As the industry progress, the use cases for blockchain technology in the commercial real estate has become stronger and more apparent in the following areas:

How Blockchain is Breaking Up the Commercial Real Estate Industry

1) Global Loyalty Programs

Using blockchain and tokenizing of loyalty programs will allow for a unified platform for rewards points between different commercial property users, allowing for rewards points to be used across real estate companies, malls or establishments. A Star-Alliance equivalent for real estate establishments will bring unprecedented value towards loyalty point holders, unlocking hundreds of millions of unspent rewards points across the industry, benefiting both shoppers and commercial property owners.

2) Data-driven and self-executing contracts

Digital contracts embodies a strong source of data and information. With digital contracts, one will be able to obtain specific data, such as terms and conditions which can be captured on to the blockchain and executed through smart contracts. For example, the return of rental security deposits can be immediately released to the tenant once the leased unit has been checked and evaluated by the landlord. Traditionally, this process can be administratively arduous and even becomes a headache when the filing of paperwork by different individuals is not consistent.

With smart contracts, the status of a deal is almost instantaneously updated which provides real-time business tracking metrics. This mitigates the need for costly administrative reconciliations that might also be prone to human error. Combined with historical data, commercial real estate players can use predictive analytics to gain deeper and smarter insights in real time, leading to more informed decision-making for their real estate business.

Hence, the blockchain acts as the “centre of truth”, which will aid in fraud prevention through its immutable properties.

3) Fractionalising Property Ownership

“A real estate investment trust, or REIT, is a company that owns, operates or finances income-producing real estate. For a company to qualify as a REIT, it must meet certain regulatory guidelines. REITs often trade on major exchanges like other securities and provide investors with a liquid stake in real estate.” (Investopedia)

Traditionally, REITs (i.e. real estate investment trusts) or collateralized structures are dominated by larger real estate companies.

However, with blockchain technology and tokenization, smaller real estate companies can now afford to make such investments available into the open market. Needless To Say, such structures will still be under the scrutiny of the respective governments and will still need to comply with legislative frameworks. What’s exciting is that smaller real estate companies and corporate owners can now gain access to the additional liquidity which can be unlocked with a tokenized structure, and at much lower “underwriting” fees as compared to the current charged by investment banks or traditional capital market underwriters.

4) Decentralised Know Your Client network

By utilizing a permission blockchain, real estate companies can share desensitized information about their clients/vendors. For example, real estate companies and place due-diligence information and repayment information onto a shared permission blockchain. Contributors towards the chain will be anonymized, yet provide a multi-faceted view of client or vendor profile based on the respective interactions with the different property owners, managers or developers. With more stakeholders onboard, the continuous update of the due diligence information by the contributor will serve to strengthen the datasets and profile of every individual vendor or tenant, thereby providing even more reliable information and behavioral indicators of the prospective vendor or tenant that can serve as crucial information for decision-makers in future transactions.

Conclusion

As the real estate industry develops and further utilize and integrate blockchain technology, tokenized transactions will soon become commonplace and inefficiencies in the system can be slowly eradicated, distributing resources to where it can be most effective. While a fully functioning decentralized system may sound ideal, we need to acknowledge that global adoption will take time and education. Therefore, for critical mass, big players in the real estate industry need to take the first step and lead the way for innovation.

This article is contributed by Real Estate Doc

About Real Estate Doc: Real Estate Doc will set the next standard for real estate technology for commercial real estate leasing. As a versatile permission blockchain protocol and real estate business application, real estate companies will effortlessly be able to manage their businesses without the tedium of administration, through self-executing functions provided by customized business logic. Our data-driven platform will enrich real estate businesses through business analytics, KYC risk management, and online business development capabilities.