Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2020 CoStar Group Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer I would now like to hand the call over to your speaker today, Sarah Sprague of Investor Relations. Please go ahead.
Thank you very much Joining us to discuss the Q1 2020 results of the CoStar Group. CoStar's CEO and Founder and Scott Wheeler, our CFO, I would like to review the Safe Harbor statement. Certain portions of the discussion today may contain statements for the Q2 of 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, the duration and impact of COVID-nineteen, the pace of recovery, customer usage and purchasing decisions, changes in investment strategy or plans, timing and success of acquisitions, 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 ks 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, further events or otherwise. Reconciliation to the most directly comparable GAAP measure to the non GAAP financial measure 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 release. As a reminder, today's conference call is being webcast and the link is also available on our website under Investor Relations.
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 Florence.
Thank you, So good evening and thank you for joining us today for CoStar's 1st virtual Q1 2020 earnings call or virtual for the management team. The Q1 was really a composite quarter with 2 normal months and 1 pandemic month. As with every business, the COVID-nineteen pandemic has upended normal operations. The pandemic operations in CoStar's the pandemic hit operations in CoStar's Beijing office first, giving us advance warning and I'm sorry, I'm getting a bunch of if we use teams, it beeps in my ears. So I'm sorry, Hub and CoStar's Beijing office first giving us advanced warning and some time to prepare to transition 100% of our North American and European operations to a digital dispersed remote workplace.
Employee safety and continuity of operations for the sake of our investors, clients and our employees was our top priority. Our teams responded promptly, working around the clock to execute our emergency contingency on how plans. We're very great. We believe that 95% of Cushion to working remotely over the past 6 weeks at 90% productivity. These are stressful and disorienting times for our employees and I'm also grateful to them for their resilience and continued focus on our professional responsibilities.
And it's okay if our employees' kids periodically duck their heads into our mini video conference calls. We're consistently keeping our customers and mission critical needs front and center. At the same time, we continue to build and innovate for CoStarz and our clients' future after this disruption subsides. We believe that our products remain mission critical to the vast majority of our clients even as they deal with pandemic driven market disruptions. The commercial real estate industry will continue to operate and to do so we'll need to sign and renew leases, find investment opportunities, value properties, dispose of properties, analyze markets and very importantly market vacancies to generate much needed revenue.
In a time when people cannot readily visit properties in person, digital marketing becomes even more important. CoStar Group and our digital solutions are here to meet the industry's continuing need for high quality data and highly effective digital marketing. In the immediacy of the initial phases of our crisis, our clients are trying to assess what it all means and are trying to derisk. This means buying new information or marketing solutions sometimes is not their first priorities initially. The clients of our clients are also putting things on hold and that's disconcerting to our clients.
As I have communicated consistently over the years in the initial phases of an economic disruption, let alone a global pandemic, our gross sales drop and cancellations rise initially. We are seeing some of that now. I want to stress that our business has always been really resilient through down cycles. In the 2,008 recession, which was very hard on the commercial real estate industry, that was the only time our revenue ever contracted over even a quarter. And even then our revenue only dropped 1% in calendar 2009, 1%.
We experienced a flat sales quarter followed by 2 quarters of declining sales, finishing with a slightly negative sales quarter after that cycle. Again, revenue dropped 1% in the worst year in our 34 year history. Sadly, in any economic cycle, some number of our clients' businesses will fail. Some clients will exit the business for good, others will lose buildings to bankruptcy. Empathetic for any of our clients whose businesses to come in this downturn.
We have often seen clients going through bankruptcy organization now and continue to pay for our mission critical services. As some building owners lose their buildings, these buildings remain valuable assets through bankruptcy and new investors step in to buy them and many of those investors purchase our services as they begin to operate their new purchases. The fact remains in every past cycle, the majority of our customers continue to operate their business and continue to rely on our services. Typically, sales of properties slowed dramatically several quarters to a year or so after a disruption like this. Fortunately, we're not as heavily impacted by the property investment sales cycle.
Our broker clients tend to derive a lot more of their revenue from leasing commissions. In the cycle, leasing pauses initially for quarters or so, but tends to rebound sharply like a sharp V. This is for the simple fact that any given time, the bulk of leasing activity is driven by leases expiring that need to be renewed. Lease expiration dates have no respect for an economic crisis and most companies remain in business and continue to need their facilities, so they sign leases even in a down cycle. And as they sign those leases, our clients earn commissions.
I've asked our economists to use the wealth information we have on past cycles and to run Monte Carlo simulations to estimate expected leasing activity over the next 12 months. We believe there will be close to 1,000,000 leases signed in the 12 months. We believe that these will generate more than $500,000,000,000 of leasing value and more than $20,000,000,000 of commissions. While leasing has initially seized up, eventually there's still a lot of business to be done in the back half of the year. This analysis refers to total leasing activity, not growth in demand.
We expect there will be a significant contraction in demand overall, but the commissions are not normally impacted by that. Rates fall a little bit, don't really hit the impact commissions too hard. In fact, with high leasing values and some contraction of demand, there is something like a game of musical chairs for building owners going on. There's a lot of leasing activity, but every time the music stops, there are few owners left without a critical tenant income or by analogy, a chair. Marketing commercial space and apartments becomes even more important when it becomes harder when a tenant net vital revenue in a shrinking pool of tenants.
The pandemic and social distancing make this economic downturn harder than other downturns. The physical leasing process of prospective tenants driving by properties, being signs and touring through the buildings has in most cases ground to a halt. Just when owners desperately need to promote their buildings and toward tenants to fill growing vacancies, the physical inspection of properties are becoming impractical. The digital marketing of Apartments.com, LoopNet, Reala, BelvEx, Lands of America or BizBuySell offer can become a critical replacement for the loss of the traditional physical leasing process. Prospective tenants can tour their options on apartments.com, see what the buildings look like, use aerial drone videos to understand the area, use Matterports to walk through the apartments virtually and even potentially use our online leasing tools to apply, sign a lease and pay the rent without ever exchanging stacks of paper with a stranger.
