Blockchain and Commercial Real Estate.
Recently I have read several articles regarding “Blockchain” and its pending doom (or awesomeness, depending on your position!) upon the Commercial Real Estate Brokerage world. If you know me, you know that I am SUPER fascinated and engaged in modern technology as it relates to CRE, particularly when it comes to data collection and analysis.
For me, Blockchain and the concept behind it is right up my alley. The best definition I have read about Blockchain comes from Jason Ray (Executive Vice President and CTO at ULI) in his article Blockchain and CRE: It’s All About Speed To Transact!:
“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 the format.”
Blockchain has several positive implications when it starts to be applied to CRE. Let me start first by using a simple dollar as an analogy. If I hand you a dollar bill, you have no idea where that dollar has been, but more importantly to me, you don’t know what value that dollar really has. That dollar bill could have purchased a cheeseburger or a house – you don’t know. You have a “range” or concept of value, but it is not precise or exact.
Blockchain would provide, within that same example, a history of where that dollar bill has been, what transactions it has been used in and where, and what it has been traded for (to better identify its worth and value!). Most importantly to CRE though, Blockchain would provide information regarding buyers, sellers, title work, reporting, lease comps, and vendor work.
In a perfect world, it would host perfect data, and all of the information necessary to buy, sell, and manage commercial real estate at your fingertips! In theory, it would work to replace brokers, title companies, appraisers, and many service providers in the industry because you have access to all of the information you would need to make a decision to buy and sell real estate in one place.
Imagine using an app on your smart phone to review available investment properties for sale, review perfect data and transactional data on that asset and similar assets, review leasing activity, building improvements, and purchase with a click of a button! Think Carfax for the car industry on steroids for commercial real estate.
Your review on your phone would include several debt options that would be executable upon when you click “Purchase”, with variables an investor could play with to determine cash-on-cash returns and goals for the investment. There would be a dropdown menu for different insurance options, as well as title insurance options. I bring up “velocity” in my team meetings a lot, and Blockchain would be the ALPHA of velocity for deals.
Can you imagine? One thought that came to my mind is the ability to overlay the investment you are looking at against the last 10 deals that have traded, overlay population growth by markets, etc. Who knows – the options are truly endless!
Let’s be honest – Commercial Real Estate is super inefficient. I was on a webinar today hosted by Rod Santomassimo of The Massimo Group (plug for Rod who I owe! www.massimo-group.com), as he had invited Jerry Anderson from Sperry Van Ness to discuss Commercial Real Estate. Jerry brought up that in 2015 alone, over $91,000,000 had been invested into CRE Tech companies! That is $91,000,000 more being put towards the creation of CRE Blockchain! There is an amazing amount of intellectual capital being spent on improving CRE inefficiencies right now.
On my team, we are constantly improving and refining our systems. I have said to my team throughout the year that I want to be the CRE APP for my clients. I want them to be able to call, text, or e-mail me whatever their goals are and BOOOOOOOOOOM – money and results come out the other end for them. Goals in, money and results out. That is where my latest endeavor and tagline was spawned: “We are BLOCKCHAIN!”.
Since the first day, I read Duke Long’s blog post Commercial Real Estate and Blockchain. Let Me Help You Understand Why This Matters, my team has heard me say, and send in the SUBJECT LINE of my e-mails, that “WE ARE BLOCKCHAIN.” The goal of Blockchain is increased efficiency AND TRANSPARENCY in commercial real estate. Better data, simpler processes, more visibility, and clearer understanding leads to better deal-making and faster transaction times.
When I first brought my assistant on, I know he was drinking from a fire hose because I walked him through our “deal cycle.” It begins with figuring out what to work on based on the trends and feedback/needs of the market, we pull a list of owners, we call/mail/meet with those owners, we educate them on the value of their property in the market, we educate them on where we think we are in their deal cycle and where we are in the market cycle, then hopefully they hire us (if it makes sense to make a move for them!), then we list the property – which kicks off an extensive checklist of things to be done – then we go under contract (enter U/C checklist), then we have a closing (enter closing checklist), then we have post-closing duties and follow up… you get the idea, and then we do it all again!
In creating my team, I was able to pull myself partially out of the “transaction treadmill” enough to start gathering important rental data, and reaching deeper into the market and deals. I was able to take a step back and look at the market from 50,000 feet up and start thinking more like my clients think. I told my team early in 2015 that our clients take our data to analyze and use to make decisions. My goal was to start collecting data points we had not been collecting (rental comps by submarket and unit mix, among others) and analyzing the data that we have to see and identify trends in the marketplace.
One of the main points I wanted to make was that while yes, Blockchain is coming, it will be a long time before it actually happens. In the short term, you will have tech companies produce and improve technology that focuses on one or a few areas of the transaction process (think crowdfunding that raises equity, but doesn’t yet find the deals). We have non-disclosure states (like Utah!) that will continue to have imperfect data. And you already have Blockchain for CRE – it’s me (or your commercial real estate broker)! We know more than anyone will know because we are in the trenches daily. We apply the pulse on what we “feel” to the data we have. We know the best building inspectors & appraisers, and we know who is lending where and when and why.
While commercial real estate might have some inefficiencies, you have access to brokers who have an unbelievable knowledge and vast networks. While you might want to wait for “Blockchain for CRE” to become whole and a free APP, you are missing out on the fact that you have ME (your broker) and my team right now. The goal of any commercial real estate broker is to provide as much information and data as possible for our clients to make informed decisions. If you are out making deals without me (your broker), I can make a pretty good argument that you should know my firm and me, or, at least, have access to our data. While this information will slowly become more readily available, do not discount the fact that brokers have access to this information now! What do you need to be successful? I will take that and run with it and add value! WE ARE BLOCKCHAIN.
Blockchain and Commercial Real Estate. Guest Post Mark Jensen.
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