A model proposal on smart contracts for commercial property leases

Abstract

Technological developments change sectors in every field, the commercial real estate sector has also been affected by these developments. PropTech, which can be explained as the integration of technology in real estate, is also transforming the commercial real estate market. In order to survive and increase their investment volume, companies are also looking for new technological alternatives. Blockchain also offers significant opportunities to companies at this point. To adapt to current developments, commercial real estate investors are trying to benefit from the liquidity and transparency opportunities provided by blockchain and its potential to solve issues considered complex in the current market. The main problem examined in the thesis is that commercial real estate leasing processes are currently complex and are handled by different actors, making the leasing and operational process prone to errors. Today's technology, blockchain-based smart contracts, promises to solve the complexity and error-prone nature of the contract process by integrating it into leasing processes. It is also claimed that smart contracts create a structure where reliability and transparency are guaranteed. The purpose of smart contracts is to ensure that the lease contract is signed, the rent is paid on time, and the contract termination is implemented in accordance with the terms. This thesis explores the application areas of smart contracts based on Blockchain technology and potential application innovations in the commercial real estate market. It identifies important criteria in commercial real estate rental contracts and analyzes which of these criteria are prioritized in smart contract integration. Smart contracts are a key example of the use of Blockchain technology in commercial property leasing. Therefore, it is essential to find criteria that will allow smart contracts to be used in commercial property leases. The criteria that smart contracts must meet in order to be preferred to the existing contract type have been questioned through methods such as literature review, surveys applied to market professionals, and AHP analysis, and if these criteria are met, it has been investigated whether smart contracts can be used in the shopping center leasing process. The criteria considered in the current lease agreement process and the use of smart contracts, which are a part of Blockchain technology, in the commercial real estate sector are examined in detail. By investigating the application areas of smart contracts in commercial real estate leasing contracts, the importance of the criteria in contract selection is determined by a survey conducted with employees in different positions in commercial real estate companies. The survey, which investigated the criteria for smart contracts to be used instead of traditional paper-based lease contracts, was conducted on the target people. The survey results were analyzed with priority tables and matrices according to the AHP method. The AHP method shows which criteria are effective in the decision to select the leasing contract process by integrating the criteria into the hierarchical structure. The scoring system determines which criteria are more important than others by having participants compare the criteria in pairs. Participants were asked which criterion they preferred over others. The criteria obtained from these surveys were scored using scoring matrices. The analysis using the Analytic Hierarchy Process method revealed the criteria and features that the leasing process should promise for the use of smart contracts. As a result, the opportunity to integrate smart contracts into the commercial property leasing process is being explored.