Blockchain is a decentralized ledger that distributes identical copies of transactions across an entire network. These transactions are encoded and stored in “blocks” that are then “chained” together. This system is very difficult to hack or cheat, and it’s also “very difficult to alter transactions logged in a public blockchain as no single authority controls the nodes,” according to Forbes.
Many people have heard about blockchain technology in the context of cryptocurrencies, but it can be used in a number of other ways as well. As the managing broker of a commercial real estate firm, I’m dedicated to studying blockchain and understanding how it will change the real estate industry. Below are some of the ways I believe blockchain technology could influence the future of commercial real estate.
New Ways To Trade Assets
I expect blockchain to make it smoother, easier and safer to facilitate real estate transactions on trading platforms and online marketplaces. In fact, there are already platforms out there doing this. For example, ATLANT is a platform that tokenizes properties; the trading can all be done online, and the tokens can be exchanged for fiat currency. From my perspective, understanding the value in tokenizing real estate is just the tip of the iceberg when it comes to the future of partnerships and investments on the blockchain.
Lowering Barriers To Ownership
In traditional real estate investing, it’s hard to conceptualize and follow through with purchasing a fraction of a property. As such, those who don’t have significant upfront funds might find the barrier of entry to commercial real estate high. Blockchain makes it possible to buy and sell properties in fractions. As the Cointelegraph reported, “Fractional ownership of buildings and property developments is becoming one of the adoption areas for blockchain technology in the real estate business.”
With fractionalized investing, people invest as much as they can afford. People can also invest in properties across the globe without being limited by where they live and without having to be responsible for the day-to-day leasing, maintenance and other property management tasks. Based on my observations, many investors see this as all reward, as it could help mitigate the risk of commercial real estate investing.
One of the great things about blockchain is that it is secure and transparent. From my perspective, this decentralized technology could pave the way for a more equitable future in real estate. Instead of fully relying on brokers, lawyers and banks, I believe blockchain could enable buyers and sellers to carry out transactions in a simpler, more streamlined way.
Real estate has historically been dominated by large and wealthy corporations, but with blockchain, I believe it may soon be possible to skip the intermediaries — along with the associated fees and commissions — and carry out peer-to-peer real estate transactions.
Transparent, Immutable Data
At its core, blockchain is a transparent, decentralized technology. Any information stored on the blockchain is accessible to all peers on the network, which builds trust and security right into the system. Historically, I believe greed and lack of transparency on the part of institutions have caused serious problems in real estate. (Think the 2008 housing bubble crash.) That’s why a transparent and verifiable system is important. Fraud is much more difficult with blockchain, so in my view, buyers and sellers could have more confidence as they conduct real estate transactions.
Of course, keep in mind that with new technology, we are bound to see challenges. In regards to blockchain technology and commercial real estate, I believe the biggest challenge by far will be mainstream adoption. In my experience, commercial real estate is notoriously archaic when it comes to technology, so the speed of integrating blockchain technology in day-to-day life will be a challenge.
Conceptually, blockchain is intimidating. But in practice, I believe blockchain has the potential to make investing in real estate more practical, safer, easier and streamlined. My suggestion to professionals in the real estate space? Educate yourself on blockchain technology. Do your research and due diligence. Learn about the technology. It is complex and unique, however, it could be your friend, and, societally, it is likely here to stay.
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