Blockchain in commercial real estate: The future is here
Is commercial real estate ready for blockchain technology?
We reveal how blockchain technology can advance leasing, as well as purchase and sale transactions in commercial real estate. Explore the time and cost benefits of blockchain, as well as increased security and transparency that the technology could drive across the purchase and sale process.
The new technology on the “block”
The existing purchase and sale transaction process is complex and involves multiple steps. As such, identifying a property and closing a transaction can be a time-consuming affair and costly for both buyers and sellers, which may include CRE owners or institutional investors. In our world of continued technological revolution, most new technology comes with a promise to improve business and profitability. And whether one likes it or not, there can be a threat to survival if a business doesn’t adapt to the changing times.
As blockchain technology continues to evolve, it is challenging status quo and perhaps requires CRE companies to better understand the technology and revisit their existing business model, strategy, processes, and financial plan. Blockchain technology has significant potential to drive transparency, efficiency, and cost savings for CRE owners by removing many of the existing inefficiencies in key processes. Hence, CRE companies and industry participants evaluating an upgrade or overhaul of their current systems should have blockchain on their radar as its demonstrated usefulness has the ability to bring significant value to the industry. Think about it, question it, but don’t ignore it.
Blockchain technology in purchase and sale transactions
In this report, we will dive deeper into the value proposition of blockchain technology and its applicability to property leasing and management, and purchase and sale transaction processes.
We identify six opportunities for blockchain technology in purchase and sale transactions:
1. Improve property search process
- Existing challenge: Inefficient property search process due to fragmented listings data.
- The blockchain opportunity: Efficient and reliable property search.
2. Expedite pre-lease/deal due diligence and financial evaluation
- Existing challenge: Time consuming, paper-driven, predominantly offline due diligence and financial evaluation process.
- The blockchain opportunity: Drive efficiency and accuracy in due diligence process.
3. Ease leasing and subsequent property and cash flow management
- Existing challenge: Complexity in managing ongoing lease agreements, property operations, and cash flows.
- The blockchain opportunity: Smart contracts enable easier, transparent, and efficient management of property and cash flows.
4. Enable smarter decision-making
- Existing challenge: Absence of rich real-time data impacts management’s decision-making capability.
- The blockchain opportunity: Connective tissue between varied technology systems refines quality of data, analysis, and decisions.
5. Transparent and relatively cheaper property title management
- Existing challenge: High title insurance and related costs due to chain of title and lien recording issues, fraud risk, required diligence, and cumbersome clearance process.
- The blockchain opportunity: Reduce fraud and simplify the process of title records and checks.
6. Enable more efficient processing of financing and payments
- Existing challenge: Slow, expensive, and opaque financing mechanisms and payments, especially in cross-border transactions.
- The blockchain opportunity: Financing and payments systems that are faster, cheaper, safer, and simplified.