Posts

Seeing Pros and Cons in “Digitization” of Real Estate

A future-focused Urban Leaders Summit discussion in Frankfurt in May on embracing new technology raised just as many questions as it answered.

Many German business leaders have been fretting about what they call Industry 4.0—the sweeping changes created by machine learning, automation, the “internet of things,” and big data—innovations they categorize under the umbrella of “digitization.” The waves of change triggered by this digital shift are going to be felt for generations to come, as more and more jobs are capable of being done by machines. Will we need humans at all? Will we create a superintelligence that finds us an unnecessary burden?

But going back to the present, Sascha Friesike, professor of digital innovation at VU Universität Amsterdam, wondered why urbanization continues to grow even as we increasingly decentralize work. If jobs can be done from anywhere, why do we still largely choose to move to cities?

Klaus Dederichs of Drees & Sommer was wary about the rush to incorporate the internet of things into properties. Tests have shown that the current generation of smart devices, which usually operate over wi-fi, is easy to hack. “They are compromising buildings’ cybersecurity,” he said. “What if terrorists attack smart buildings rather than drive into crowds?”

But Dederichs did also note some potential for buildings to get smarter, optimizing energy use being one of them. Building information modeling (BIM) is another promising field in the world of smart buildings. This digitizing of the planning, construction, and maintenance of buildings increases efficiency and extends the life of a project. Thus far, BIM has not seen huge adoption rates in Germany; the industry is hesitant largely because of the financial investments and the additional training needed for workers.

Blockchain came up in practically every discussion, as did artificial intelligence. It is difficult to find the middle ground between viral anxiety and tech evangelism, said Thomas Metzinger of the Johannes Gutenberg-Universität Mainz. “What do we do when a smart city crashes? And it will crash. We need graceful degradation,” referring a web design term that refers to designing a project to continue to function even if some features fail.

“We aren’t going to build houses that aren’t future-proof anymore,” said Martin Rodeck of EDGE Technologies, owned by OVG Real Estate. You cannot risk a new building being outdated within five years. And you should not jump on a trend like blockchain or virtual reality just because everyone else is doing it—you need to focus on how to solve the problem at hand.

Read more on Urban Land Institute

 

Bitcoin won’t encourage cryptocurrency for real estate, but cryptoeconomics will

As Bitcoin enters the mainstream economy, a number of homebuyers and sellers are starting to use the cryptocurrency to conduct real estate transactions.   

Last year, Southeby’s International Realty sold one of the first single-family homes in Austin, Texas using Bitcoin. The Austin home was sold when Bitcoin prices were $3,429 in September 2017.

In addition to these transactions, other residential real estate properties are being listed for Bitcoin. A recent Forbes article describes how Canter Companies, a full-service investment firm specializing in real estate and asset management projects, recently listed two multi-million dollar homes for sale in Bitcoin. The homes are collectively priced at under $20 million in Bitcoin. And recently, a 27 acre piece of land in Silicon Valley has been listed for sale in Bitcoin, Ether and XRP with a starting price of $16 million.

However, while there are a handful of homes currently listed for sale in Bitcoin, some believe that using Bitcoin for real estate transactions will not result in widespread adoption — At least not until the real estate industry starts to utilize blockchain technology, which in turn will drive the adoption of cryptocurrency transactions.

While Bitcoin is stepping into society’s massive adoption as a decentralized cryptocurrency, the next-generation blockchain technology  brings a lot more to the real estate world than just a payment alternative. For example, Propy is based on the Ethereum blockchain, an enormously powerful shared global infrastructure that can move value around, while also representing the ownership of property. Ultimately, this enables title deed transfers to take place entirely online. Imagine a world where you can buy or sell your property while sitting on your couch – now this is a reality with blockchain technology, Natalia Karayaneva, CEO of Propy, told me.

According to Karayaneva, the only way to encourage homebuyers and sellers to take advantage of cryptocurrency for real estate transactions is to take a “cryptoeconomics” approach, which goes much further than simply putting homes up for sale in Bitcoin.

Cryptoeconomics lays out the framework for the way in which cryptocurrency ecosystems thrive and function across a decentralized network, known as the blockchain. These ecosystems are able to allow a number of entities who do not know one another to reliably reach consensus across an anonymous, trustworthy network through the use of cryptocurrencies. This is achieved by using a combination of economic incentives and basic cryptographic tools.

 

 

Read more from Forbes

 

 

 

The Blockchain For Real Estate, Explained

There is a lot being written about blockchains, bitcoin and related technologies, and for many real estate professionals, this is part of a brave, new, confusing world of technology.

Like the original internet, the blockchain is a revolution in technology that will touch all people and all businesses. So people are paying attention, but many still don’t understand what the blockchain is.

Imagine that you and your best friend Bob are standing on a stage in an auditorium, and there are 1,000 people in the audience. In front of these 1,000 people, you hand your car keys to Bob, and Bob hands you his Rolex. You declare, “Bob, you now own my car.”

Bob declares back to you, “You now own my Rolex.” There are 1,000 witnesses who can each declare, without doubt, that your car now belongs to Bob, and the Rolex belongs to you. If anyone in the audience later tells a conflicting account of who owns the car or the Rolex, the other 999 people will refute it. And, if you take a spare set of your keys and try to give that same car to someone else, the 1,000 audience members will confirm that Bob owns the car, as each of them witnessed the “transaction.” This is the essence of how the blockchain works.

In its most simple sense, the blockchain is a series of computers (thousands to potentially millions of them) that each keep the same record of an event or transaction in a ledger that is open to the public. Each record is encrypted, and the ledger is virtually hack-proof. Since all these computers see the same thing, they offer consensus that the recorded event or transaction is valid. The most important value of the blockchain is that it allows two or more parties to interact with, say, a financial transaction, with no middleman.

 

Read more from Forbes

 

 

Five Predictions For The Great Consolidation Of CRE Tech

It’s hard to believe that only three years ago the $15 trillion commercial real estate industry had virtually no software support and was vastly underserved by available technology.

The opportunity to innovate in this space has been identified by gritty entrepreneurs and smart investors who have committed over $1.46 billion of early stage investment capital to build and capture the substantial value to be had. “CRE tech” is now a recognizable term used to identify and communicate this period where the commercial real estate industry becomes tech-enabled.

Today, there are hundreds of institutionally-backed software and other technology companies built for the specific needs of commercial real estate that are achieving various levels of traction and success. We’re even seeing early winners with valuations in the hundreds of millions of dollars. I have little doubt that this will grow to include publicly held companies that employ thousands of people and are measured in the billions of dollars as they power commercial real estate into the future.

Read more from Forbes

Real Estate Forgot To Take A Summer Vacation

In commercial real estate, August is traditionally the slow season when business drags on as people come and go from the office to the beach, mountains or some foreign country for a family vacation. But this summer is marching to the beat of its own drum. With the first two weeks of August complete, nothing has slowed down, and the market is as active as ever.

Read more from Forbes