Blockchain and CRE: It's All About Speed To Transact!
Recently the mysterious blockchain has been peaking the interest of “in-the-know” industry experts; some foresee it as the next big thing, some choose to ignore it, and others have no idea what it is. My advice to you; don’t ignore it…
What Is A Blockchain?
A blockchain is a distributed and highly scalable database that is hardened against tampering, even by operators of the datastore’s nodes. The most prominent application is the public ledger of transactions for Bitcoin. Distributed technology has finally advanced to the point where we can host physical asset types in the virtual world in a distributed and near-impossible to tamper with format.
What Does This Have To Do With CRE?
The obvious applicability of blockchain in CRE is as a better alternative to the paper-heavy and human-heavy paradigm that we currently have learned to live with. Blockchain will enable every property, everywhere, to have a corresponding digital address that contains occupancy, finance, legal, building performance, and physical attributes that conveys perpetually and maintains all historical transactions. Additionally, the data will be immediately available online and correlatable across all properties. Standard practices that normally involve specialists, like title searches, legal, finance, etc. will be less needed or in most cases totally unnecessary. The speed to transact will be shortened from days/weeks/months to minutes or seconds.
Financiers will have access to real-time data to structure risk-appropriate and highly profitable deals. REITs will be able to control portfolio volatility and inject proprietary logic with help from big data feeds with more success to find and capitalize on undervalued properties.
Real Estate transactions will begin to resemble the buying and selling of stocks/commodities. Properties in bustling areas could change hands many times a year, or many times a week based on strategy.
Property management firms will be structured as ultra-transferable service providers that convey as building ownership changes. Contracts will transition from owner to owner with re-compete occurring on a transferable schedule that is tied to the property.
Why Is It Inevitable?
With the reduced number of hurdles to retrieve the proper information to make an informed buy/sell decision, it is inevitable that the larger, more progressive institutions have already started the push towards the standardization and automation of the industry. Many are saying that, "blockchain should be taken as seriously as you should have been taking the development of the Internet in the early 1990s." - Bloomberg
Buying and selling property will become much more fluid and real-time. A deal that used to take months can be made in a matter of minutes. Real-time simulations can be run to compare far more parameters to determine potential investment potential. A bustling community of online products/services will flourish to connect and correlate environmental data, financial markets data, and political stability/instability data, amongst others, to return on investment and risk potential for properties globally.
Property ownership norms will also change. The timeline reduction of buying and selling property will fuel the notion that ownership of a property can be more transient. It will be the norm to see multiple property owners within a year. It will also increase the perceived liquidity of physical property and buildings/structures as liquidity is directly related to the speed it takes to convert to cash.
How are you getting ready for blockchain and its effects on CRE?
Let me know!