Like many industries, there are various pieces of insider information that have long been deemed sensitive within real estate and its institutions. Commonly kept under wraps have been details such as comparisons of real rent levels for different property types, the actual price of property or exact valuations. It takes much more than just a Google search to access certain information. This lack of transparency has generally been viewed as creating a competitive advantage. That is before technology and the power of data, turned the tide of information.
A shift in freedom of information
In today's digital and hyper-connected world, there is constant attention at keeping the seal of secrecy around information. In response to an increased demand for transparency, technology has progressed for several years now to trigger a trend towards gradually making certain information public. However, much of the world’s digitized information is hosted on disparate systems. It’s a disconnect that can limit transparency and efficiency as well as incidences of inaccuracy. In the end, the potential for fraud remains as high as ever.
As a decentralized, permanent digital thread of information, Blockchain is a technology that could allow the residential real estate sector to deal with these issues of inaccuracy and inefficiency. At the same time, its permanent state also can aid transparency as it creates a trail of information that can be reliably referenced. In 2015, the World Economic Forum conducted a survey of 800 leaders and IT specialists in the communication technology sector. 57.9% of respondents thought that 10% of global GDP information will be stored using this technology by 2025. In practical terms, what does this imply for the world’s largest asset class in the real estate industry?
Direct applications for real estate
It’s more than just a buzz word. Until recently, blockchain technology has mostly been associated with the rise of the cryptocurrency market. However, real estate is among the many industries that are now realizing the potential of blockchain-based applications. Smart contracts and the tokenization of transactions are just two major instances of blockchain’s ability to impact real estate immediately. A change may be coming to some of real estate’s core operations in purchase, sale, hiring, finance and overall management functions.
Property owners are also seeing solutions to some of the existing problems in their leasing operations using blockchain technology. This includes:
- Inefficient search processes due to fragmented data
- Tedious paperwork and procedures
- Complexity in the management of current leases, real estate transactions and cash flow
- Lack of accurate, real-time data affecting decision-making
How will Blockchain impact your business?
While technology is often disruptive, it is up to each company to determine its utility. Of course, as an emerging technology blockchain has its own limitations but the basic principles of its functionality are clear.
As is the case with any investment, technology must meet certain conditions to be relevant for a business. In doing this assessment, real estate professionals need to consider current processes against goals, needs, and challenges. Are your company’s goals in tune with those of an audience that is now increasingly looking for greater transparency, data security, streamlined processes and a single platform for sharing information?
As with any shift in core business practices, there is an evaluation of costs and benefits. In doing so, the potential benefits relative to the extent of an overhaul of existing systems in conjunction with the different technological systems used by the various stakeholders in CRE's operations will emerge.