If Fortune 500 executives are touring potential new office space in a high rise tower right now, I believe that it's much more likely they're in their PJs at home doing it on LoopNet rather than touring in person. It's much safer that way. I believe that this phenomena is why Apartments.com had its 2nd best sales month ever last month. And in fact, if you exclude a convention sales month like NAA, it was our best sales month ever last month. Even this happened, we achieved that best sales month even after most of the country was locked down and our entire sales team was working from home.
At this point, in April, sales for Apartments.com is pacing ahead of April of 2019. To be clear, we expect that revenues overall may contract in the near term, but we feel that there are number of drivers that make our business resilient or even somewhat countercyclical over the course of the next year. With 34 years of experience running a company that provides economic insights through multiple cycles, there is no doubt that this pandemic has created more uncertainty than any other scenario I've seen. The pandemic has created too much tragedy for too many. It has created serious economic uncertainty.
Good thinkers I respect hold diametrically opposed outlooks. So from where we stand today, it's essentially unrealistic to predict with the certainty we need what the detailed consequences of this pandemic will be on our business over the year to come. So we will provide guidance for the next quarter, but not the full year. However, we continue to believe that our data, analytics and marketing tools will be among the most valuable source of information, leads and potential traffic for our customers. Therefore, we remain very confident in our business model and the role we play supporting the CRE industry.
We're maintaining our investments to strengthen our position, both from a brand as well as a product perspective and believe that we will exit the present uncertainty in a stronger position than before. With that qualifying prologue, I want to continue and quickly review our Q1 results. I'm very pleased that in the Q1, we delivered at the high end of our guidance range across the board. CoStar Group's total revenue grew 19% year over year to $392,000,000 Across all of our service lines, our revenue growth was ahead of expectations with LoopNet revenues leading the pack at nearly 23% year over year growth. Barbers.com was strong with revenue growth just above 20%.
In the context of significant investments we are making in the Apartments.com brand, this quarter's net income was strong at $73,000,000 Adjusted EBITDA was solid at $124,000,000 During the course of the Q1, our sales team generated $48,000,000 in net new bookings despite the pandemic's disruptive impact. Again, Apartments dotcom was the true standout, achieving its 2nd highest quarter ever of net new sales, up 34% versus the prior year quarter. And the whole multifamily team delivered an amazing, resilient and adaptive performance throughout the Q1. They never missed a beat. LoopNet had an exceptional start to the year also, but the CRE industry slowed a little harder in March in reaction to the pandemic.
Let's go into apartments.com a little deeper. In 2019, we invested approximately $150,000,000 to market Apartments.com to consumers. We continue to feel that Apartments.com represents a huge market opportunity for CoStar Group and that we can achieve an outside return by increasing our investment in marketing apartments.com to our previously communicated level of $250,000,000 in 2020. Our enhanced marketing campaign launched in March just as runners began quarantining at home and they consumed unprecedented amounts of media. The initial results from the 1st month of the campaign were strong with 1,500,000,000 impressions, nearly double that last seen last year.
The total visits to apartments.com reached a new all time high, our unaided brand with a new high of 35%. I believe Jeff did a fantastic job with Accretive and we're really happy with the whole series of ads we're going to be able to present to consumers. After a dip in March, as quarantine efforts across America began, leads have recovered substantially and are now trending above the levels we saw at the same time last year. So without a doubt, our marketing investment is paying off and combined with the efforts of our sales force, we hope this will allow us to maintain good net new bookings levels. We continue to work diligently through all the required regulatory processes required before we can close on our acquisition of RentPath.
The bankruptcy proceedings are following the expected course. In late March, no auction was held Okay, that's a virtual earnings call. When the kids call you in the middle of the call and the call waiting against your phone. Sorry. The bankruptcy proceedings are following the expected course.
In late March, no auction was held because no qualified bidders came forward. From the public filings, we can see that the vast majority of the debt holders support the planned reorganization, which includes the contemplated sale to CoStar. The SEC review is ongoing and we expect a second request, which will extend the review on previous estimates of 3 to 12 months from signing the FTC process and will cooperate fully to provide the agency with all the information they need to perform their investigation. There is no additional information we can provide on the outlook for the process at this time. LoopNet started the year very dynamically, continuing the positive usage and sales trends that we saw in the Q4.
As we and the rest of the country transitioned to home in early March, we experienced a drop off in daily average users that lasted for about a month. Over the past couple of weeks, we've seen a steady increase in users just about back to last year's levels. More importantly, the number of searches now exceed last year's level and that's what counts for our customers. As I mentioned, LoopNet sales dipped as in March as people transition to working from home. LoopNet sales have not yet shown the same resilience that apartment sales have shown.
I think one thing to remember is that digital advertising value proposition has been well understood for many years now in the multifamily industry, whereas we're in the early stages of adoption for the commercial real estate industry. Ultimately, we believe that the current situation will actually accelerate LoopNet adoption, but it may take more time. I'm a huge believer that LoopNet will be an essential virtual solution for owners looking to win an outsized and important share of the 100 of 1,000,000,000 in commercial leasing dollars that are likely to occur this year. Right now, industry participants really need to know what's going on. They need to have the best information available for forecasts, availabilities, listings and the pricing information and commitment to continuously improving our user experience and the utility of our CoStar product.
For CoStar Suite in particular, 2020 will be a year of significant product development initiatives. We are deeply engaged with the back end integration of the STR platform. As the year progresses, we plan to integrate STR into the CoStar product at the front end as well. While CoStar operates in dozens of countries around the world, our product is not yet one seamlessly integrated multilingual system, multi localized system. While in the short term, commercial property sales volumes will fall dramatically, we expect those surge again in a year or so.
Much of that investment activity will be multinational. In order to provide the most value and capture the most value for that opportunity, we want to provide our clients with a truly CRE Global Transaction Analysis and Marketing platform. We're hard at work on that initiative and expect to release the first phase in of our global system in the Q3 of 2020. We expect to support a dozen or so languages by the end of the year. Ultimately, a customer from one country will be able to use one platform to seek, analyze and compare investments across multiple countries and cities.
