Advocates of the digital record-keeping system say it can streamline the transaction process, reduce fraud, cut costs
In Canada’s commercial real estate market, there are countless extra fees and processes involved in purchases that go beyond the price of the property. But blockchain technology could hold the key to cutting down some of those costs by reducing the intermediaries.
Blockchain is essentially an online ledger that manages recorded transactions. What makes it innovative is that the ledger is distributed, meaning anyone connected to the network has a copy of it. The implications of this in commercial real estate are numerous, from purchasing to leasing to management.
“If we have a blockchain approach … then it cleans that whole process and streamlines it,” says Sheila Botting, national real estate and construction leader at Deloitte Canada.
At its root, blockchain technology compiles records of transactions into systems called blocks, which are secured cryptographically and contain a digital fingerprint of past and present records.
Technology and real estate experts alike say blockchain technology has an important place in the commercial real estate market with its ability to streamline processes, reduce fraud and cut costs (and middlemen), but it remains unclear how and at what rate it will be adopted.
According to a recent Deloitte report, Blockchain in Commercial Real Estate: The Future is Here, landlords, sellers and intermediaries (such as brokers and lawyers) all have access to the historical data for both the specific property alongside the commercial real estate market as a whole. No more entering data in multiple places, multiple times.
“Today we can do all of those things with both websites and e-mails … but in a blockchain world, assuming that confidentiality is cleared, that property would have a property identity, so the previous people who owned the property, any of the inspections or records, landlord information, would be fully disclosed,” explains Ms. Botting.
“In theory, you’re not involving a lot of paperwork and you’re reducing the number of people involved in the process.”
Transaction fees and services in both Canada’s residential and commercial real estate spaces – such as legal costs, land-transfer taxes and real estate commissions – make up about 2 per cent of Canada’s economy, according to Statistics Canada’s latest GDP survey.