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Exploring Commercial Real Estate: Opportunities, Challenges and the Impact of Tokenization
September 6, 2023
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The world of investing can be really complex. There are lots of different ways to put your money to work. One area that many people find interesting is commercial real estate. This is a big category that includes all sorts of properties used for businesses. Examples would be tall office buildings, large shopping centers, warehouses, and fancy hotels. What stands out about commercial real estate is that it attracts both experienced investors and those who are just starting out.

As compared to residential real estate, commercial real estate is known for the following:

  1. Income potential. Commercial properties often produce higher rental income. This is due to their intended use for business purposes.
  2. Longer lease terms. Commercial properties typically have longer terms. This provides a stable and consistent income stream for investors.
  3. Professional tenants. Commercial tenants are usually businesses or corporations. There tends to be more structured approaches to leasing agreements and property management.

However, investing in commercial real estate comes with its costs. These include:

  1. Higher initial costs. Getting hold of commercial real estate generally requires a larger upfront investment compared to residential properties. This is due to their larger size and potential for customization.
  2. Greater vacancy risks. Commercial real estate can offer higher potential returns. But it also comes with higher risks. This includes the potential for longer vacancies during economic downturns.

Commercial Real Estate

As an investor who is looking to get into real estate, commercial real estate would have likely crossed your mind. Adding commercial real estate to your portfolio can help to manage risks. This is due to the inherent nature of commercial real estate. It is not as volatile as other assets you might invest in, such as stocks, currencies or bonds. When the stock market goes a bit wild and everything starts shaking, commercial real estate stays pretty stable. It does not swing up and down as much, which means your whole portfolio is safer. This steadiness is like having an anchor in your portfolio that ensures your risks are reduced. So when the economy gets a bit uncertain, having commercial real estate in your investment mix is like having a shield. It adds an extra layer of protection to your portfolio, keeping it strong even when things around you might be a bit shaky. Therefore, allowing you to feel more assured during down times.

A great example of this is commercial real estate’s steady growth rate. This is in spite of the current poor economic conditions. According to CBRE, commercial real estate is poised to continue its steady growth. This is due to both rental growth and the rising value of commercial real estate. Let us dive into why commercial real estate is like an anchor.

One of the largest advantages of real estate is that it can give you a steady stream of money. This steady stream of income comes in the form of rent. For commercial properties, the real estate is typically rented out for longer periods of time. This is as compared to residential real estate which has shorter rental periods. A longer lease length means a more stable source of income. This means that investors can be sure that income is coming in regularly at a fixed rate even if the economy is not performing well. Moreover, as mentioned earlier, commercial real estate tends to offer higher rental income. Thus, making it more attractive of an investment.

That is not all. Commercial real estate’s robust nature provides a hedge against poor economic conditions. Currently, high inflation is a pervasive issue that corrodes the value of cash. With inflation being wide spread, keeping savings in banks is not always the optimal choice. Commercial real estate helps to preserve that value. As prices in the world go up, the value of these buildings go up as well. So, when the cost of things around you gets higher, your investment can grow too. This makes commercial real estate a great choice to keep your money strong.

Problems with Commercial Real Estate

However, it is important to know that even though commercial real estate has all these great sides, there are also challenges in this field. One of the biggest problems is that it costs a lot to get started. Well, buying commercial properties needs a large amount capital, and often, it's more than most people have. This often leads most people to think that only the big firms or businesses can get into commercial real estate because of the large sums of money they possess. Whereas the average joe would be left out due to the lack of sufficient capital.

Another tricky issue is that selling these assets can be slow. With commercial real estate, matching a buyer and a seller can take prolonged periods of time. This is because these buildings are worth a high amount of capital and there aren't always people ready to buy them, selling them can take a while. This is why it can take anywhere between weeks to even years for owners to sell their commercial real estate asset. This slow process can be a problem, especially if you need money quickly. Thus, commercial real estate’s illiquid nature is also a challenge.

The power of Tokenization

Fortunately, there is a solution to these issues. That is tokenization. Tokenization can help to address these problems. But what is tokenization. Imagine an asset split into thousands of parts. Investors are able to buy as many of these parts as they desire instead of having to purchase the entire asset. Tokenization converts real assets into digital tokens on the blockchain. This makes it easier for regular people to join in. Instead of needing a ton of money to buy a whole building, you can have a small piece of it shown as a digital token. Just picture your local supermarket being divided into thousands of tokens, and you are able to buy a handful of those tokens instead of the whole supermarket.

Tokenization, the process of converting real-world assets into digital tokens on the blockchain

Tokenization does not just stop at owning digital tokens. These tokens can be traded on secondary markets. This means that even after tokenization, token holders are able to buy or sell tokens. So, if you ever need to turn your piece of real estate into cash money, you can do it quickly. This new way of making transactions makes managing investments easier. Investors are able to exit and enter positions with greater ease. This is due to the increased liquidity of the asset along with the lower barrier of entry.

But it's not just about making transactions. Tokenization makes investing easy by removing the responsibilities of token holders. An owner of a commercial space would likely need to handle management of the property. For tokenized assets, instead of dealing with all the complicated stuff that comes with owning a big building, like fixing things that break or finding tenants to rent the space, you can let other people who are really good at this handle it. You still own your piece of the building, but you don't have to worry about all the details. It's like having a team of experts take care of everything for you.

Tokenization takes place on a blockchain. This way of doing things is more open and transparent. It's like having a window into how things are going with your investment. Investors can see what's happening with the building, how much rent it's making, and if there are any changes that might affect your investment. This openness helps you make smarter decisions about your money.

Case Studies

Tokenization might sound like a new idea, but it's actually been around for quite a while. It is a technology that's been stealthily developing behind the scenes. Let's look at an example that happened a few years ago. The St. Regis Aspen resort was tokenized in 2018. The company that owned the resort, Elevated Returns had initially considered listing it as a REIT. Eventually, the company opted to offer it as a digital security. This was in the form of tokens that could be acquired by accredited investors. The number of investors in the hotel has since grown from less than a dozen to over 500.

Here is another example of tokenization recently done by CitaDAO. 18 Sin Ming Lane, 18SML, is a commercial property located in Singapore. The office space was tokenized in May 2023 and had a value of US$635,000. The tokenization process spanned across the duration of a month. A total of 64 wallets participated in the tokenization of the asset. Token holders of the tokenized property were able to buy or sell the tokens on a decentralized exchange, Uniswap. They were able to do so 24/7 and in an instant manner.


Commercial real estate is an attractive investment vehicle. It can help your investment mix through providing steady income and protecting your investment from rising prices. But it also has some tough parts, like needing a large sum of capital to start and taking a while to sell. However, tokenization can help address these problems. Join CitaDAO in onboarding the next billions of dollars in commercial real estate through tokenization.

About CitaDAO
CitaDAO.io is a Decentralized Finance (DeFi) platform for Real Estate to be tokenized on-chain, built on the Ethereum ecosystem. CitaDAO aims to solve the lack of liquidity, access limitation, and lack of composability in existing real estate ecosystem by creating interoperability with other DeFi applications/primitives that operate on the Ethereum protocol. Real estate token allows the community to diversify their portfolio on-chain to generate stable yield through real world assets that have constant liquidity through AMM — interested to learn more?
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Disclaimer: The information contained in this communication is based on sources considered to be reliable, but not guaranteed, to be accurate or complete. This communication should not be relied upon or the basis for making any investment decision or be construed as a recommendation to engage in any transaction or be construed as a recommendation of any investment strategy

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