There’s so much technological advancement happening in the world right now that staying current with what might affect you as an individual or business owner becomes overwhelming. Even some of those trends that we might perceive to be in their infancy and haven’t yet been fully adopted, such as cloud computing for example, are already being overshadowed by emerging technologies.
This acceleration in digital technologies can lead us to question whether something really has the potential to make a difference to our lives or if we should not pay too much attention before the next buzzword comes along to replace it. Ignoring any hype, Web 3.0 cannot be dismissed as just another fleeting digital technology.
What is Web 3.0 and how is it different to previous generations?
Web 3.0 is the next generation of the internet, one which we haven’t heard much about, probably because the foundational technology underpinning Web 3.0 is blockchain; something that is dominating our feeds right now and not always in a good way given it’s association with bitcoin.
Web 1.0 started life almost like an online directory, where users could view a limited amount of structured information but there was no interaction with web pages and content was created and managed by webmasters only. Importantly that content could only be understood by humans too, there was no element of machine recognition and learning.
With Web 2.0 the main advance was that the internet became interactive. It was a two-way street rather than a one-way corridor and users were able to generate their own unstructured web content and share it between platforms and applications. This era saw the birth of web applications that enabled blogs, podcasts and other collaborative platforms for socializing and information sharing between users.
So why do we need another internet era?
What Web 3.0 brings to the party is processing with near human-like intelligence and the eradication of boundaries between digital content and physical objects. In simple terms it brings together humans, systems and physical devices - fast. This could be through humans using IoT devices such as smartphones and watches, connected to 5G networks which transmit data securely over a decentralized network without the need for any middle-men or gatekeepers such as search engines or social networks or in financial terms, doing away with the central clearing house required to monitor and approve financial transactions.
Web 3.0 gives control over information and transactions back to the user and this is all made possible by a type of Distributed Ledger Technology (DLT) called blockchain. These distributed networks of Web 3.0 will change the way businesses operate across many industries just as previous generations transformed the way business was done.
What’s the role of Web 3.0 in commercial real estate?
The implications for commercial real estate are far-reaching. Initially, Web 3.0 has the potential to transform operations for the commercial real estate industry through the wider usage of smart contracts in a purchase or sale transaction and there’s a definitive role to play within lease and management contexts. As technologies mature and the benefits are more widely understood, opportunities exist for blockchain to play a part in utilities management including smart parking services and waste monitoring.
Some of the key areas for CRE stakeholders to benefit are;
Improved property search
Real-time information replaces outdated and siloed systems such as MLS which has been known to be outdated and inaccurate in the past. Timely, accurate information, visible to all is a step forward in accessing the right investment opportunities.
Remove inefficiencies from the sale and purchase process
Aside from the property search process, other sale and purchase procedures are time-consuming and somewhat antiquated. They often involve a drawn-out due-diligence process using paper-based offline methods which adds additional insurance and costs to the transaction. Using blockchain, a lot of the procedural steps can be removed and due diligence performed online using digital identities.
When parties to the transaction are new to each other and data is held on disparate, unconnected systems (more often than not, paper-based), due diligence can take much longer. A distributed blockchain network records each individual transaction and makes them publicly available, reducing inaccuracy and potential for fraud. Digital identities and other real estate records can also be recorded through blockchain and this additional level of transparency speeds up the process for all involved.
Streamlined contract management process
For tenants, landlords and building managers, the entire process can be streamlined and completed online through the use of smart contracts, setting out rental amounts, frequency and property details. Payments to the landlord and contractors can also be initiated according to the contract which allows for better cash flow management. The kind of real time data made available with blockchain will support smarter decision-making by the lessor and management.
Reduced transaction costs
Commercial real estate transactions can be notoriously slow and complex and transacting internationally adds another layer of time and cost with foreign exchange fees and additional intermediaries. These costs can be mitigated, if not cancelled out completely with the adoption of blockchain.
Should commercial real estate invest in Web 3.0?
It’s a little early to think about trading in your physical assets like you would stocks and shares but nonetheless, the benefits of Web 3.0 are already here and can be leveraged by all stakeholders in commercial real estate transactions. Blockchain has the potential to drive out inefficiencies in many of the key processes for CRE companies and at the same time decrease operating costs and improve transparency.
With increased transparency and real estate opportunities more visible to a wider pool of investors, we may also see competition on the rise, pushing property values upwards. Once the technologies become mainstream and that will likely happen in a stealth-like manner, the process will still require human intervention at points. The role of CRE consultants as negotiators becomes more crucial and they will need to up their game in this respect if they’re to get ahead of the crowd.