Blockchain is emerging as the new cutting-edge technology disrupting the entire digital world and transforming traditional industries such as real estate. The introduction of blockchain technology in real estate is creating lucrative investment opportunities and streamlining traditional operational processes.
In 2021, the global market value of blockchain was $4.67 billion and is expected to increase from $7.18 billion in 2022 to $163.83 billion by 2029 at a CAGR of 56.3%. Blockchain development trends in the real estate industry have been continuously increasing for the last couple of years.
From increasing investment opportunities to adding security in transactions and streamlining property management tasks, blockchain is revolutionizing the commercial real estate industry.
In this blog, we will take a look at the 7 opportunities for blockchain technology to reengineer the commercial real estate industry as we know it.
Blockchain In Commercial Real Estate
Despite being one of the largest investment sectors, the commercial real estate industry has always been known for being slow in technology adoption. The present global market size of Commercial Real estate is $4.1 trillion. Blockchain technology can help in maintaining such a vast industry by keeping up with the latest market trends and streamlining operations.
Blockchain technology in commercial real estate is a digital, decentralized network that keeps a record of property information and transactions on an immutable ledger. Although blockchain is popular for being associated with cryptocurrency and bitcoins, its applications in commercial real estate are endless.
With its distributed ledger system and cryptographic encryption, blockchain increases transparency and data integrity while ensuring immutability. This means data once stored cannot be altered or hacked without the consent of all participants.
Though commercial real estate provides exceptionally high returns, investments require time, a greater number of intermediaries, and other challenges. Blockchain technology is helping commercial real estate address these challenges by providing limitless applications.
Lilypads’ blockchain network provides users with a next-gen commercial real estate investing platform that helps them discover potential deals and tackle existing challenges to make commercial real estate investments future-proof. Check out Lilypads’ blockchain-based products to know more.
7 Ways Blockchain Will Revolutionize Commercial Real Estate
- Real Estate Tokenization and Fractional Ownership
The tokenization of commercial real estate properties is one of the biggest and most significant blockchain applications. Utilizing Web 3.0 technologies, blockchain offers tokenization of real estate properties and portfolios.
Tokenization refers to the digital transformation of an investment property into several unique tokens or NFTs. These tokens are also known as shares and represent the total value of the tokenized asset.
Tokenization of real estate assets allows you to trade the shares of the property. It furthermore creates an opportunity for you to own a fraction of a high-class commercial real estate property.
Fractional ownership, also known as co-ownership or shared ownership creates opportunities for investors to invest in commercial real estate properties.
Fractional ownership makes it easy to invest in premium commercial buildings that are harder to get a hold of for smaller investors due to the extensive requirement of investment capital.
Moreover, Fractional investment provides you with direct ownership without needing to manage the property. Thus, making it a perfect means for passive investment.
- Smart Contracts transforming leasing and property management
Smart Contracts are digital representations of lease agreements between buyers and sellers. Based on blockchain technology, smart contracts are self-executing digital deeds that contain the terms of lease agreements written in lines of code.
Generally traditional real estate leasing agreements involve a ton of paperwork. Manually handling such extensive paperwork could be tiresome and also leave room for human errors.
Utilizing smart contracts can help eliminate these obstacles by automating property management tasks and streamlining payments. Owners can reduce costs by saving time and minimizing interaction with tenants with automated rent collection. It further ensures timely payments and fewer rent defaults.
Moreover, smart contracts keep a record of the property information, lease agreement details, and payment terms to avoid future discrepancies.
- Increased security and transparency in transactions
Security risk is a major issue in the traditional real estate transaction process since property transactions are controlled by third parties. Blockchain technology helps in adding an extra layer of security to these processes with its decentralized and distributed network.
The decentralized and distributed network makes sure that data stored on the blockchain network is accessible to all the participants. As a result, the transaction process is transparent and trustworthy.
Moreover, transactions in blockchain real estate are facilitated by smart contracts. It keeps a record of real estate transactions on the distributed ledger.
As a result, transaction details are accessible to all the participants and can track payments in real-time. Thus increasing transparency and eliminating security risks.
- No more title frauds or falling for Ponzi schemes
Data stored on the blockchain network is immutable and cannot be altered or tampered with. Changing data stored in the blockchain network will require consent from all the participants.
Moreover, data once altered will result in a change in the unique code of the block. This change is also updated to the rest of the blocks linked. Hackers would therefore have to change every block code across the network if they wanted to change any data. Thus, helping commercial real estate reduce title frauds.
Another common fraudulent activity in commercial real estate is mortgage fraud. The current mortgage lending process involves multiple intermediaries leaving investors open to fraudulent mortgage lending schemes.
Blockchain maintains all records and documentation in an immutable smart contract that allows borrowers and lenders to access ownership details and transactional history along with verifying the identity of lenders.
- Easy on your pockets and time
The use of blockchain technology can revolutionize commercial real estate investing by reducing the involvement of third parties and intermediaries.
Traditional real estate investment involves various intermediaries such as lawyers, brokers, property managers, and others. As the number of intermediates increases, the investment process becomes more time-consuming.
Blockchain can eliminate these intermediaries by utilizing smart contracts and automating tasks such as payments and property management. As a result, eliminating intermediaries leads to faster operational and transactional processes and also reduces the cost of hiring external third parties.
- Better property listing
Properties can only be searched for through the Multiple Listing Service (MLS) in traditional real estate. This means you will need to sign up with several platforms to access their property listings.
By leveraging its centralized database, blockchain technology provides you with a single marketplace. It eliminates all of the need for signing up with multiple listing platforms and makes the real estate property searching process cost-effective, transparent, and efficient.
- Global investment opportunities and increased liquidity
Tokenization and fractional ownership are one of the most important applications of blockchain in real estate. Introducing tokenization has resulted in expanding commercial real estate investing to a wide range of investors.
Tokenization lowers the entry barriers to commercial real estate investment by providing fractional investment opportunities. It facilitates global trading of property shares similar to the stock market.
Moreover, the tokens can be purchased and sold globally using cryptocurrencies making commercial real estate possible from anywhere at any time.
Technology is being rapidly adopted by the real estate sector after the pandemic event. In the aftermath, blockchain has emerged as the cutting-edge technology to disrupt and transform the entire industry. It is unlocking greater investment opportunities and capital returns by addressing and eliminating the existing challenges in the real estate industry.
Several top real estate companies have started implementing blockchain and bringing change to this old industry. As one of the few companies using blockchain technology for commercial real estate investments, Lilypads makes investing in blockchain real estate easy, collaborative, secure, and instant for investors.
Get on board with Lilypads’ network to get early access to exclusive deals and seamless blockchain real estate investment opportunities.