So we're clearly in the under-construction phase with Ten-X. And as Scott says, optimizing the eyeballs to bring more bidders, we want to bring more demand to that market so when someone puts an asset up there, there's a robust set of bidders. So in each auction, I'm watching carefully to see how many registered bidders, how many people actually bid on each property, and I'm -- and this is not a monetary event. This is more of a tuning it to make sure we're bringing the demand to the marketplace. And we're getting fantastic results there. So the number of bidders is going up. The sell-through rate is going up. And as you do that -- and then also, we're -- yes, so as we do that, we're making good progress there. We're fine-tuning some of their go-to business strategy, go-to-market strategies like their pricing scheme, the way they're -- like there was some -- they were using traditional auction pricing, which I don't think is appropriate in a digital marketplace. We've been playing with their gross margins at different price levels and trying to optimize that a little bit. But the one thing that really stands out is that these numbers are great. I mean if we've got a process here that takes your success rate on selling a commercial property from 36% to 70-some-percent, that's really -- this can -- that's discontinuous change.

That's transformative. If you take a process from taking 500 days down to 90 days, that's discontinuous change. We have appraised values for all these CMBS properties, and we'll take that data set to write a white paper to show that the properties actually sells the same or more in a digital process than an offline process. Then you have -- we can show that and establish that. We've got -- you're achieving the same value but you're doing it at a higher sell-through rate and you're doing it faster, dramatically reducing risk, everyone makes more money, all good. So you got a big winner. Ten-X was a relatively small company and it sort of sat in the shadow of Auction.com, the residential arm of that business. It's interesting Google had invested in Ten-X and Auction.com, and I'm told their primary interest was the commercial real estate marketplace side and I can see why. But recently, there hasn't been a lot of investment in that company, scaling it to its potential. And they have a very, very small sales force to feed the supply side. We're tuning the demand side right now, but the supply side was underdeveloped, so effectively 10, 12 salespeople to try to reach hundreds of thousands of properties selling. So that means that 99% of the properties going to market never heard from a salesperson from Ten-X. And one of the cool things is we've got this very large research, marketing consulting group in Richmond, Virginia, that's constantly talking every month with all these people that happen to be selling buildings. So we're going to be training them on how to develop interest in using this digital platform, and that will be happening over the next month or so. And then we are ramping up that Ten-X sales force so that we can take those leads and pursue twice as many, 3, 5 times as many, 10 times as many prospects, and so a great team-up with research and a growing sales force. We've put a new leader into that sort of field, traditional CoStar field research for us for Ten-X, a gentleman named Brandon Lewe. And so that will feed the supply side. So we're doing all these things, not moving the dial for revenue this month or next month but getting us really optimistic about the potential going into the back half of 2021, '22 and potentially change in the world.

Operator

And your next question will come from the line of Brett Huff of Stephens. Please go ahead.

Brett Richard Huff -- Stephens Inc -- Analyst

Good afternoon or evening Andy, Scott and Sarah. Hope you're all well.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

We are. Thank you. Likewise to you.

Brett Richard Huff -- Stephens Inc -- Analyst

Thanks. So a little bit bigger question because I'm having trouble trying to wrap my head around it and I've gotten some questions from clients. All the moratoria that are still in place and that may stay in place or however long they go for no apartment evictions, how do you all think about that both impacting the business today? Is it a negative demand driver today or positive? And then as those moratoria roll off presumably at some point, what is the impact on Apartments then? I don't understand how that good, bad and different or otherwise. So, thanks.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Yes. So it puzzles me a little bit because I would have expected a higher default rate at this point for people paying their apartment right now. You saw the article. I think they're in the Wall Street Journal. It's definitely growing, and the consortium of folks who are collecting rents have shown that the number of people who are in default on the rent is growing. While there's a moratorium in effect that in theory is bad for Apartments.com because I can't move in a new tenant if there's a moratorium in eviction, in practice, what's happening is the landlords want to build that supply so that the second they can evict someone who isn't paying their rent, they can bring a new renter. And so in practice, short term, in moratorium where it's not impacting us negatively and then when it actually -- when the system clears, that will probably create a lot of demand because you're going to have a lot of flow. Obviously, there's a terrible human cost here, but the question is more technical in the business. I did double check in preparation for the call today. I just checked with -- we're handling hundreds of thousands of rent payments for individual, generally single family homes, and surprisingly that the rent payments there holding up remarkably well. So, so far, no negative signals to our business in what I would have thought would have created a big negative signal. But when it clears, it's a positive signal.

Operator

We have no further questions at this time. I'll now turn the call back over to presenters for closing remarks.

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Thank you all for joining us for this third quarter earnings call, and we look forward to wrapping up the year and I guess a number of months from now, but we'll update you on our progress toward some of the goals we've talked about today. And I hope you all have a good evening, and stay safe. And great for us to be back together in the same conference room for earnings call. Thank you.

Operator

[Operator Closing Remarks]

Duration: 88 minutes

Call participants:

Sarah Spray -- Investor Relations

Andrew C. Florance -- Founder, Director, President & Chief Executive Officer

Scott Wheeler -- Chief Financial Officer

Peter Corwin Christiansen -- Citigroup Inc. -- Analyst

Mayank Tandon -- Needham & Company -- Analyst

Ryan John Tomasello -- Keefe, Bruyette -- Analyst

Mario J. Cortellacci -- Jefferies LLC, Research -- Analyst

Sterling Auty -- JPMorgan Chase -- Analyst

Andrew William Jeffrey -- Truist Securities, Inc. -- Analyst

Keen Fai Tong -- Goldman Sachs Group -- Analyst

Stephen Hardy Sheldon -- William Blair & Company -- Analyst

Jitaek Chu -- BofA Merrill Lynch -- Analyst

Jeffrey P. Meuler -- Robert W. Baird -- Analyst

Joseph P. Goodwin -- JMP Securities LLC -- Analyst

Brett Richard Huff -- Stephens Inc -- Analyst

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