SDR's clients are clearly one of the hardest hit segments of our client base in this pandemic. Peers definitely have had a hard time here. This downturn will be more damaging to them than 9eleven and the great recession combined. We expect STR will likely see the drop in revenue and profit, but we expect the fallout to be relatively or comparatively mild. For our STR subscriptions, we've been able to handle about 80% of the client financial deferrals.
For the other requests, we have offered 2 to 3 month contract extensions that represent in total $300,000 in annual revenue. We also had $54,000 in annual cancel. At this point, it's remarkable, but it suggests less than 1% of canceled revenue. STR subscribers are key partners and the least likely to cancel their products. These are hotel operators that know the data is vital to understand the market and what is happening with their competitors as well.
They also want to make sure they have continuity and reportings they're able to track as soon as recovery is beginning in their market. Due to the number of hotel closures in some markets, especially outside the U. S, we have a plan to continue to provide value to these subscribers even if we cannot report on market numbers for some period of time. We are providing custom analysis such as a deep dive on the average daily revenue declines that uncovered the fact that ADR declines were not from hotels flashing rates, but rather from a rapid shift in the mix of demand. The feedback from these clients in our exclusive content series developed for them has been overwhelmingly positive and underscores the importance and value of maintaining their contract with STR.
STR is the most risk associated with revenues. Ad hoc revenues have been recovering in June. This will begin recovery and development activity will restart, which will result in trend sales or if we have a prolonged downturn, there will be trend sales happening with distressed assets or portfolio evaluations or dispositions. We are releasing for the first time tomorrow monthly profit and loss analysis for U. S.
Hotels. The data has continued to come even and even with so many hotels closed and there's even more desire from hotels to see this profit loss information. The entire industry is watching the recovery in China to hopefully shed light on what a recovery in their part of the world will look like. We have been reporting on China weekly and have now added a video series focused on China recovery that we're producing both in English and Chinese. As of last week, 90% of the hotels in China are open.
And we have a couple of markets that are inching towards 50% occupancy. Overall though, occupancy in China is at 35% and that's certainly nowhere near the normal 70% to 70% but it's well up from the low of 10% occupancy a few months ago, slow but measured. Finally, I want to update you on the state of the commercial estate economy overall. It's really still too early to empirically the pandemic on the commercial real estate. So far, it shows an unprecedented collapse in economic activity.
Jobless claims over the past 4 weeks have exceed $26,000,000 and this figure would likely be higher if it were not for the overwhelmed application websites and offices. Most high frequency economic indicators are showing unprecedented declines from manufacturing output to core traffic to retail sales to consumer confidence. Consensus forecasts are calling for a 4% decline in GDP in 2020 and for the unemployment rate to approach 20%, levels not seen since the Great Depression. We're already seeing the effects of the outbreak on commercial real estate. Continuing with the hotel theme, hotel revenue per available room is down more than 80%.
We have simply never reported figures like that. The immediate impact is less profound than the other property types though, thankfully. Our daily apartment rent series shows that asking rents have fallen by about only 1 percentage since, 1 percentage point since peaking on March 10. That's not much compared to what we've been seeing in hotels. But normally, we'd expect apartment rents to be up about 1% over the same period.
But all in all, given everything, there's no problem there. But we believe that many Americans are actively looking for new apartments. As we've seen, search activity at Apartments dotcom is exceeding pre outbreak levels. In the commercial sectors, leasing volume over the past few weeks has fallen to about half of typical levels and we expect it will fall further in May before it begins rising again in June or July. We expect the retail sector to be the hardest hit as many shops have closed due to social distancing measures.
Demand for retail space has already turned negative so far this year. Many shops, restaurants, bars and coffee shops sadly may never reopen. Our forecasting models predict occupancy losses of as much as 300,000,000 square feet and that vacancy rates could rise 3.50 basis points to levels well above the peak of the last downturn. Rent losses could reach 15%, topping the 10% losses in 2000. Outcomes for office at this point are look less severe as vacancies are lower and construction is about half of the level in 2000.
We expect occupancy losses ranging from 100,000,000 square feet over 4 quarters to a quarter over 2 years, compared with just 57,000,000 square feet over the 7 quarters of the last downturn. Our models predict asking rent losses of 10% to 20% compared with 14% in 2,008. Declines in effective rents will be larger as landlords offer concessions and TI packages to retain tenants. Demand for industrial has held up better thus far. 1st quarter leasing set an all time record and while the pace of leasing has slowed mid March, Amazon has leased more than 6,000,000 square feet in April alone.
Can't help it, I need to point out that Amazon is one of the single heaviest users of LoopNet and we can see their staff looking at LoopNet at many of these properties they eventually lease, need a commercial in there in the economic section to pay for the economics. Amazon has also announced that it's already hired 100,000 workers to cope with the demand and plans to hire 75,000 more. But even industrial will see occupancy losses and rising vacancies. Demand falls even in our upside scenario. The positive absorption returns quickly and rents resume trend growth by the middle of next year.
With negative net absorption, we'll likely suppress the losses last downturn. The 2,008 experience also gives us some confidence that leasing activity won't fall by nearly as much. In 2,008, total leasing volume across commercial property types was down just 7% from the pre recession average and 2,009 was down just 4%, even as occupied space followed by more than 300,000,000 square feet. By 2010, leasing was up 10% from pre recession levels. In the capital markets, it's too soon to know the effect on deal volume, but initial indicators suggest investment activity could be down by as much as 50%.
In the last downturn, deal volume fell by 75%. Swift and unprecedented action by the Fed and thus far prevented the worst, but we expect prices to fall by at least 10% and potentially by as much as 30% or more. In the most dire outcome, prices remain at the depressed levels for the next decade. Our baseline scenario though predicts conditions start to improve next year, where this prediction comes to pass depends on containment of the outbreak and progress towards treatments in the vaccine, two variables that are almost impossible to predict and difficult to incorporate into economic models. We can say with some certainty that many firms will fail, rents will fall and vacancies will rise.
