Blockchain is one of the most transformative technologies available, yet many in the commercial real estate industry aren’t harnessing its full power. With the technology developing and scaling at a rapid pace, real estate developers and investors are facing challenges of just how far they should invest. However, successfully adopting blockchain-based smart contracts can generate value and improve efficiencies.
As a ledger tool that enables the secure and permanent recording and distribution of data across multiple users, blockchain is revolutionizing commercial real estate by expediting deals through rapid transactions. Because anyone using the system can verify every transaction, blockchain provides enhanced transparency while protecting user privacy. See our earlier blog, Blockchain-Based Smart Contracts to Transform the Commercial Real Estate Industry, for additional background.
Smart Contracts Add Value
Commercial real estate transactions are heavy on the details. Often, the leasing and sales process is filled with tasks that require document verification and proof of identity, such as a tenant or buyer’s income, history of ownership, occupancy, and maintenance records. Here are three areas where blockchain can add value to the commercial real estate industry.
- Enhanced pre-leasing financial evaluation. Using a manual verification process to review signatures and legal terminology is prone to human error and loss of information. Combining blockchain, artificial intelligence (AI) and smart contracts, the process becomes streamlined. In some cases, it can reduce the transaction time from months to just minutes. Additionally, a blockchain-based verification process can expedite the sales process, including underwriting, financial evaluations, and mortgage commitment, to name a few.
- Simplified lease management and accounting compliance. These processes can get complicated when managing CRE properties. Not only are payments tracked but intermediaries confirm and monitor the cash flow records regularly. Blockchain-digitized contracts offer a higher level of transparency when it comes to lease terms and transactions. For example, the contract could use rent or bonds for monthly automated payments to owners, property managers, and key stakeholders with real-time reconciliation.
- Data at your fingertips. Blockchain is improving the quality of data for predictive applications with a real-time view of ongoing activities. No longer is data fragmented, which can lead to uninformed decisions and added costs. The technology offers an open and shared database for everyone involved enhancing the quality of data, real-time recording, and data retrieval.
Are you considering blockchain technology as a solution for your real estate business? For questions about blockchain or other real estate issues, contact Eric Olsen at 972-818-5300 or fill in the form below.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.