The world runs on commercial real estate. It’s that simple. A significant amount of the world’s transaction activity and economic assets fall under the umbrella of commercial real estate, making it a colossal marketplace. With such an influential foothold on the world’s economy, it’s no wonder that the transactional process and ecosystem need safeguarding.
There are countless independent networks and partnerships moving at a rapid pace every single day. While this volume is exciting for those in the commercial real estate sector, it comes with friction and a lack of transparency, which can cause concern for many investors. You may be wondering what this has to do with blockchain integration in commercial real estate. Well, let’s take a look.
What is Blockchain in Real Estate?
If you’re unfamiliar with blockchain, you may think that it only pertains to cryptocurrencies. While it does play a role in the crypto landscape, its role isn’t unilateral. Popular cryptocurrencies leverage blockchain for operations and transactions, and the real estate sector can also benefit from its processes.
Here are some surface-level benefits of blockchain integration for commercial real estate investors:
- Track transactions and records across a secure network of computers
- Boost trust with investors by securing transactions
- Safeguard requests such as currency, legal contracts, a record, or other sensitive information
- Speed up transactions such as buying, selling, leasing, and financing assets
Exploring real estate tokenization can boost trust and speed up transactions, contracts, and so forth.
What’s the Deal With Tokenization?
Falling down the blockchain rabbit hole, you may run into the term “tokenize” or “tokens.” What does it mean?
Well, for starters, tokens are what you may already be thinking — value. In the world of commercial real estate blockchain integration, tokens refer to the ownership stake in equity, cash flow, or even debt. This is incredibly important for limited partnerships that may involve dozens of investors. These partnerships can benefit from a full-service investor management platform that streamlines transactions.
For example, a 200-unit apartment building could be owned by 70 investors with their partnership secured through blockchain integration. Each and every investor can own tokens that reflect their equity in the commercial property.
Blockchain integration can play a vital role in documenting, storing, and verifying ownership in commercial real estate. This tokenization simplifies liquidity as well. Once equity is tokenized, it can be easily traded, sold, and liquidated.
If there’s one challenge that the commercial real estate sector faces, it’s liquidity. Traditionally, this process is long and arduous. Blockchain helps to create an expressway to these transactions and creates incredible flexibility for commercial real estate investors looking to gain the most traction with their assets.
Tokenization does more than simply create liquidity; it also opens up a pool of investors. A general partner can purchase property through blockchain and break that cost into investable tokens (or shares). This allows for a more expansive catalog of buyers and creates a massive marketplace to buy and sell commercial asset tokens.
What’s On the Horizon
The introduction of blockchain integration in commercial real estate is exciting and brings with it countless benefits. Let’s explore some of the applications of blockchain technology and the future of real estate investments.
Smarter Contracts
It’s no surprise that legal contracts play a vital role in commercial real estate investments, sales, and purchases. So, how does blockchain help?
Well, through blockchain technology platforms, investors can create, authenticate, and even audit contracts in real-time from anywhere in the world. No more middlemen are required. This adds incredible agility to the real estate transaction process and eliminates payment disputes between parties as all transactions get managed on one secure platform with secure and reliable ledger information at hand.
You’re able to verify identities, incomes and drastically reduce the chances of fraudulent activity as well.
One-Stop-Shop For Transactions
Blockchain enables the entire spectrum of real estate transactions. From start to finish, investors can leverage blockchain to facilitate quick and painless commercial real estate transactions.
All transactions can be codified within a safe digitized ledger, from submitting and verifying titles to accepting offers, financing, due diligence, and eventual closing.
Easy Financing Preparation
Mortgage financing and other forms of commercial real estate investment funding can be a hassle if all of your paperwork is scattered about. You can hold and verify credit checks, identity verification, income verification, debt to income ratios, and other crucial documents you need to secure financing using blockchain.
Gone are the days of scrambling or running around trying to find all of the paperwork you need for funding. Reduce friction by holding your documents in a safe and secure blockchain platform.
Ownership Verification
Real estate blockchain allows for a single source of asset ownership verification. In addition to owning the entirety of a commercial real estate asset through blockchain tokens, one can also own a fraction of an asset through tokenization as well.
Through blockchain platforms, investors can either privatize or publicize this ownership information to allow for more investors, partners, or potential buyers.
Blockchain Integration is the Future of Commercial Real Estate
The real estate industry has an exciting future ahead of itself with blockchain integration. Many of the unique challenges facing commercial real estate are mitigated when blockchain capabilities get introduced.
- Eliminate the need for transactional middlemen
- Boost investor trust
- Act as a secure ledger
- Speed up contractual agreements, leases, and transactions
- Improve liquidity
- Reduce the likelihood of fraud
- Decrease overall costs and fees
While blockchain integration in commercial real estate was once a theoretical construct, it has blossomed into reality over the years. Investors looking to diversify their portfolios even further can discover the massive potential in the tokenization of commercial assets, and the incredible opportunities present with blockchain.