DigiShares has released a detailed report outlining the state of the global real estate tokenization industry. The report provides in-depth analysis of market volumes on the key markets for real estate and the opportunities for tokenization.
The report presented by DigiShares provides an analysis of the STO market and the potential of the global real estate market in the United States, Europe, the Nordic states, and Japan. All of the market analyses were conducted based on market size, capital volumes, and the number of Real Estate Investment Entities (REIT).
Issues hampering the development of tokenization and benefits such approaches could bring to the market were also highlighted. The automation of middlemen processes is one of the main advantages of tokenization mechanics, which can significantly reduce associated commissions, as stated in the report. Another major advantage of tokenization is the opportunity of lowering investment barriers – approximately 93% of all U.S.-registered commercial real estate is exclusively accessible to only accredited investors.
The lack of public markets is a major challenge, as public exchange listings can cost up to 3% to 10% of the asset’s value. Another challenge analyzed in the report is the difficulty of transacting that involves large amounts of paperwork, as proven by a KPMG report, which states that real estate transactions can take anywhere from 6 months to 2 years, and that transaction fees usually range from 1% to 3% of the asset’s value.
Real estate tokenization is gaining popularity, as in 2019 alone, there were issuance providers, 16 of which focused on real estate assets. 60,000 investors participated in real estate crowdfunding in 2020, and the global real estate crowdfunding market was valued at $13,207 million. The market is expected to grow at a CAGR of 58.3% to $868,982 million in 2027.
Real estate is the world’s biggest and most important asset class representing a total value of $228 trillion with 827 listed REITs globally with a total market capitalization of $1.7 trillion, 27% U.S.-based. The European real estate market has a valuation of $37.5 trillion with commercial real estate comprising roughly 20% at $7.5 trillion. In 2018, the Nordic countries saw a total of $53.40 billion invested into Sweden, Finland, Norway, and Denmark. Meanwhile, Japanese REITs managed to raise a total of $3.15 billion.
The industry report can be obtained by request on the DigiShares homepage: https://www.digishares.io