1. The Problem: Macroeconomic Context and Data
Shifting workplace patterns and a contracting banking environment have produced a structural crisis in US Commercial Real Estate (CRE). This research grounds its argument in published institutional market data.
1.1 The Commercial Mortgage Maturity Wall and the Commercial Credit Crunch
S&P Global Market Intelligence (2026) tracks an unprecedented refinancing bottleneck:
- 2026: $936 billion of commercial mortgage debt reaches maturity.
- 2027: $983 billion reaches maturity, marking the cyclical peak.
- Commercial credit crunch: Regional and commercial banks are shrinking their balance sheets because of unrealized bond-portfolio losses. Debt roll-overs are largely frozen, pushing otherwise viable properties toward technical default. This research calls the combined effect the commercial credit crunch: viable properties struggle to obtain refinancing.
1.2 Secular Vacancy Trends
The Cushman & Wakefield and Newmark Office Market Beats (2026) show structural erosion in asset utilization:
- National office vacancy sits at roughly 19.8% to 19.9% across major central business districts.
- Drivers: institutionalized hybrid and remote work, and corporate cost rationalization.
- The rigid lease friction: under traditional leases, tenants bear 100% of utilization risk. When revenue drops, the result is liquidation or immediate vacancy.
1.3 Core Hypothesis: The Landlord's Two Options
Consider a landlord whose building sits at 30% vacancy and below breakeven. The existing tenants are good, but the building still does not cover its costs. Filling the empty space with businesses that can make money is the landlord's only real path to breakeven.
The logic is a portfolio bet. If the landlord signs 10 new tenants, perhaps 3 of the 10 succeed, enough to bring the building to breakeven, and perhaps 1 of the 10 does exceptionally well. These ratios are illustrative assumptions to be tested, not findings.
That leaves the landlord two options:
| Dimension | Option 1: Fixed rent | Option 2: Future-revenue lease |
|---|---|---|
| Rent timing | Owed upfront, regardless of results | Tied to revenue; floor low or zero |
| Appeal to new businesses | Low: the tenant carries all utilization risk | Higher: no large cost before revenue arrives |
| Chance of reaching full occupancy | Lower | Higher |
| Landlord default risk | Higher | Hypothesized to be lower |
| Upside if a tenant breaks out | None beyond the fixed rent | Shared through α |
Hypothesis. For a landlord below breakeven with high vacancy, a future-revenue lease is more attractive to prospective tenants and carries a lower risk of default for the landlord than traditional fixed rent. This is the central claim the paper sets out to test.
2. Theoretical Foundations
The model reconciles classical lease theory with early literature on collaborative office networks.
2.1 Wheaton (2000): Mitigating Landlord Moral Hazard
In Percentage Rent in Retail Leasing: The Alignment of Landlord–Tenant Interests, Wheaton moves the focus of lease incentives from the tenant to the landlord.
- Core thesis: In multi-tenant buildings the landlord controls curation, maintenance, and competitor placement. Under fixed rent, the landlord is tempted to maximize density, for example by adding direct competitors, even when this dilutes each tenant's sales.
- Remedy: Tying rent to a percentage of sales (r × Sales) makes the landlord internalize the cost of poor curation.
- Extension to office: Giving the landlord a variable share of operator revenue rewards community integration, premium hospitality, and active utilization.
2.2 Halvitigala et al. (2019): Joint Ventures and Management Models
In Coworking and Leasing Models, the authors describe the shift from the traditional lease model to the management model and the joint-venture model in coworking.
- From passive to active: The landlord stops being a passive rent collector.
- Structural precedent: Instead of fixed rent per square foot, flexible-space operators enter profit-split agreements with owners. The landlord funds fit-out capital expenditure, the operator manages the user base, and net operating income is split.
3. Proposed Solution: Tokenized Portfolio Leasing
The proposal merges Wheaton's incentive alignment with the operator-sharing model of Halvitigala et al. and implements both through RWA tokenization. It rests on three pillars.
3.1 Pillar 1: Variable Two-Part Pricing Lease
The lease replaces fixed overhead with a two-part structure:
The floor is typically set to cover baseline building operating expenses, but it is negotiable and can be set as low as zero. α is the negotiated revenue-share coefficient. The structure removes upfront capital friction for high-growth operators and supports immediate occupancy.
What each term means
- R (tenant revenue): what the tenant's business earns in the period.
- B (base rent, the floor): the minimum rent, owed even in a weak month.
- α (alpha): the negotiated revenue-share percentage. At α = 10%, the landlord's share is 10% of R.
- max(0, x): “x, but never below zero”, so the overage cannot turn negative.
- Reading the formula: pay the floor, plus whatever the revenue share exceeds it by. This equals the larger of B and α · R.
