4 Ways Blockchain is Disrupting the Commercial Real Estate Industry

blockchain is disrupting

A blockchain is a distributed database or ledger that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format.

Whatever your own experiences with or impressions of the blockchain, its disruptive potential cannot be denied, as it has already made waves in a number of industries.

Commercial real estate (CRE) is one of the better examples of how the influence of blockchain technology is gaining traction, with several elements of this sector already being shaped by it.

The transformation of transactions

One of the main ways in which the blockchain will change commercial real estate relates to how contracts can be managed and executed.

Transactions for CRE projects are complex, costly and rarely efficient in their nature. Making use of smart contracts hosted on the block chain, multiple parties can enjoy an automated, decentralized and indelible tracking of obligations which is also entirely transparent.

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This should speed up transactions, without compromising on trust. And of course the tech doesn’t just apply to buying and selling buildings, but also covering all sorts of other contracted agreements, whether that’s between developers and construction firms, lenders and any other parties.

The digitization of asset transfers

Cryptocurrencies have become a controversial topic, and yet even with price volatility, rug pulls and the collapse of entire exchanges, frontrunners like Bitcoin are still seen as inherently valuable by many.

This in turn means that crypto assets represent a means of transferring wealth, and of conferring ownership of a physical space through digital methods.

In the case of the former, being able to complete CRE transactions with crypto tokens changing hands in addition to or in place of fiat currency is an intriguing prospect.

With the latter, the possibility of equating ownership of a given token to ownership of commercial unit floor space is especially disruptive.

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Proponents are predicting that this so-called tokenization of CRE will make it much more akin to liquid assets, rather than being more of a burden to use and trade.

The prevention of fraudulent activities

The blockchain is all about using various mechanisms to come to a consensus about data, rather than relying on a single, central entity to say what is and what isn’t accurate.

This makes it inherently more resistant to fraud and manipulation than traditional setups, and the upshot is that using it to manage things like CRE transactions and investment in construction projects will dramatically reduce the likelihood of fraud being committed.

It’s the aforementioned transparency which also comes into play here. You can’t change data on the blockchain without reaching a consensus, and if tampering is attempted then it is easy to trace.

The marketing of commercial properties

For developers and agents that want to get their commercial premises seen by prospective leasers or buyers, the options at the moment are fairly limited. There are a handful of mainstream listings platforms, and to market on them costs quite a lot of cash.

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Things are made more complex by the fact that no two of the listings platforms use the same standards and processes for formatting real estate ads, which increases the amount of legwork involved in using them all.

Migrating listings to the blockchain would fix this instantly, because the decentralized nature would allow for newly available locations to be promoted swiftly, efficiently and affordably to a large audience.

The bottom line

Some of the effects of the blockchain are already being felt in CRE, while others will take longer to percolate and generate disruption. Even if this shakeup is not permanent, the influence of the blockchain will change how traditional technologies are used in this arena, forcing all parties to up their game as a result.

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