But we also know that the day to day business of commercial real estate will continue as leases expire, tenants seek new space, brokers and landlords negotiate, borrowers refinance, lenders underwrite deals, appraisers determine value and opportunistic buyers come in strong looking for bargains and Americans continue to look for new apartments. CoStar Group is on a strong foundation as we face the full impact of this pandemic. With 19% year over year revenue growth, $73,000,000 of net income in the quarter and $1,900,000,000 in cash on the balance sheet, we had a great quarter in the overall context. Our staff has successfully transitioned to remote working. We believe that we will have a rich set of attractive acquisition opportunities ahead and we're currently exploring a number of such opportunities.
We continue to support our clients' mission critical needs and we're hard at work building the innovative products that will drive our future growth. At this point, I would like to turn the call over to our CFO, Scott Wheeler, for the much more interesting and entertaining section of the call.
Well done. And thank you, Andy. It certainly was an unbelievable start to this year in so many ways. It's unlike anything I've ever seen, that's for sure. But I'm thankful that our CoStar teams are safe and productive.
Our business is performing well and week by week, we will continue to navigate through all of these changes. Financially, we're in a very strong position. We maintain a very conservative balance sheet precisely for times like this, a time when we can continue to invest for the future and take advantage of new opportunities that come our way. We have $1,900,000,000 in cash. Our subscription revenue model is resilient and the services we provide are 100% digital, perfect for a time when person to person contact has been practically eliminated.
Our business is much more diversified than it was in the 2008, 2009 recession, with 50% of our revenue now coming from online marketplaces as opposed to almost 100% from CoStar 10 years ago. On top of that, owners, property managers, institutional investors and lenders now represent our largest customer base, whereas we were much more heavily concentrated in the brokerage customer sector during the last downturn. But things are changing and over the past month and a half, we have financially become very, very granular. We watch daily metrics on contracts, on sales, on customer inquiries, customer retention, cash receipts, purchases and payments. This information, although valuable, does not tell us what the future holds, but it certainly provides insight for the multiple revenue scenarios we create in our financial models, of which even the absolute worst case scenarios do not indicate any concerns with regard to liquidity or the ability to gain operating cash flows.
Now on to some color on the results. We had a great start to the year with revenue in the Q1 up 19% over the Q1 of last year, while revenue growth in the Q1 excluding the STR acquisition was 15% year over year. CoStar Suite revenues grew 12% in the Q1 of 2020 versus Q1 of 2019 as expected. As the stay at home orders began in early March, we saw the daily sales in the new contract flow for CoStar decline dropping to roughly half of the January February levels by the 3rd week in March. Coming into the last week of April, sales levels have stabilized and have improved slightly.
We expect renewal rates to gradually soften in the month ahead just as they did in the previous economic downturn. We discontinued all price increases in early March to our customers. Assuming these sales and renewal trends continue through May June, would expect the revenue growth rate for CoStar Suite to be in the 7% to 8% range for the Q2 of 2020. Revenue in our information services grew 72% year over year in the Q1 of 2020 to $32,000,000 This includes our 1st complete quarter of results for STR. On a combined basis, STR and our Real Estate Manager business represent approximately 80% of the revenue in Information Services.
Both of these businesses have reoccurring subscription revenue as well as one time transaction or implementation fee revenue. The subscriptions revenues, which were 80% of the revenue in the Q1, are stable and as Andy said, will continue to be stable and actually growing both year over year and sequentially into the Q2. This is encouraging as the global hospitality industry is certainly one of the hardest hit by these recent travel restrictions. Now the transaction implementation fee revenues have declined as customers delay purchases and planned implementations. Overall, we expect the reported revenue from information services to grow at a rate somewhere between 30% 40% in the Q2 of 2020 compared to the Q2 of 2019.
Multifamily revenue growth for Q1 remained really strong at 20% over the Q1 2019, which was exactly what we were expecting. Our revenue growth continues to be generated from both an increase in the number of properties that advertise with us, which was up 9% in the quarter, as well as growth in the average rate per property, which increased 11% in the Q1 as customers upgraded to higher level ad packages. Despite the disruptive events that occurred in margin, Multifamily had a phenomenal first quarter with their 2nd highest ever quarterly bookings. Digital marketing has never been more critical than right now. So far in April, we see continued strong sales levels, which have sustained through the 2nd quarter would result in revenue growth of approximately 18% to 19% for the Q2 of 2020 compared to the Q2 of 2019.
Commercial property and land revenue grew 20% year over year in the Q1 of 2020. Our LoopNet marketplace, which represents over 75% of the revenue in this sector, grew 23% year over year in the Q1. Following very strong LoopNet sales in January February, we saw sales volumes drop roughly in half, consistent with what we saw in CoStar Suite in the second half of March and the remainder of that level pretty much through this time in April. With LoopNet user traffic and lead volumes improving week to week, we are optimistic that these sales levels could improve in the months ahead. We expect commercial property and land revenue growth rate to be approximately 10% to 12% for the Q2 of 2020 compared to the Q2 of 2019.
Our gross margin came in at 80% in the Q1 of 2020, in line with expectations, and we expect our gross margins to continue at that level in the Q2. Our profitability was strong in the Q1 with net income, adjusted EBITDA and non GAAP EPS results all ahead of the guidance we issued in February. Overall spending levels came in below our first quarter expectations as we rapidly adjusted to the business to respond to the stand negative effects in the economy. In some areas, our spending increased, included cleaning and sanitation of our offices, the technology. We also increased our bad debt reserves to reflect anticipated economic hardships in certain customer segments such as hospitality, retail and small brokerage shops.
Our vacation accrual actually increased as time off was deferred by many of our employees. In other areas, of course, our spending decreased. This included travel, conferences, facility improvements, infrastructure related initiatives that are not mission critical to support our customers and our products. We froze non essential hiring and compensation in the beginning of March and we curtailed all discretionary spending. Our marketing spend increased year over year in the Q1 of 20 by over $20,000,000 as part of our previously announced multifamily growth strategy.
