The core operations of commercial real estate include purchase, leasing, sales, financing and management. For a long time, commercial real estate (CRE) has been carefully keeping data on rent levels, property prices and valuations confidential. This has cause the CRE core business process very inefficient. Blockchain technology has the potential to increase the transparency, efficiency, yet saving costs for CRE owners.
There are enormous opportunities for CRE in the following aspects.
- Efficient and reliable property search process
In CRE transactions, most individuals or brokers use multiple service providers to obtain relevant data, such as property information, rent, location, etc., but these data are subject to problems of human intervention, outdatedness and incompleteness. MLS, the housing resources sharing system based on blockchain technology, allows data to be distributed in a peer-to-peer network. Housing resources can be viewed in anytime. It can also provide more accurate and detailed information on ownership issues and historical leases, meaning market participants can get more accurate information at a lower cost.
- Reduce investigation costs before transaction
Before completing a CRE transaction, a lot of time is spent on financial and legal due diligence, so as to make sure the rent or selling price is reasonable. This involves a lot of verifications of document authentication, where errors might occur, incurring high commission expenses. According to a survey conducted by Statistics Canada, Canadian residential and commercial real estate transaction fees and commissions account for about 2% of GDP. If blockchain technology is implemented for the development of digital identities for real estate, a lot of issues on documents and physical identities authenticity can be avoided. The digital identity of the real estate and the related transaction parties constitute a complete and secure online transaction record, which greatly improve the convenience and accuracy of due diligence.
- Smart contracts increase transparency of property management and asset management
The relationship between property, tenants, homeowners and developers is complex, not to say the complexity of property management. The need for continuous execution, tracking and recording is costly. Blockchain technology brings a simplified solution to CRE management. The smart contract clearly records the agreement and the responsibilities of both parties in a digital form, making the transaction more transparent. The smart contract can also make the first payment of the lease or sale to be done in real time, thus no longer being subject to geographical and working hours limitations.
- Process financial and payment more efficiently
The traditional commercial real estate payment process and transfer model are often complex, cumbersome and opaque. Blockchain can simplify the financing process for loan applications. The digital identity of real estate saves time and effort for due diligence without suspecting data integrity. Moreover, in cross-border transactions, a number of intermediaries are involved, generating a large amount of foreign exchange charges and delaying the delivery time. The blockchain can record the trading objects, fees, exchange rates, trading hours and other information of the buyers and sellers in the smart contract. The transaction is completed through the network. Fast and accurate settlement process minimize the settlement risk and payment delay.
Blockchain technology has great potential for commercial real estate, providing an efficient and reliable property search process, reducing the investigation costs before the transaction, smart contracts also can make property management and asset management more transparent, and the process of financing and payment more efficient. Blockchain technology greatly enhances the efficiency and operational transparency of the industry while reducing costs and creating more industrial value.