BOSTON– Cushman & Wakefield released insights on how blockchain, the $945 million-dollar technology underlying cryptocurrencies, will impact the commercial real estate sector around the globe.
Cushman & Wakefield’s latest research, Blockchain, Bitcoin and Real Estate – Part 2 of the Tech Disruptor Series, takes a deeper dive into the industries and verticals most likely to transition to blockchain technology in the coming years, and how these innovations will, in turn, impact commercial real estate.
While blockchain is forecast to turn into a billion dollar industry in the next few years, growing to $9.7 billion by 2021, the report states that adoption in the commercial real estate markets is limited.
To date, a handful of single – family sales have taken place using cryptocurrency. In March 2018, Cushman & Wakefield helped facilitate the first ever tokenization of a multifamily property in Brooklyn with Meridio, a subsidiary of ConsenSys. The developer, Cayuga Capital Management, is utilizing the Meridio platform to raise equity set up through the sale of digital shares on the blockchain. Investors can purchase digital shares (tokens) representing a fractional ownership in the property with the ability to trade among approved users on the Meridio platform.
In December 2017, New York-based REALECOIN announced what it claims is the world’s first real estate fund for cryptocurrencies.
“As of today, blockchain and cryptocurrency adoption in our industry is in its early stages, but as with any technology that possesses the potential to essentially redefine how transactions occur in the real estate space, we are paying close attention to it,” said Revathi Greenwood, Cushman & Wakefield’s Americas Head of Research.
“As operational hurdles are addressed, convergence with other technologies grows and questions over scalability are answered, we expect blockchain to influence and impact commercial real estate across several verticals,” Greenwood added. “Our timeline for adoption follows Gartner’s expectations that blockchain technology will be widely adopted in a decade, therefore, we see individual applications of blockchain in the commercial real estate space developing as the technology matures.”
Venture Capital expenditure in blockchain technology has exploded. CB Insights estimates $1.0 billion was raised in funding in 2017.
Blockchain technology, also known as distributed ledgers, provides a transparency that many real estate processes lack or do not have access to. At the heart of this technology’s value is transparency and efficiency, which lends itself to a variety of real estate applications from title insurance, due diligence, smart contracts and their supply chain management processes.
Cushman & Wakefield’s Senior Managing Director, Strategic Consulting, Jeff Lessard, takes a global outlook in his role and said blockchain technology should result in faster transaction processes, specifically cross border transactions.
“This improved efficiency will have numerous financial benefits, including reduction in friction costs of commercial real estate transactions, like fees tied to document preparation and review,” Lessard said.
Other key insights detailed in the report examine how blockchain technology can improve how the commercial real estate industry transacts business and operates. Some of the efficiencies include:
- Asset management: Blockchain can improve how large, multi-tenanted properties and portfolios are managed by facilitating the automation of invoicing, reconciliations, and lease management.
- Property searches: Blockchain has the potential to disrupt and transform property searches on a global scale by increasing transparency and access.
- Smart contracts: Improve transaction process through increased transparency which leads to speedier closings. Documents on a blockchain will remain immutable; however, amendments can be appended to show changes which must be approved by all parties. Due diligence will most likely remain the same with the added requirement that technology experts who understand blockchain will need to be added to the process.