It included higher levels of search marketing as well as the launch of Apartments.com brand advertising campaign. This represented a significant increase over prior year spending levels and total marketing spend in the Q1 was just modestly lower than planned, primarily due to timing of the spend as some of the expected advertising events such as the NCAA tournament were canceled. In addition, we pulled back on certain types of marketing that would not be effective when our customers are working from home, such as direct mail or office visit gifts. As Andy mentioned, we intend to continue our increased investments in marketing as planned for the Q2 of 2020. Our digital marketplace tools are becoming more relevant and effective during social distancing, Now is not the time to pull back on marketing support for these investments.
Cash and investment balances were approximately $1,900,000,000 as of March 31, 2020, up $857,000,000 since the end of 2019. In March, we borrowed $745,000,000 against our revolving credit line in order to prefund the expected RentPath acquisition and the increased cash reserves for other acquisition opportunities that could emerge in the near future. Remaining $120,000,000 cash generated was due to strong cash from operations and other areas in the Q1. Now, we'll look at a few of our performance metrics. At the end of the Q1, our sales force totaled approximately 800 people.
That's up 45 people from the Q1 of 2019 and down approximately 40 people sequentially from the Q4 of 2019. As we stopped hiring in March, sales force attrition is not currently being replaced with new hires. The majority of attrition in the Q1 relates to inside sales roles. In addition, we shifted a number of our best field customer service people into direct selling roles, resulting in little impact to our direct field sales teams for CoStar and Multifamily, whose levels are roughly equivalent to the Q4 with just a slight decline. The renewal rate on our annual contracts for the Q1 of 2020 was in line with the rate we achieved in the Q4 at 90%.
The renewal rate for the quarter of customers who've been subscribers for 5 years or longer was 95%, also in line with the renewal rate in the 4th quarter. As a point of reference, during the last economic downturn in 2,008 and 2,009, renewal rates for CoStar declined gradually over the course of similarly, we could see declines in our renewal rates in the months ahead. Assumes that our 12 month trailing renewal rate will decline around 200 basis points from the current levels. Subscription revenue on annual contracts accounts for 83% of our revenue in the Q1, in line with the Q4 of last year. Now on to the outlook, and as indicated in our press release and Andy mentioned, we're withdrawing full year guidance and we're not going to be issuing new annual guidance at this time.
We expect to resume our practice of providing annual guidance at some point in the future. We are able to provide estimates for the Q2 of 2020 as our subscription revenue model provides a reasonable forecasting visibility for the near term. Our approach to the 2nd quarter revenue outlook assumes that the overall sales results observed for revenue for the Q2 of 2020 in the range of $387,000,000 to $392,000,000 representing top line growth of around 13% at the midpoint compared to the Q2 of 2019. For the Q2 of 2020, we expect adjusted EBITDA in a range of $110,000,000 to $115,000,000 This outlook assumes we will seasonally increase 2nd quarter marketing spend in apartments and in LoopNet, which will partially be offset by reduced spend levels in personnel and other operating expenses when compared to the Q1. For the Q2 of 2020, we expect non GAAP net income per share in a range of $2.02 to $2.12 based on 36,800,000 shares.
In summary, we delivered very strong financial results in the Q1 of 2020 and our business is on a very solid financial footing. Our teams are safe and productive and we believe our information analytics and online marketplaces will become increasingly valuable to our customers in the months and the years ahead. Thank you for all of your support and I look forward to updating you on our progress in July. With that, we will now open up the call to questions.
And your first question comes from Mario Cortellacci with Jefferies. Please go ahead.
Hi, thanks for the time. I hope all of you and all your families are healthy and staying safe. I was just curious because we've had limited insight into how apartments.com has performed during the last downturn, obviously it wasn't part of your financials. Just wondering if you can give us a little more insight into how that business reacted. And I guess, I think the expectation is that it's more of a consumer type of business.
So it would likely be more impacted, but any extra color or any more background?
Sure. I've asked tenants.com or similar companies that we acquired in the last downturn and typically said that the farmers.com does better in a downturn than in a really healthy market. So higher vacancy rates mean there's more demand for leads and traffic into leasing offices. So in point of fact, many people, executives believe that a really healthy market like we had a year ago is a bad environment to operate Apartments dotcom. Consumer behavior here is fundamental.
It's like having a roof over your head. So it's very resilient during a downturn.
Great. And then just more of a longer term question. I think we've gotten a lot of questions around how the industry could structurally change on the commercial real estate side. I guess just the working from home environment, do you think that impacts demand for commercial real estate longer term? I think I heard you tossed out a number on just square footage of commercial real estate declining over the next 2 years.
I don't know if I heard that correctly or maybe this has something to do with that. But do you think that this is a structural change in the industry that could happen longer term as more people work from home and there's just less demand for office space?
Well, forgive me, I don't want to sound, flooded of having these sorts of discussions. I come across a little bluntly. I was an early cynic on the concept that co working would take over the world. I may be if we're going to want to continue working from home. And I actually think that I think there was a little knee jerk where people said, oh, gosh, I was going to work from home.
I'm not seeing that. And in fact, I could actually make the argument that the potential downside of a quarter 1000000000 square feet of demand going away in the office sector is really just driven by job loss as one person per 200 feet. But the demand for office space is very elastic to the price. So the amount of space per person in Houston is dramatically larger than the amount of space per person. Prices fall 20%.
Overall demand may go up, especially when companies are trying to figure out potentially over each other and want to spread out a little bit. But our staff in Beijing is thrilled to be back in the office. And I've never seen people look happier.
Great. Thank you so much.
Yes. Your next question comes from Peter Christiansen with Citi. Please go ahead.
Thank you, guys. And Sarah, great to hear from you. Thanks for the opportunity to ask a question. Andy, do you think this economic shock will you think about changing any of your products or services, whether it be features or perhaps the way it's priced or packaged? Do you think CoStar will need to change any of its products because of this economic shock?
