If you have specific regulations or practices, you will need a custom solution.
Interest in the application has increased in recent years. Blockchain technology and commercial real estate tokenization. In theory, the combination of tokenization and fractional ownership structures would allow companies to sell their interests to investors of all sizes, expanding their market and unlocking further value. Distributed ledger technology has the potential to automate processes and achieve enough efficiencies for significant market adoption.
But the realization of a vision and the distance it takes to make it a reality is more complicated than putting your heels together and saying, “There’s no place like cryptocurrencies.”
“One of the interesting things about real estate is that even though it has traditionally been an investable asset class, it is difficult for individuals to invest in it,” said Head of New Markets, Market Technology, Nasdaq. Scott Shechtman told GlobeSt.com. “A big stepping stone will be the creation of a secondary market for individual properties. That is the stage the real estate industry needs to go. Consider breaking up and trading individual properties, whether residential or commercial. You can see a variety of venture companies.
Nasdaq has the technology to run secondary markets with fragmented real estate exchanges such as Rex Market in the US and IPSX in the UK, but its role is selective.
“We are facilitating the secondary market behind the scenes,” Shechtman said. “We have people who have solved the problems of dividing assets, doing paperwork and all these other things. That is their specialty. Once they are fragmented, they are the means by which our technology can be traded. We are in a better position to serve the general secondary market.”
When it comes to who can trade or register, regulations, etc., the details get very complicated. “We're a long way from that, otherwise we wouldn't be able to do it at scale,” Schechtman says.
In other words, blockchain features like so-called smart contracts (software programs that run under certain predefined conditions and perform actions such as triggering payment transfers at the right time) can be used to improve workflows. The focus is on automating certain parts.
Trust in those providing and enforcing mechanisms like smart contracts is key. “I can't stress enough how important marketplace trust is when people are trying to create marketplaces in new areas,” says Schechtman. One aspect of Nasdaq's focus is to spot manipulative trading patterns and stop fraud before it gains traction.
Once fragmentation is complete and a reliable mechanism for a secondary market is in place, availability should expand and a higher level of opportunity discovery by investors should open up the market.
