“There’s a demystifying process that needs to happen, and from a regulatory perspective, there are some unknowns,” said Witness Yi, Treasury Services Manager for Chase. “But there are clear applications for blockchain in commercial real estate, with potential for increased efficiency and transparency as these solutions develop.”

What is blockchain?

Blockchain may be best known as the technology that powers cryptocurrency, but it’s a versatile innovation with broader applications.

Blockchain technology functions as a digital ledger that stores and shares information across a computer network. Information in this ledger is stored as “blocks” of data, such as transactions. When a new transaction occurs, a block is added to the “chain” using technology designed to prevent tampering—including alterations or deletions by network members. 

Each node in the network maintains its own copy of the ledger, and no one node controls the changes. When changes occur, they’re instantly shared with every copy, ensuring all network participants access the same information. 

Opportunities in real estate

Blockchain technology is still evolving, as are regulations governing its use. But the commercial real estate industry has begun exploring its potential to increase efficiency and transparency through applications including: 

1. Smart contracts

A smart contract is a digital agreement stored on a blockchain, programmed to execute automatically once predefined conditions are met. 

A smart lease, for instance, might automatically return a renter’s security deposit following a satisfactory move-out inspection. And in theory, a smart contract could perform title company functions in a commercial property sale, transferring title and issuing payment once the buyer and seller execute the contract.

“If smart contracts help investors automate processes around contract compliance and verification or remove intermediaries, it could lead to cost savings and faster execution,” Yi said. “This isn’t something we’re seeing clients use today, but it’s something we could see more of in the future.” 

2. Programmable payments

Blockchain technology—including J.P. Morgan’s Kinexys—facilitates complex payments quickly and efficiently. Transactions settle within minutes, including cross-border payments that traditionally take up to two days via wire transfer, reducing payment timing uncertainties. 

Blockchain also streamlines payment automation. A commercial real estate owner could program payments to execute automatically when specific conditions are met, such transferring funds exceeding a set threshold to a different account.  

“There are other payment methods that let clients set parameters for automated payments, but it isn’t as detailed as what you can do with blockchain,” Yi said. “We’re investing in this technology and continuing to push the envelope and innovate.”

3. Tokenized assets

Tokenization converts ownership rights of digital or physical assets into “tokens” stored on the blockchain. 

If a commercial real estate owner tokenized a multifamily property portfolio, each token would represent a share available for investor purchase. When investors sell their stake, they transfer the token to buyers. The portfolio owner could use smart contracts and programmable payments to distribute income automatically to token holders.

“Many people avoid real estate because of the upfront capital required. Tokenization, or fractionalizing assets, could open real estate to a broader audience,” Yi said.  

Staying informed

Implementing blockchain requires carefully weighing costs and benefits for your business, including how the technology will integrate with existing systems, potential regulatory implications and necessary technical expertise.  To learn more, contact your banker or payments and liquidity team. 

“It’s in a client’s interest to ask questions about the future state of the industry,” Yi said. “See what ideas they can provide and learn how they’re exploring the technology.”  

Yi also recommends joining a learning community. This might include other investors and professionals from different industries who bring fresh perspectives. “It’s about connecting with folks with similar interests and, as a community, leveling up your tech fluency,” he said.