Yes. We are our product teams have probably initiated a dozen or more product changes to deal with this situation. If you go to LoopNet, you'll see a very prominent virtual tour button now on the homepage. We now have an ability in LoopNet where a broker can or 2 executives, a broker and a tenant or 2 executives can join each other on a LoopNet tour and actually initiate video conferencing together and into LoopNet website as they view properties, we call that co tour. There are probably a dozen or so of these sort of virtual leasing, more social distancing type things that we're doing.
And we're also ratcheting up the marketing. This is the one thing that happens in any one of these disruptions is typically behavior changes permanently. And so we believe that there is a chance that people will come to value online marketing in real estate much more than they valued before. And we're basically pulling all the strings and product features to try to capture that as quickly as we can. There's some other initiatives we're looking at and maybe 1 or 2 acquisitions we're looking at that are responsive to what's occurring right now and what we think will happen next year.
So we're I think probably 30% of what we're doing in product is around this situation right now. I don't think there's a lot changing in pricing. I think we never increase prices when the market is in disruption. But beyond that, I don't think there's a bunch of no big need to change pricing. Too long an answer there, I'm sorry.
No, that's fine. And then have you seen any new use cases for CoStar products? Have there been new clients that have approached you? Interested if anything has popped up.
It's a little early for that, but I'm positive there will be. What you typically see is money on the sidelines looking to move in on distressed properties. That's already starting to ramp up as usual. Great.
Thank you.
Yes. Your next question comes from Stephen Sheldon with William Blair. Please go ahead.
Hi, thanks. Andy, you made the comment that revenues could contract in the near term. So I know there's a lot of uncertainty out there. But generally, how much visibility do you have right now looking at potential revenue in the 3rd and 4th quarters this year? Is there at least a meaningful likelihood that revenue in the second half of the year could be down organically?
Or were you just saying that as a general possibility, but maybe not what we should expect at this point?
I would reiterate that there's a lot of uncertainty right here. We don't know if we're going to be fully back at work, when, how, but I would not be at all surprised if there wasn't I would expect softness in revenue. I have to say that when I saw the apartment sales numbers, see the sales numbers coming in this month, I'm shocked. I'm like, oh my gosh, world's falling apart and we're selling a lot of online marketing. But yes, I have to assume that some elements of our business as with other downturns will see softness, cancellations will go up.
We've had a number of customers ask for forbearance on their bills. We've probably negotiated some deferrals on about 160 customers on CoStar. We probably eliminated some user headcount at some sites on 100 or 200 some sites. Yes, we have to change the long term course. We would expect to pick back up if there's softness shortly thereafter.
And we're going to be try to try to keep everything moving in the right direction, but we certainly can't say that it won't go negative here or there. But again, when it went negative last time, it only one time ever in 3, 4 years on annualized calendar basis, it was 1% down. So I'll take that. If that's the hit we're going to take, I'll take that. But we're going to try to fight it.
Okay. And then secondly, you'd mentioned the potential global system that you plan to roll out in the Q3 for the CoStar Suite. Any thoughts on what that could mean for the CoStar Suite financially as we think about the next few years?
Yes. It's certainly not a pandemic related investment. It's the long play. But you look at I think we when I look at the early days of CoStar, we were in a handful of cities. There was ex demand for our products.
As soon as we covered the majority of the United States, I felt that there was ForEx the demand for our products because we were a way to transcend multiple markets and geographies in the United States. I believe that same opportunity exists on international level. Once we can start to stitch together our European point solutions into a consistent solution along with a consistent solution in the United States and tie in some of our new assets in Asia into that same platform, I believe we'll be able to offer a lot more value. We will not be making massive investments in cycling up Poland this year, obviously, but modest investments to start to build our network around the world. And we'll be doing things like if a customer subscribes to national data in the United States, they will automatically get global data.
So someone in London will search for sales opportunities in Toronto or in look at hotel information in Beijing, etcetera, etcetera. But we do think that we want to be well positioned for what we think the drop in investment select to be multinational. And we want to really be able to build a really capture that global capital flow that's invested in commercial real estate. And it's making good progress and we're lucky that our lead developer, Mike Fulkerson there from my gosh, how could I possibly remember the number one language software. What is it, Scott?
If you're going to learn a new language?
That is a good question. Maybe C plus
Rosetta Stone. Thank you very much. Right. Okay. Thank you.
That comes from our General Counsel. Perfect guy to have running CoStar Development is the guy who led development over at Rosetta Stone.
Sounds good. Appreciate the color.
Definitely have too many devices up in my screen now on my desk now. I have like Rosetta Stone popping up on 16 bubbles on 3 screens.
Your next question comes from Andrew Drew Jeffrey with SunTrust. Please go ahead.
Hi, good afternoon. Appreciate you taking the question
and all the color as usual.
Hi, Louise.
And Andy, I know it's a super fluid environment and I'm just trying to quantify especially on the 2nd quarter guide, which is pretty good all things considered. And some of the qualitative commentary, again, just to acknowledge surprisingly strong sales in multifamily LoopNet. So if you continue to do well given the investments in LoopNet and given the countercyclical aspects of multifamily, should we infer that to the extent the numbers sort of get much worse comparable to the worst parts of the 'eight, 'nine downturn that most of the downside risk exists in suite? And I just wonder about the mechanics of that.
Yes. So we sadly, I really do expect to see a lot of bankruptcies. And I remember clearly in 'eight, you had thousands of companies that were clients going bankrupt. So I imagine you're going to see some bankruptcy, you're going to see folks at the end of their career decide to step out at this point. So you'll see that you'll see that hit the CoStar Suite side and that typically that will happen over X number of quarters, but you also see new buyers entering the market in the after a quarter or 2, especially like vulture investors or opportunistic investors.
You will see building owners go bankrupt. The only up the silver lining there is that they tend to maintain they have in the past tended to maintain their marketing plans through bankruptcy. Bankruptcy courts tend to approve that because they don't want the revenue stream to erode during the bankruptcy process. And then the thing that I remember clearly from the last several cycles is that the new owners $0.50 on the dollar, they are flushed with cash and much of it flows our way. So I think that there'll be friction throughout the system, but probably a little bit more on the brokers who step out of the business or go bankrupt on the CoStar side.
