Blockchain to Transform Commercial Real Estate
Get ready for the blockchain-powered commercial real estate, according to a Colliers International report.
Entitled Tame or Transformational? Assessing Blockchain’s Commercial Real Estate Impacts in Asia, the detailed report noted that blockchain would improve security, efficiency, and transparency. When combined with AI, it can change the way commercial real estate markets operate.
“Real estate is ripe for blockchain-based disruption due to the complexity of the typical transaction. Moving land registries, for example, onto blockchain promises to create tamper-proof records, enhancing the clarity and security of property ownership,” Sam Harvey-Jones, Managing Director of Occupier Services Asia at Colliers International said in a press release.
The most significant benefit of blockchain adoption is the speed of business. Commercial real estate transactions involve various parties. Blockchain can help to build a secure platform where all involved parties can verify and share data.
“Blockchain could be used to build ‘smart’ contracts in which terms and related transactions are automatically, and near-instantly, recorded and immutable,” Michael Bowens, Executive Director, Regional Tenant Representation Asia, Colliers International said in the press release.
Security and transparency would improve with blockchain. According to the report, data quality or availability -- areas that are sometimes lacking throughout emerging Asia -- will particularly benefit.
“One of the applications generating the most excitement is in land registries, which in their current form are often out of date, incomplete and/or prone to manipulation. Moving land registries onto the blockchain promises to create automatically updated, tamper-proof records, ultimately enhancing the clarity and security of land and property ownership,” Bowens added.
Blockchain would also change the way commercial real estate assets are traded and managed, while impacting the structure of regional property markets.
When combined with AI, blockchain could heighten efficiency. The report forecasted that blockchain and AI to "lower staff requirements in the back and middle offices and reductions in office sizes (or at least greater efficiency in office use)." In turn, these impacts would drive decentralization in the financial sector and increase the demand for flexible workspace.
“A definitive industry shift towards smaller, remotely connected or flexibly deployed teams could encourage migration to non-CBD locations and the adoption of flexible workspace models, with clear consequences for markets where financial firms have a heavy presence,” Andrew Haskins, Asia Head of Research at Colliers International said.
However, the report noted that a lack of specific regulations would be a hurdle to blockchain adoption. As regulators take time to ink new regulations, the commercial real estate market would be left in limbo or in a "grey area." For example, registries or digital identities would not be able to get official recognition.
Standardization is another challenge for blockchain adoption. The report noted that Asia's diversity of real estate assets, markets, and regulatory regimes could make it difficult for a standardized blockchain implementation.
Lastly, blockchain solutions would require new or modern systems. Commercial real estate firms with legacy systems might face a transition time and require significant investment for adoption.
While blockchain offers a host of benefits for commercial real estate companies, the report warned that it might face lukewarm reception from the real estate agencies and legal professionals. The technology can make many of their tasks, like title searches or registration of transactions, redundant. In turn, the industry might face resistance to adoption from these participants.
