Commercial Real Estate
Commercial Real Estate is a large and thriving industry. On a global scale, CRE has a value of over USD $30 trillion. But what if this number could be larger? Enter blockchain. The use and implementation of blockchain in CRE has the potential to efficiently change the current format of business within CRE, increasing overall efficiency, ease-of-use, value, trust, and transparency.
On the Blockchain
Using a blockchain in CRE transactions has a multitude of benefits. The main of which is digitizing processes within CRE. This might include digitizing mortgages, property deeds, and agreements for ease of access.
Blockchain provides a highly secure “vault” for this data to be stored. Additionally, blockchain in CRE helps to cut down on associated costs, such as needing an attorney or notary to verify documents or validate transactions.
As a faster process, blockchain cuts down on time and overall expenses associated with many processes within CRE. Blockchain is able to authenticate deals, ensuring trust and validity for each party. In turn, this creates smoother and more transparent transactions – every transaction on a blockchain is securely timestamped allowing for transparency on all levels.
Blockchain can also handle high data input on its digital ledger. Due to the blockchains secure nature, data can be kept confidential while transaction records become transparent. Record-keeping in CRE therefore can become much more fluid, efficient, and secure.
CRE investors benefit from these characteristics, especially the fluidity and ease of data accessibility on blockchain.
As such, CRE using blockchain would be able to ensure trust and attract more investors. It would also help improve portfolio management by providing verification of the data prior to investment, ensuring authentic sources.
Tokenizing CRE Assets
Arguably one of the most game-changing aspects of CRE use of the blockchain is the opportunity it poses in digitizing assets. Through tokenization, assets become “digital tokens” and can be traded instantly like stocks and bonds; this opens the gates for more liquidity in CRE and creates a more uniform marketplace for capital.
CRE assets as digital tokens are also likely to increase the number of investors able to contribute to the project, given that these tokens are digital and can be easily distributed and fragmented.
CRE blockchain tokenization also enables the use of “smart contracts” within the blockchain.
These contracts, which exist as a way of ensuring trust and efficiency between parties, include contingencies based on the proposed agreement. For example, a smart contract initiated between two parties on the purchase of an apartment building might hinge on the buyer’s ability to transfer the payment before the deed is released from the seller to the buyer. The Blockchain ensures that these digital tokens can only be transferred to the intended parties, – or blocked from transfer if conditions are unmet.
CRE smart contracts and digital tokens allow the user to automate and customize the process. Additionally, utilizing the blockchain can ensure CRE contracts and conditions are regulation compliant – cutting down on overall costs.
The use of blockchain in CRE can revolutionize the current processes, bringing new and widespread benefits to clients, investors, and businesses and expanding the value of global commercial real estate.