Blockchain and its flashier cousin, Bitcoin, have dominated news cycles for the past year or two, but have yet to be utilized by mainstream industries. However, a new report by Cushman & Wakefield predicts that there will be widespread adoption of blockchain technology by commercial real estate in the next decade. This would change the market as we know it.
Despite some public misconceptions, blockchain and bitcoin are not interchangeable. While bitcoin is a type of a cryptocurrency, blockchain is the underlying technology that has many applications supporting cryptocurrencies. At its simplest, blockchain provides a decentralized database of transactions that are each verified by multiple users of the database. This aims to increase the security, efficiency and transparency of those transactions.
For retail, in particular, blockchain could have a large impact.
“Retailers are exploring the use of blockchain in improving supply chain efficiencies, thereby reducing time delays, costs and human error,” explained Revathi Greenwood, Americas head of research at Cushman & Wakefield. “Recently, IBM formed a partnership with major U.S. food retailers and manufacturers to increase transparency and traceability in their food supply chain. For instance, if food is recalled, a product can be traced in a matter of minutes.”
Blockchain could also impact more than supply chain management; it could provide streamlined multi-tenant management for shopping centers and multi-brand retail concepts, thanks to automated invoicing and lease administration. It could even allow for greater global reach, by increasing transparency and access to buyers and sellers across the world.
So why hasn’t real estate capitalized on this yet? Cushman & Wakefield has identified three preconditions for a technology to take off: “acceptance, convergence with other technologies and scalability.” At the moment, blockchain is still an experimental technology and not yet an integrated part of the mainstream. With bitcoin’s value still proving volatile, the technology also carries the risk of the unknown.
“Cryptocurrencies are a little further along the hype cycle in terms of adoption and already accepted as payment by several retailers, but caveats exist,” said Greenwood. “Overstock.com was one of the first online retailers to accept cryptocurrency payments, however, only 0.2 percent of its 2017 revenue came from purchases utilizing cryptocurrencies, much of which were converted to dollars.”
But experts are still confident that widespread adoption is on the horizon. The report claims that more than $1 billion in venture capital was invested in blockchain in 2017, with Q4 investment nearly four times that of 2016’s Q4 total. Tech giants IBM and Microsoft are developing blockchain platforms, while firms such as Zilliqa tackle the issue of transaction speed.