Blockchain is gradually trickling into all industries, including the property market, as Jeffrey Berman, General Partner at Camber Creek, explains. The real estate industry is dynamic and constantly undergoing change, and Berman explains how blockchain is making its way into real estate and how it’s being used or why it’s not quite ready to be used.
Digital Journal: What are the main trends with real estate?
Jeffrey Berman: One of the trends that we are watching very closely is the “amenitization” of the residential/multifamily and commercial real estate sectors. It used to be that when you rented an apartment or leased an office, you got the keys, settled in and then were left alone. You only heard from your landlord if you were late on rent or if they were addressing a problem with your space. The idea of providing an “experience” for your tenants/residents wasn’t high up on the priority list for most landlords. That’s changed. On the commercial side, you see an increased focus on health and wellness (gyms, fitness classes, even pop-up massage parlors), food and retail, and event spaces. The growth of co-working spaces is contributing to this trend because they are creating competitive pressure as to what services and amenities offices should offer.
The same trend is playing out on the residential side. We’re seeing landlords and property managers focus on health & wellbeing – yoga studios, meditation rooms, on-demand personal training, etc. We’re also seeing efforts around community building, major growth in pet amenities (indoor dog parks, roof or balcony dog parks, pet wash rooms), and entertainment. A number of companies have emerged in the proptech universe that are providing these services. For example, TF Living coordinates fitness classes and personal trainers for multi-family buildings and helps landlords retain residents by providing bespoke fitness (& other amenity) experiences. Landlords are embracing these products and services as a way to retain tenants in an increasingly competitive market.
DJ: How is digital transformation impacting on real estate?
Berman: At the broadest level, I’d break down the impact of technology into two buckets.
First, you have new tools that are helping people in the real estate industry do their job better. Take multi-family leasing: it’s easier to advertise, sign-up tenants, collect rents, and manage the tenant experience with technology. For example, Nestio, a company in Camber Creek’s portfolio, offers a unified marketing platform for multi-family buildings. Similar tools are emerging in every real estate sector. On the transactional side, Camber Creek portfolio company Bowery, offers tech-enabled appraisals for commercial real estate buildings.
Second, technology is bringing new levels of efficiency, transparency and liquidity to the real estate market. Take residential real estate for example. Since the emergence of Zillow and Trulia, real estate brokers have become less essential; not great news if you’re a real estate broker. But those platforms have also helped many more people track residential real estate markets and ultimately invest.
They’ve democratized access to information and in the process made the residential market more efficient. Now you’re seeing a new generation of ‘iBuyers’ offering cash on the spot for homes online, creating much more liquidity in the market. Home flippers can now access hard money loans online through crowdfunding sites; and individual investors can get in on investments that were historically difficult to access.
DJ: What are the general advantages of blockchain?
Berman:The advantages to blockchain technology are the ability to establish chains of ownership, the difficulty in corrupting blockchain data and the speed of transactions.
DJ: How is blockchain disrupting real estate?
Berman:Blockchain can facilitate the investment and sale of real estate to create additional transparency, security and liquidity in the market. In theory, blockchain can allow market participants to see a clear line of ownership for a real estate asset and then transfer that ownership without relying on the existing and cumbersome legal system and record system.
Today, for example, if you want to buy a house, you need to get a company to do a title search just to make sure the seller actually owns the asset they are selling – and then you generally still need title insurance! Blockchain could solve all of that by providing an incontrovertible chain of ownership visible in the public domain. At the same time, blockchain can allow for the “tokenization” of assets, in which the ownership of an asset can be broken into fractional, tradable shares. Those tokens can then be traded more freely, like stocks are today.
This vision for how real estate ownership is tracked and organized is powerful. It’s sparked enormous interest from entrepreneurs and investors. But given the significant institutional and legal barriers, my view is that we are a long way from our property system moving in any meaningful way onto the blockchain system.
DJ: Is the main drive coming from start-ups?
Berman:Primarily; start up entrepreneurs recognize that real estate is a huge industry that has historically lagged in technology adoption. That presents an enormous greenfield opportunity. We have seen funding for real estate technology companies grow exponentially over the past decade – and we’re still in early innings.
At the same time, you’re also seeing large, legacy companies pivot towards technology. In some cases, that just means adoption. In other cases, large asset managers, property management companies and developers are hiring of CTO/CIO’s, investing in proptech funds like Camber Creek, or even making direct investments.
DJ: What will the landscape look like five years from now?
Berman:One thing about real estate is that, at the end of the day, it’s a physical asset. That is not going to change. What you are going to see is three things. First, buildings will be managed based on exponentially more data. Property managers will know how many people are using their buildings, when and for what purposes with a high level of precision, and will be able to plan accordingly.
Software will precisely manage heating and cooling. In that sense, managing a building will be more like managing a technology platform – you will know exactly how people are using it and how to maximize revenues. Second, people will have much more control over their experience within a building – booking a bike at the gym, managing the lighting in their office, preheating their oven on the way home from work. Third, the development and ownership of real estate will be more and more accessible to the public.
DJ: How will consumers benefit from this technology?
Berman:Consumers will benefit in many ways. For example, I mentioned above how technology is creating more transparent, efficient and liquid markets. Nowhere is the impact of that process clearer than in online crowdfunding for real estate. In 2012, the JOBS Act enabled online real estate investing. In the seven odd years since, dozens of companies have sprung up that democratize access to real estate investments that were once available only to high net worth individuals and family offices.
Companies like Fund that Flip, LendingHome, and Patch of Land, for example, target the “fix & flip” market. Others, like Roofstock, help investors purchase residential homes with a renter already in place. There are similar companies that offer access to commercial properties, like ShareStates, and others that offer a diversified real estate portfolio, like Fundrise.
