Blockchain Could Shrink Differences in How Public, Private Real Estate Returns Are Measured

Brad Case, Nareit senior vice president for research and industry information, was a guest on the latest episode of Nareit’s REIT Report podcast and discussed the impact of emerging blockchain technology on the real estate industry.

Developed in connection with cryptocurrencies, blockchain is “essentially a set of practices that make it possible to keep records of who owns assets,” Case explained. He noted that although blockchain is not the same as distributed ledger, for the purposes of considering the effect on real estate, the two terms can be treated as synonyms.

Blockchain can establish ownership of an asset much more efficiently than at present, Case said. In addition, the technology makes it possible for governments to keep property records used for tax purposes at a reduced cost and lower probability of fraud.

Meanwhile, blockchain also has the potential to eliminate much of the appeal of private real estate investing relative to REIT investing, according to Case. He noted that while buying a REIT stock only takes a matter of seconds, the process of investing on the private side can take about six months on average. Much of that time is spent on due diligence, a process that blockchain can cut down to days rather than months.

“Most of the reason for investing in private real estate is to take advantage of the differences in the way returns are measured. Blockchain has the technology to bring those to a minimum and eventually eliminate them—that will eliminate a lot of the appeal of private real estate investing relative to REIT investing,” Case said.