Going forward in the interest of time, we ask that you please limit yourself to one question. Your next question comes from Mayank Tandon with Needham. Please go ahead.
Thank you. Andy or Scott, maybe one
of you could answer this. In terms of the multifamily platform, I think Scott, you mentioned that 11% of the growth last quarter came from some of the upgrades. Could you provide a little bit more color in terms of what those features are that the users are buying? And what does that mean for 2Q in terms of the contribution from the upgrade on the platform? Thank you.
Yes, sure. What I was referring to in the growth in the quarter was that the our clients are choosing higher level ad packages to purchase, which cost more per package. You may recall last year we announced that we're putting in a Diamond Plus level for sorting to the top of the Diamond section. And then this last year at the end of Q4, we also introduced platinum and gold plus tiers as well to sorting to the top of those level. And those aren't material parts of our sales right now, but it's just examples of when people want to get more exposure, when they have additional vacancies they need to fill, then they can buy up to higher level ad packages to get more traffic and more leads.
And we saw that in the Q1 and that's what generated that 11 percent revenue growth from that price mix effect.
Your next question comes from Bill Warmington with Wells Fargo. Please go ahead.
Good morning. I'm sorry. Good evening, everyone.
Can we start the call in the morning? No.
It's that long.
It has. So
signature ads at LoopNet, that was a big focus of the sales conference in January. And the whole move from having LoopNet go from being a broker focused broker driven to the owner driven market. Are you seeing uptake on those ads moving from the broker price point at 35 dollars 40 dollars 60 per listing per month up to the $2,000 to $3,000 level for the owner. Is that taking place? And is that going to continue to drive the revenue?
Because it sounds like the revenue on that division is going from around 20%, 22% expected revenue growth to about 10% to 12% revenue growth?
Yes. So before the pandemic hit, we saw some really good sales results in LoopNet Signature Ads. And then the pandemic hit and everything just basically stopped, while people are figuring out what's going on. But the really good results in Signature Ads continued January, February. And as much as anything, I think we saw some brokers who are more vulnerable calling back some of their spending.
And while it's there was a dip in search activity in LoopNet initially as we went into the pandemic in the United States, that activity has come back up and searches are now stronger than they were before. I think we need to clarify our message or evolve our message to the owners about the fact that they have, the message is really solid for those folks. There will be 100 of 1000 to a 1000000 leases in the next year. There will be a contraction of overall demand. People are not driving by and seeing building signs.
People are not touring the buildings. We are continuously improving the immersive quality of marketing their buildings on LoopNet. And we think we will pick up revenue there and we think it will keep going. But we're being conservative right now because a lot of our revenue on LoopNet comes from small brokerage firms and we think they will take an outside hit, but that's not really impacting the fact that we're going after a new market pretty aggressively, which is the larger institutional owners and the amount of money they spend on an advertisement on a high end LoopNet ad relative to their vacancy loss is about as levered as you can possibly be. You're looking at a $100,000,000 vacancy loss and you're looking at an that costs a couple of $1,000 So I remain optimistic.
I spent most of Sunday working on new marketing materials for LoopNet to try to adjust in focus. And I think we'll I'm still bullish about the potential there. But Mr. Wheeler, Doctor. Wheeler will be Doctor.
No because we're in the low and being conservative.
And Bill, we talked about the revenue per listing increasing in apartments as people buy ads. In just signature ads alone, we saw from the Q4, we were around $500 per ad in the 4th quarter. Now we're a little over $700 per ad in the Q1. And that's not price increases, that's people deciding to buy the platinum and the diamond level signature ads in more and more quantities as time is going on and as our sales force is really focused on those high value properties. So, it's starting to move up nicely from an average price perspective.
Your next question comes from Brian Tomasello with KBW. Please go ahead.
Good evening, everyone. Thanks for taking the question. Regarding the expense base, can you talk about what levers you have to pull there going into the back half of the year and how willing you'd be to pull them depending on how this all plays out over the next few quarters? And particularly with respect to the apartment ad spends, can you clarify your comments regarding the intent to continue with that plan? Is that just with respect to 1Q, meaning the ad spend in the second half of the year could potentially be curtailed depending on how the environment unfolds?
We at this point, as we've mentioned, so there are a bunch of different levers we can pull on cost structure. We have a lot of optionality there, but don't have conditions that would merit contracting our spend dramatically. We actually have a lot of great growth drivers in the business and we are as we report this quarter, we're meeting our expectations. If things fell apart, certainly we would react, but that's not what's going on. And when you look at the results we're having in Apartments dotcom, they're strong and we believe that potential is still there.
And we don't see a reason at this point to change our strategy. Our traffic to Apartments dotcom and our lead flow is at the highest level it's ever been. So across the board, almost all of our key sites are hitting the traffic numbers. And we think that there's a transition going on from more offline to more online. And this is an opportunity that we don't really want to change our course or our mission given what the facts we have today.
So we're anticipating continuing the same investment we originally planned unless something changes.
Your next question comes from George Tong with Goldman Sachs. Please go ahead.
Hi, thanks. Good afternoon. You withdrew your full year 2020 guidance on only guiding 1 quarter out for now. Can you discuss your confidence level in achieving your previously disclosed 2023 targets? George, in the midst
of an extremely George in the midst of an extremely uncertain environment. When we decide not to give 2020 guidance, George asked me for 2023 guidance. I kind of knew you were lurking out there, George. You can get to that. So right now, like we said, we've got the 2nd quarter is what we're seeing so far.
And clearly, we're focused on growing back at our historic levels as quickly as possible and continue to invest so that can snap back and continuing to pursue acquisitions, which will help fill any of those revenue gaps that might be created by a temporary slowdown. Certainly, you either have to buy more acquisitions or you're going to have to get that revenue growth rate running up further in the out years. But mathematically, we can still get there. Again, we didn't tell you know what the length and the duration of the downturn is. You can't say for certain.
