Blockchain record-keeping technology could prove to have meaningful applications for the commercial real estate industry, including origination of financing, distribution of funds, property listings and more.
Given the potential savings in time and costs, many companies are looking at transferring all sorts of records onto Blockchain, the technology behind the Bitcoin currency, and the real estate industry should do so as well, said panelists at the 2018 ICSC New York Deal Making.
Besides eliminating paper and reducing transaction times from hours to minutes, Blockchain is appealing because it is based on so-called “smart contracts” — self-executing agreements with the terms directly written into lines of code. These exist across a decentralized Blockchain network. Smart contracts facilitate deals without the need for a central authority or legal system or for any external enforcement. They make transactions more traceable and more transparent, as well as irreversible, says Mo Shaikh, co-founder of Meridio, a web app backed by Blockchain technology. “And they may one day be accepted in court.”
Smart contracts allow engagement without giving one party control, Shaikh said. “If two parties don’t trust one another but [nevertheless] want to share, it’s a good system.” Title insurance companies and escrow agencies are most in need of Blockchain’s smart contracts, he said.
“There’s a lot of asymmetry out there. Blockchain brings the info together and empowers the user”
One major application for Blockchain technology in commercial real estate is financing. Cushman & Wakefield recently teamed up with Meridio to help finance a multifamily property in Brooklyn, N.Y. The owners, already Bitcoin fans, used Meridio to raise equity for the project.
Another use for Blockchain would be property searching. “There’s a lot of asymmetry out there. Blockchain brings the info together and empowers the user,” Shaikh said. “The accessibility and the integrity of the information can be increased.”
Data analysis will benefit too. New York City’s Economic Development Corp. is developing its own Blockchain strategy to apply to the 66 million square feet of commercial space it manages. “These properties are owned by a variety of agencies, and they keep a lot of disparate lists,” said Karen Bhatia, Economic Development Corp.'s vice president of creative and applied technology. “There are many ledgers out there. We need them to be streamlined and more accurate.” Blockchain technology could be particularly useful for pop-up retail lease management, she suggested, as the frequent turnover is a good fit with the pace of the technology.
By Brannon Boswell