TY - JOUR T1 - Tokenization—The Future of Real Estate Investment? JF - The Journal of Portfolio Management DO - 10.3905/jpm.2021.1.260 SP - jpm.2021.1.260 AU - Andrew Baum Y1 - 2021/06/02 UR - https://pm-research.com/content/early/2021/06/02/jpm.2021.1.260.abstract N2 - This article examines the mechanisms now available to tokenize real asset ownership and create active secondary markets in tokenized or fractionalized units. Real estate is lumpy and illiquid, and tokenization would allow participation in the market by a broader group of investors and the ability to build diversified portfolios with modest sums of money. However, two developments are necessary for the digital tokenization of single real estate assets: (1) an expressed demand for the fractionalization of single real estate assets, and (2) market participants need to be comfortable with blockchain, the digital underpinning of tokenization. Further, in many land markets fractionalization requires an intermediate structure to be established because the direct ownership of land cannot be shared amongst many, increasing the cost of tokenization. Larger assets already held in fund structures may eventually be tokenized successfully; there may also be an alternative market for tokenized residential, social impact, or community assets where investment regulation and risk/return are not the main drivers of behavior. The mass market for the tokenization of single commercial real estate assets, however, may be some way down the road.TOPICS: Real estate, exchanges/markets/clearinghouses, currency, performance measurementKey Findings▪ The author examines the mechanisms now available to tokenize real asset ownership.▪ The author presents new survey-based evidence of real estate tokenization deals.▪ The author concludes that an intermediate structure is likely to be both necessary and convenient when fractionalizing a single asset. For that reason, funds are more natural targets for tokenization. ER -