But that's not all we know about it so far. And as pace and directions change, we'll obviously keep that in mind.
Uncertainty clearly is high right now. And but the and we don't have a reason to believe that's not achievable at this point until facts change and there's a reason why it's not achievable. I would actually say you could say if an element of that is organic, it would probably be more achievable to I'm sorry, it's an element of that target is acquisitive or by acquisition, it may become easier to achieve those targets in this acquisition environment.
Your next question comes from Brett Huff with Stephens. Please go ahead.
Good afternoon, guys. I'm glad you're all well. Andy, I want to follow-up a little bit with you because I know you've been probably talking with
a lot of your customers and we've gotten a lot of questions on kind of the microeconomic decisions that say a multifamily owner or a commercial building owner who wants to sell or maybe is under duress or maybe wants to wait. Do you have any anecdotes that will help us get some insight into those decisions that folks are making and how therefore they're going to make decisions on whether they advertise on LoopNet or advertise on multifamily? You gave us a good example of the large multifamily owner with lots of vacancy risk, buying an ad for a few $1,000 But are there any more in the middle market or even any more for LoopNet that you could give us? Thanks.
So in terms of I think there are 2 different questions there. One is the microeconomics and the decision to market on LoopNet for Apartments dotcom. I think that math is really quite simple. Like if across the board, the economic trend is going to be to softness in leasing revenue. And when you hit softness in leasing revenues on big dollar items and traditional methods like broker parties or events or signs or people spinning the sign out side or walking through the building are all gone away.
That beautiful print brochure is not going to be seen or touched by anybody. It's a no brainer that the trend should be to digital marketing, virtual experiences, more Matter ports, more drone videos and the like. So that's a no brainer. And on the other element about decisions, how people are using our tools to try to decide, should they sell, should they I think those macro I think those trends are tsunami like and I think that, I hope our clients use our data aggressively and trust the numbers to set their pricing realistically quickly to win at the game of musical chairs, I. E.
Sit down first if the data says you should sit down first, because having a chair is better than having no tenant at all.
So I
think that people should be using our data right now to really be realistic between and also to help coordinate between owner, lender and owner, lender, investor, make sure that they're all making that decision together with data as opposed to hope. And then on the part of investment sales, I feel that there's typically a big disconnect right now where it's going to be really difficult for people to sellers to reduce their expectations enough to meet where buyers are right now. So typically that doesn't happen for a year to 18 months to 24 months, but we will build products and services to try to be there with strong offerings as that volume unleashes.
Your next question comes from Sterling Auty with JPMorgan. Please go ahead.
Yes, thanks. Hi, guys. So for my one question, just want to go back to multifamily in terms of the comments that you made. Is it fair to say that you actually believe the bottom has already been put in, in multifamily? Or is there potential that multifamily could see sequential contraction in the upcoming quarters?
I think there's 2 questions. One is, our experience selling advertising to multifamily and then secondly, rates and occupancy levels and asset prices in the multifamily world. I believe that just by the nature of our business, we are somewhat insulated as to what happens with occupancies. We may be inversely correlated to what happens with occupancies. I think we're relatively independent of what happens with the rents.
The rent falls so far are not material. And I think we're independent of what happens to asset values. We may be somewhat negatively impacted by the fact there may not be a lot of new development over the next 2 years. But at this point, the sales are holding up strong because if you have tenants who are not paying rent and were paying rent the month before and you anticipate they may not be paying rent again in the future, you need to begin to back fill them. If you just had a large property delivered and it's got a lot of vacancy, then you may have a need to really pick it up.
So I don't again, we can't really see beyond next quarter as to what's going to happen in the economy, but right now we feel pretty good about what's happening from Apartments.com's perspective and our experience. It could change, but right now, it has surprised me materially to the upside, shocked me.
Your next question comes from Joe Goodwin with JMP Securities. Please go ahead.
Thank you for taking my question. Real quick, on the comment on the revenue potential revenue growth going negative, could you maybe just give some color on how you're thinking and
So Joe, I'm sorry, could you speak up a little bit? It's very dim. Could you try again?
Is that better? Yes, it's much better.
Sorry about that. So hold me
me a second. So on the commentary around the potential of your revenue actually going negative growth, Could you maybe just give us some color around what quarter will likely be the bottom or at
least how you're thinking about that?
I would look at we don't know, but I would just look back to the worst we ever experienced in 30 years was 2008, 2009 and we had 2 quarters where it really materially fell. So that would be a quarter or 2 out on the CoStar side, but we this is a different cycle and we have no idea when it's just too hard to predict past the quarter. But it typically wouldn't be if you would just take exactly what happened in 'eight and stick it right here, it would be 3rd,
Q4. Yes. The other thing people we're seeing and that you can keep in mind is that if you recall back in the last recession, it started to build the negative momentum started to build through 'eight and then dropped pretty heavily at the end of 'eight, early 'nine. So it took a number of quarters for that to develop. What we're seeing happen here is things dropped quickly and they dropped within a week down to the levels I mentioned, half of the levels of sales, etcetera, which never happened before in the 'eight, 'nine.
And then when we see what's happened since then, as Andy mentioned, we've seen volumes move up in traffic and leads on both LoopNet and Apartments.com. Apartments.com is up where it was before the downturn. We've seen CoStar in the last week and a half. We've seen the contract pacing move up a bit in CoStar in the last week and a half. So we just saw this the cliff dropped quickly and then it held there for a week or 2 and then we've seen some build underneath it.
Now does that mean it's going to continue to build or is it going to drop again if something else happens in the economy or is it going to build faster? Like we don't know. But the pattern is very different in this shock than what happened in as many lessons as we can from it and then just see how this thing develops in a different pattern.
There are no further questions at this time. I'll turn the call back to presenters for any closing remarks.
Thanks for the Q1 joining us for
the Q1 earnings call. We look forward to updating you this summer on the Q2 and I hope you're all staying safe and well and appreciate you all joining us here on the call today.
This concludes today's conference call. Thank you very much for joining us. You may now disconnect.