Worked example
Take B = $10,000 and α = 10%.
- R = $50,000: α · R = $5,000, below the floor. The tenant pays $10,000 and the overage is $0.
- R = $200,000: α · R = $20,000. The tenant pays $20,000 ($10,000 floor + $10,000 overage).
- The breakeven is R = B / α = $100,000. Below it the tenant pays only the floor; above it, rent rises with revenue.
Low revenue (α · R below the floor). When the revenue share is smaller than the floor, the overage is zero and the tenant pays exactly B. No income reaches token holders in that period, and the lockbox split changes (see Pillar 3).
Zero base rent. The landlord can also set B = 0 to maximize occupancy. Rent then equals α · R: the tenant pays nothing upfront, and nothing in a month with no revenue. The cost is that the landlord carries the building's operating expenses until tenants grow, so B = 0 trades short-term cash for a better chance of filling the space.
3.2 Pillar 2: Portfolio Diversification and Power-Law Returns
The appraisal problem is reframed by treating the building as a small venture portfolio. Under fixed rent, vacancy risk is binary and catastrophic. Under revenue sharing, risk is spread across, for example, a 10-tenant layout. Total landlord income I across N tenants is:
If nine of ten tenants stagnate, their floor rents keep the building operating. If one tenant, K, breaks out (a scaling AI hub, a specialized tech firm, a viral flexible-workspace host), the overage α(K) × Revenue(K) can offset the vacancy and underperformance elsewhere in the property.
What each term means
- I: the landlord's total rent income across the building.
- Σ (sigma): “add up”, here the rent of every tenant from i = 1 to N.
- i is the tenant number and N the number of tenants. Each tenant has its own floor B(i), share α(i), and revenue R(i).
- K: the single breakout tenant.
- Power law: outcomes are very uneven, as in venture portfolios. Most tenants do modestly and one does far better than the rest.
Worked example
Ten tenants, each with B = $10,000 and α = 10%. Nine earn $50,000 of revenue or less and pay only the floor: $90,000 in total. Tenant K earns $2,000,000 and pays $200,000. The building collects $290,000, and one tenant supplies most of it. Fixed rent at the same $10,000 would have collected $100,000.
3.3 Pillar 3: Blockchain Liquidity and the Commercial Credit Crunch Bypass
To get around frozen bank lending, the variable revenue contracts are institutionalized on-chain:
- 1. Fractionalized receivables: Projected variable overage streams are tokenized as RWAs.
- 2. Capital-raising platform: Landlords sell revenue-share tokens to global backers and receive upfront working capital to address the 2026–2027 maturity wall.
- 3. Smart-contract lockbox: All tenant transactions flow into an escrow contract that splits each payment programmatically and instantly:
| Destination | Normal case (α · R ≥ B) | Low-revenue case (α · R < B) |
|---|---|---|
| Tenant operational account | (1 − α) · R | R − B |
| Landlord mortgage / OpEx escrow | B | B |
| Token holder dividend pool | α · R − B | 0 |
In the low-revenue case the tenant keeps what remains after the floor, and token holders receive nothing for that period. If R itself is below B, the floor cannot be paid in full from revenue. How that shortfall is handled (arrears, deposit, carry-forward) is a contract term still to be defined.
Because the split is enforced by code and visible on-chain, the arrangement is auditable by design.
3.4 Extension (Not Finalized): Tokens as Collateral or Loan Security
Using the revenue-share tokens as collateral for loans is a possible extension. It is not part of the core proposal and its design is not finalized. Whether it is legal, and under which securities, lending, or property-law rules, remains an open question.
4. Academic Terminology
To keep the terminology clear and academically precise, the following phrasing is used throughout:
| Concept | Formal phrasing |
|---|---|
| Fixed rent replacement | Mitigating tenant front-end capital constraints through a variable two-part tariff |
| Landlord revenue risk | Asymmetric operational risk exposure and cash-flow volatility under management agreements |
| Tokenized collateralization (extension, not finalized) | Asset-backed securitization (ABS) of variable commercial receivables and structural mortgage covenant modifications |
| Occupancy maximization | Maximizing asset recovery valuation via occupancy stabilization under distressed debt scenarios |
References
- S&P Global Market Intelligence (2026). Commercial real estate mortgage maturity data.
- Cushman & Wakefield (2026). Office Market Beat.
- Newmark (2026). Office Market Beat.
- Wheaton, W. C. (2000). Percentage Rent in Retail Leasing: The Alignment of Landlord–Tenant Interests. The Journal of Real Estate Finance and Economics, 21(2), 185-204.
- Halvitigala, D., et al. (2019). Coworking and Leasing Models. Property Management / Pacific Rim Real Estate Society.