FMJ Facilities Management magazine providing industry-specific intelligence to FM and property professionals
Blockchain is a relatively new digital technology which is finding its way into the property sector. Polly Plunket-Checkemian, Property Management Director, Broadgate Estates explains what it is and how it could impact the built environmentA leading light in the tech world said “every company is at risk from a blockchain version of themselves”, a fascinating proposition for a sector with a cautious adoption of technology thus far.
At its core, blockchain is a ledger allowing anyone with permission to see recorded transactions and information. Every piece of data is traceable and transparent. Once a transaction is recorded, it cannot be altered. Imagine a series of transactions as a big chain with every link (transaction) bound to the previous link providing an unbreakable record. Some may be public blockchains, others will form part of millions of private chains designed for industry and enterprises. Linux, the collaboration behind Hyperchain, describe how blockchain offers “physical traceability in a trustless world”. So how might an industry as opaque as property develop a blockchain version of itself?
Whilst property is a popular asset class traded daily, it has challenges. It is illiquid, requires intermediaries and operates with little transparency. It is underpinned by the fundamental principle of caveat emptor (buyer beware). Pricing may be based on rent and yield, but the final price and transaction time is a black art, relying on access to diverse detail about the asset and the skill of the parties using this to their respective advantages.
Block chain could offer an authenticated set of essential data on title, asset, leases and building performance, instantly. Given today’s data rooms can take weeks to assemble, this would be transformational. In a world where compliance is needed, it’s an outstanding solution. However, before we herald blockchain as the technology that makes property ‘liquid’, it’s worth remembering that in markets where a buyer needs to invest capital into property, and quickly, the availability of supply is what matters most, and not the availability of a complete set of information.
Similarly let’s not kid ourselves that transparency of ownership will be readily embraced by this industry. Almost £122 billion of property in the UK, the majority of which is in London, has almost complete anonymity according to MP John Penrose, the anti-corruption Tsar. Will this technology be able to convince the industry that it can withstand forced disclosure by Governments with Unexplained Wealth Orders or future iterations of this legislation?
But let’s change direction to the occupational side of the industry. There’s real and obvious benefit to businesses entering into leases or homebuyers wanting access to true and accurate records of previous transactions, consents and construction information. An irrefutable source of service charge expenditure with absolute clarity around apportionment, and other liabilities over the term of the lease could be valuable to some. Imagine a requirement for a rent deposit negated by a blockchain showing great payment history. These all represent a step change in efficiency, but would be hard described as industry changing.
Early adoption of blockchain in consumer industries has been helpful to ethical sourcing and supply chain transparency. Property as a brand gets a bad rap, and in many cases deservedly so. For housing, when looking to buy or rent, we are dealing with a fragmented industry of individual owners. Ninety eight per cent of the UK’s private rented housing stock is held by owners of five houses or fewer. Recent coverage for Persimmon and Bovis Homes indicates that when buying from house builders, the experience worsens. In the commercial space, retailers in prime shopping centres can expect to be feted and given a better and more transparent service from their landlords, but for the rest of retail and offices, consumers will be dealing with anonymous owners and agents, for whom brand has little relevance.
For brands seeking to own the CX space, there’s no denying that a blockchain platform should form an integral part of their armoury. It would be a powerful and transparent way of building trust. However, it can only apply to a relatively small part of the sector. Only a very small percentage of the built environment is replaced each year. So, can block chain flourish when the previous transactional history for the remaining offices and homes, whether decades or centuries old, is buried in dust covered deeds and files that are only starting to be digitised?
Some pundits are saying that blockchain is a solution looking for a problem. I wouldn’t go quite so far, but when looking at industry level, we are a little remote from “a blockchain version of ourselves”. Starting with a clean slate, it can and will flourish in the hands of those for whom transparency provides competitive advantage.
According to guidance from RICS, blockchain is described as a database of information made of blocks chained together in a way so that they cannot be tampered with and so is a secure way of recording transactions from peer to peer without using a third party.
It is also a concept for use in property and facility management processes and provides a secure depository of documents relating to a building such as lease agreements and payments.
