Web3 Will Impact Commercial Real Estate in Four Ways
As the real estate industry adapts to Web2, Web3 is descending like an avalanche. Here are four ways in which Web3 will affect commercial real estate.
What is Web3, particularly for us novices?
Overview of Web3
Web3 is the Internet’s next evolutionary step. Web2 was dominated by centralized apps and software-driven operations. Internet corporations such as Facebook, YouTube, and Google, among others, have developed vast data collection, storage, and redistribution systems. They possessed the data and returned it as content, suggestions, and result sets, among other uses.
Web3 is based on an open, trustless, permissionless, and secure internet. Using modern algorithms, AI, and networks, data is no longer held centrally but is instead disseminated. Every computer is connected to the internet. Creators share their data using smart contracts and tokens. This will increase the significance and use of data in the global commercial and personal landscape.
Here are four ways in which Web3 will impact commercial real estate now that you are familiar with the context.
Impact of Web3 on Commercial Real Estate
Smart contracts on the blockchain-enabled the fractionalization of ownership. The opportunity to own 0.00000001% of a property or portfolio allows more investors than ever before to enter the market. Using a laptop, a cryptocurrency wallet, and an internet connection, investors can invest in an array of global assets.
Once a purchase is made, and the transfer is confirmed via the blockchain, a distributed open ledger enforces ownership. The ledger reduces the possibility of fraud and generates ownership evidence. At the time of sale or reinvestment, smart contracts control all capital outflows. These smart contracts distribute dividends to investors’ wallets automatically.
Fund Managers are replaced with DAOs (Decentralized Autonomous Organizations).
Existing fund managers enjoy a vast natural moat. To acquire properties and portfolios, a fund requires a large quantity of capital. The majority of commercial real estate enterprises acquire their initial money from wealthy people or family offices. As the company grows and establishes a track record of success, it may decide to raise a larger amount of cash under a fund structure. Institutional investors, such as endowments, pensions, and other public funds, are tapped by the company for funding. These fund managers invest years cultivating relationships in order to obtain this capital. The money is then invested in real estate. In a waterfall structure, the fund management retains a percentage of the entire fund as a fee before paying it out to investors.
Web3 facilitates investors’ ability to bypass the typical fund manager.
In a DAO, crucial decisions are no longer made by a central authority; rather, each member has voting and decision-making rights on all proposals. Members may establish distinct DAOs for each investing strategy, geographic region, or other grouping. This gives the investor greater freedom to invest flexibly in single property or portfolio. DAOs acquire capital from all members via cryptocurrencies and can invest that capital in physical real estate as a group. With the elimination of middlemen’s margins, the collective DAO receives a larger share of the earnings.
Data Monetization in Web3
Data has always been an indispensable asset for establishing a prosperous real estate firm. Individual investors use data to calculate property and investment indicators such as the cap rate and IRR. Large corporations invest hundreds of hours (or dollars) in data collection. Third-party research firms amass and sell data to interested parties, making a fortune in the process. Through the help of web3 consulting company you can easily know about web3 real estate development.
As we transition to Web3, data creators can now generate income. Anyone who developed property-related data can claim ownership of it. Assessors who physically walk through a structure may own the data they generate. Permit records, parking information, HVAC unit numbers, and tens of thousands of other useful data pieces are awaiting capture or storage. Once documented, this material is liberated from the silos of historical data aggregators that charge hundreds of thousands of dollars annually.
Once the data has been saved and confirmed on the blockchain, the original owner of the data will be able to profit from the sale of the data. The blockchain will always tag the data creator’s license (and royalties).
When commercial real estate companies upload their data to the blockchain, they may immediately monetize their data goldmine. Potential purchasers may be interested in your property’s utilities, rent, or other information. This presupposes that real estate companies already have access to their data in a centralized data repository. We imagine a future in which real estate companies may sell not only buildings and land but also the data created by the property. Through smart contracts, Web3 will not only streamline the acquisition and disposition process but also enable commercial real estate owners to monetize their data.
4. Digital Real Estate AND Commercial Real Estate
Creating a digital duplicate of your property enables the selling of web3 real estate software development separately from the physical property. We are close to the point where the metaverse and physical realm overlap. You cannot rent the same unit twice, but what if you could rent your metaverse units or buildings indefinitely?
In addition, data-driven advertisers are the leading purchasers of screen space in buildings. For instance, most offices are now outfitted with many screens. Whether it is a 65-inch flat-screen in a conference room or a small screen on the exterior of shared spaces, marketing organizations may pay a fortune to rent “billboard” space within commercial (and residential) real estate structures. They would be especially interested in structures where they could obtain direct demographic information about their audience. Using NFT coins and smart contracts, businesses might lease their spare screen time to advertising firms. This may be a tremendous opportunity for millions of properties around the world if executed properly.
Innovation occurs rapidly. Web3 is in its earliest phases. Some new technologies will fail, but those that endure will have the ability to influence our lives in the same way that Google has become associated with “search.” Now is the moment to begin preparing for the future by putting the necessary components in place.