By Kris Lindahl, CEO/Owner Kris Lindahl Real Estate
Blockchain’s Potential Impact on the Commercial Real Estate Industry
Blockchain has quickly established itself as one of the hottest and most innovative technologies of the 21st century. Most commonly associated with cryptocurrency transaction methodology, blockchain has the potential to have a huge impact on business globally, including the commercial real estate industry.
What is Blockchain?
Essentially, blockchain permits the distribution of digital information using encryption technology across a peer based cloud network. It’s literally an online public shared database that keeps a record of all transactions coming through the chain. This transforms the data sharing process from paper copies and electronic files to a secure digital ledger that is created and automatically updated with each transaction. Blockchain is not controlled by a singular entity and its data is incorruptible and transparent.
While blockchain methods have barely scraped the surface of the commercial real estate realm, its use within the industry may increase considerably over the next few years. Just to indicate how strongly the business world is embracing this technology, surveys indicate that 80 percent of executives plan to integrate blockchain amid their business structure in the next three years. Furthermore, with an eye towards profits, owners are excited by the potential of using blockchain technology to reduce financial infrastructure burdens by nearly 30 percent. That being said, here are some specific impacts blockchain can have upon commercial real estate.
Blockchain In Commercial Real Estate
Amid the growing digital world, some businesses have become more savvy in staying connected while maintaining greater accuracy, security and transparency concerning transactions by using blockchain technology. Blockchain has the potential to help the commercial real estate industry address current issues in these areas in addition to helping increase efficiency through allowing faster, secure and cheaper transactions compared to traditional systems. The following are a few specific ways that blockchain could potentially promote improvements amid commercial real estate.
Real Time Data Analysis for Faster Transactions
Using blockchain can help real estate agents facilitate commercial title and lease records much faster than by using traditional paper-driven options. Blockchain creates secure digital identities while providing real time data analysis that expedites transactions significantly. Furthermore, the integration of smart contracts can further automate the management of on-going property operations, lease agreements and cash flow.
This allows controlling entities to streamline transactions that enforce, facilitate and verify contracts without an intermediary service getting involved. The connectivity of data, transactions and contracts between entities at the speed of light would benefit all of the parties in a commercial real estate transaction. Overall, these benefits equal cost savings and expedite multiple processes in commercial real estate while maintaining transparency. As an additional perk, the speed of blockchain transactions makes commercial real estate assets more liquid which is highly appealing to many investors.
The Impact of Blockchain on MLS
The majority of real estate transactions are processed through Multiple Listing Services (MLS). The blockchain has a potential to disrupt this currently vital aspect of the commercial real estate industry. For starters, the MLS system is prone to inaccuracies, is highly fragmented and features a good deal of restricted information, which can make it challenging for agents and investors to identify trends or make realistic comparisons. With blockchain technology, there is a digitized ledger that openly records and shares real time information straight from the source.
Greater Transaction Transparency
Blockchain records will allow every property to be quickly accessed and can provide information about construction updates, current owners, maintenance costs and inspection records which would be available publicly. This would mean that buyers, sellers and investors would all have equal access to this information to create a level playing field, which eliminates common barriers that often result by fragmented or outdated information.
Enhanced Data Accessibility
Blockchain has the potential to eliminate some of the common challenges faced by agents and investors amid commercial real estate. Because the blockchain is open to the public anyone can see the information, and no single entity has control over it. Firms will no longer be challenged by having stacks of files or data on multiple computers. Additionally, it also removes the opportunity for counterfeit documents such as titles and deeds that are common amid fraud scams.
The future of blockchain seems unlimited, but it’s future will impact different industries in different ways. Of all industries, commercial real estate is ripe for the enhanced benefits that blockchain will have to offer. Time will only tell how businesses adopt this technology.