Blockchain’s Role in Commercial Real Estate’s Data Governance and Asset Management

September 2, 2022

Investors rely heavily on open source data to understand customers’ wants, trends, and desires. This is because valuations in the property market often rely on shifting factors. The rise of digital identities, security, and data ownership are essential for the next generation of real estate.

Blockchain technology has led the way, and new companies are emerging daily. Here we look at the most recent developments in blockchain, focusing on its role in data governance and asset management.

What Is Data Governance?

When organizations build enterprise systems, they often fail to think about how to govern the data in those systems. Data governance (DG) is a process that ensures that data is consistent and trustworthy based on internal standards and policies that control data usage.

It’s increasingly critical as organizations face new privacy regulations and rely on data analytics to help optimize operations, driving business decision-making.

According to Worldbank, the current estimated global data traffic is over three zettabytes, which is still expanding. The Real Estate industry has a vast base, a high number of employees, unprecedented investment and financial requirements, and many assets. For instance, the US only has an estimated $ 33 Trillion.

The data in real estate is virtually untapped compared to other markets. Commercial real estate investors need to manage, control, analyze and govern this data by designing a comprehensive data strategy to benefit from this. Visit Youtube for more information.

Steps for Developing a Sound Data Governance Framework

The first step is defining the data assets of custodians and owners by effectively covering the data storage, backing up, and protecting it from attacks.

Then developing procedures and standards to explain how data is to be utilized by the authorized personnel. The final step is setting an audit procedure and control to ensure compliance with external government laws and internal data policies.

What Is Blockchain Technology?

What Is Blockchain Technology?

There is a need to understand what blockchain technology is, its classification, and its importance, in addition to knowing how the technology works.

Blockchain, a distributed ledger technology, is the underlying technology behind cryptocurrency and can potentially change how properties are transferred between and within business networks.

Blockchain technology is the future of digital assets. Not only does it allow for the transparent movement of assets, but it also provides auditable and verified records for all transactions relating to the property.

#1. How It Works

A blockchain ledger is a distributed database that records digital transactions between parties. Each transaction records who paid whom and what they exchanged in return.

Each chain block consists of a hash of the previous one, and each new block’s hash is calculated by using the previous block’s hash as a starting point. All versions of the distributed ledger in existence share the same state, which makes them equally trustworthy.

#2. Types of Blockchain Technologies

Public, private, and federated blockchains are the most common distributed ledger technologies used in various applications. A public blockchain involves free and anonymous participation, e.g., Bitcoin, which operates on a peer-to-peer basis with no central authority or intermediary.

Private blockchains offer greater control over who can access blockchain data, such as their activities and transactions. This control allows for more efficient and trusted business processes.

Blockchain Platform has been designed to comply with the public, private, and consortium standards for each of these types of blockchains.

#3. Role of Blockchain Technology in Real Estate

At first, you may be thinking about how to use a blockchain to track the movement of money and assets. The technology is also applied to many industries, including healthcare, education, and government. In real estate, its role includes:

Blockchain technology has the means to transform the real estate industry. It can allow parties to share information without compromising confidentiality, significantly impacting the ability to transact with parties to trust an asset’s transaction history.

The shared ledger can potentially change how we trade and manage assets. It would allow parties to exchange asset records with assurance and save them from inaccurate information in untrustworthy networks.

It will empower people to be more in control of their financial lives and give them the ability to make better decisions regarding their money.

#4. In Asset Management

Asset management is managing assets such as property or money for businesses or governments. In most cases, asset management involves a lot of paperwork and manual processes.

This means that there are often problems with dispute resolution. And when disputes happen, it can take a long time for them to get resolved because people have to agree on what happened and how to solve it.

Blockchain technology revolutionizes this process by creating a consensus-based database that keeps track of all relevant information about an asset. Any update can only happen if all parties agree with it first.

It also means that updates can happen faster because they rely on algorithms that don’t require human intervention.

How Is Blockchain Technology Being Used To Solve Data Governance Problems?

There are several ways in which investment management data governance has used blockchain technology in the commercial real estate industry, and they include:

#1. No Middle Men

Blockchain technology is the first use case built on a public blockchain and allows for transparent ownership and real estate transfer. It is used to register, track, and verify transactions in real-time. This can reduce costs and speed up transactions while reducing time to value.

#2. Smart Contracts

Smart contracts are designed explicitly for discerning the intent of one party, who can then act on that intent. This feature makes smart contracts more enforceable and verifiable than traditional paper contracts.

The blockchain is essentially trusted as a decentralized technology because the information is accessible to all peers on the network, making data transparent and immutable.

Since smart contracts can interact with people beyond computers, they would have a tremendous commercial impact on the real estate industry.

#3. Title

Blockchain can create a more efficient and accurate process for recording property ownership. Firstly, the blockchain can provide instantly inarguable and indisputable proof of who owns and manages the assets in any location at any given time without third parties.

Furthermore, integrating smart contracts on top of this system makes it possible to store multiple copies of critical documents on a distributed ledger without any intermediary having access.

#4. Payments Are Made Easy

Blockchain technology can reduce settlement time while only costing little in transaction fees, undeterred by international buyers.

#5. Fraction Ownership of Property

Property ownership can now be fractional. Offering multiple owners the opportunity to buy into a property against one owner allows increased accessibility by lowering the minimum capital needed to display real estate as an asset category.

This is especially helpful when many people need access to the property but don’t have enough seed money for entry-level properties.

Types of Data Used in Commercial Real Estate Investment

The most crucial types of data used in commercial real estate:

#1. Performance Data

Commercial real estate is different from residential. There are many factors to consider, and the best way to determine self-worth is by comparing your performance against other realtors in your space.

That’s why it’s crucial to add all sales data, looking at the metrics that matter most. By benchmarking for profitability per square foot and revenue compared to others, you can see exactly where you stand and make more informed decisions about your investment management data governance moving forward.

#2. Market Data

You can use this tool to compare your current offer to the market, finding properties that are below market or too expensive for the value you provide. It is also a way to compare your bid to other offers on the marketplace.

This will help you negotiate for better deals, find relocations and negotiate more extensive offers from landlords.

#3. Structuring and Organizing Site Data

With your total space information in one place, tracking the available space and how much of it you have can be more accessible. You can also include leases and any other information in your system to get relevant information.

#4. Adjustment and Expenses Data

Real estate expenses and rent adjustments are due every month. Rent is typically determined with a simple formula, so it’s easy to calculate. It’s convenient for comparing different options. You can also see which sites use more electricity or other forms of energy, which helps you save money.

When tracking expenses, you can determine whether the site’s usage fits your expectations. Real estate expenses can also help you analyze the cost of an investment and make adjustments, so you don’t run out of cash flow before your goals are met.

Types of Data Used in Commercial Real Estate Investment

Conclusion

Blockchain technology offers a powerful alternative to current database systems, vaulting it into the heart of business processes. This shared ledger makes financial transactions more efficient, transparent, and secure by enabling everyday professionals to work with faster, more reliable information.

EXtrance’s investment management data governance software allows you to keep your information, communication, and documentation secure while taking advantage of innovative blockchain technology. A blockchain-based system makes it nearly impossible for hackers, cheaters, or viruses to enter the system.

Contact EXtrance today to learn how we can help you improve your investment management processes with blockchain technology.