Investors expect to see the first property lease contracts based on blockchain to emerge by 2022. The finding comes from BrickVest, the commercial real estate investment platform, which recently asked investors for their views on the disruptive technology. On average, respondents said that it would come into use within four years’ time, but 25 percent of investors also predict that blockchain will be behind some leases as early as 2020.
In addition, six in 10 real estate investors expect the industry to adopt blockchain technology for transactions, a 9 percent increase on 2016. In contrast, just 18 percent of investors do not expect to see the future use of blockchain in property transactions.
Respondents told BrickVest that blockchain’s main benefit will be to speed up the process of buying and selling a property through smart contracts. Investors also expect it to make transactions cheaper to execute and reduce fraud. Greater transparency and a larger secondary market were other benefits cited by property investors.
The biggest obstacle to the introduction of blockchain, according to 62 percent of property investors, is a lack of knowledge and education into the benefits it brings, closely followed by the integration challenges with existing regulatory and legal frameworks (59 percent).
Nearly half of investors also believe that there is a reluctance among banks, insurers and private equity firms to invest in the technology, while 41 percent cited the opposition by the financial gatekeepers, such as notaries and trustees, whose existence is threatened by blockchain.
Rafal Okninski, chief technological officer at BrickVest, says that most real estate investors no longer ask whether blockchain will be used in property deals. Instead, they are busy attempting to predict the date of its widespread introduction.
“We believe awareness and support of blockchain as a positive force among real estate investors is rapidly growing,” says Okninski. “Once it’s introduced, blockchain will revolutionize the market and bring greater transparency to what remains an opaque and old-fashioned sector.”
RealFoundations has also been looking into potential technological disruptors. The company has conducted research into artificial intelligence, blockchain, the Internet of Things, 3D printing, and virtual, augmented and mixed realities with the support of the European Public Real Estate Association. As part of a report on the subject, RealFoundations has focused on how these new digital developments are likely to affect the real estate market by 2025.
The consultancy has conducted in-depth interviews with 10 leading authorities on emerging technologies, including experts on their application in real estate markets.
In regards to the office sector, RealFoundations has predicted that technology will make it easier to forecast occupancy and space usage, allowing property owners to manage tenant demands for flexible, collaborative and co-working spaces. Physical and online retailing, perhaps the most vulnerable to further disruption, will become integral parts of the same business, according to the report.
Industrial real estate will have to adapt in order to accommodate demand for high-tech storage such as data centers and specialized logistics warehousing.
Marek Handzel is the editor of Institutional Real Estate Europe.