Metaverse for Real Estate: Select Use Cases
Edition 2 | March 2022
Earlier this week, Meta’s senior management gave a glimpse of how the firm is embracing remote work: Adam, head of Instagram will work from Hawaii, Los Angeles, and Cape Cod; Naomi, Meta’s head of product has relocated to New York; Alex, their chief marketing officer has moved to the United Kingdom, while Guy, the firm’s vice president of integrity, will be moving to Israel.
Meanwhile, Mark Zuckerberg, Meta’s chief executive officer, will be spending half his time in California, and the remainder of the year working remotely from different parts of the world.
In all of this, Meta is not just trying to make a statement about the future of work. There’s more.
By scattering themselves across the world, Meta’s senior management will try to demonstrate how teams can work effectively together, not simply by colocating, but rather by using a more immersive virtual platform.
If they succeed, it will be a rejoinder to the efficacy of the metaverse, central to Meta’s strategy of making our internet more interactive, conversational, and life-like. And if they succeed, it should also make the country’s — nay, the world’s — leading office owners and developers take notice.
The question at stake here is the following: when the pandemic and subsequent adoption of Zoom made physical office less relevant, will the metaverse further dent our conventional understanding of what it means to ‘head to work’ every day? Will offices in their current avatar stand, or will they imminently become an antiquated commodity?
And it’s not just Grade A office landlords that should be thinking about the metaverse.
There are signs of change across asset classes in real estate: from retail landlords and mall owners to luxury apartment developers to hotel operators — all have the opportunity to embrace the metaverse or risk getting impacted by its advent. Here’s how.
I. Retail Landlords and Mall Owners
Retail landlords and mall owners have faced a challenging few quarters with the pandemic and e-commerce’s growing market share. In the face of record vacancies and store closures, there’s a growing demand among tenants to offer something more in the physical world, by way of an experience, to lure customers back to stores.
An example: Leading sneaker brands like Nike and Adidas along with select luxury brands such as Gucci, Burberry, Louis Vuitton, Balenciaga and Valentino have already had successful activations on the metaverse. These have ranged from a suite of dedicated, immersive experiences to limited edition digital handbags, which drive brand awareness and also generate growing revenue.
What this indicates is that prospective retail tenants are demonstrating growing appetite to launch in the metaverse but not all of them may have the resources or technical wherewithal of Nike. And herein lies the opportunity for retail landlords and mall owners: first, by creating a digital replica of their stores and malls, and second, by leasing the same space both in the virtual and real world, enabling brands to cross leverage both platforms.
Brands have the ability to redefine customer loyalty and rewards through this interplay between the real and physical world. “Buy the limited edition shirt in our virtual store, which gets you access to our exclusive spring event at our flagship 5th Avenue store,” is how a brand’s conversation with its customers will increasingly look like. In providing the underlying real estate for both physical and virtual worlds, retail mall owners and landlords can enable brands to create this conversational bridge, and a reason for customers to come back to stores.
II. Luxury Apartment Developers
Inducing a sense of exclusivity and scarcity is a core attribute of selling luxury condos well. The metaverse augments both these tenets.
An example: By creating a virtual replica of an ongoing residential development, developers can leverage a new channel to market their physical product. Limited edition NFTs that record proof of ownership for the virtual asset can replace the conventional waiting list, giving prospective buyers early access and preferential pricing to certain units in the development.
The same NFTs can be used to create additional buzz in the market, tying its ownership to exclusive perks that prospective buyers may receive. “Own a piece of the asset, in the digital world? Get 2 nights on a yacht, until we open bookings for our development in the real world.”
At the heart of creating an exclusive vibe around a luxury condo, is a developer’s ability to cater to the mimetic desires of potential buyers. As Luke Bergis talks about in his book, “Humans learn — through imitation — to want the same things other people want…[where] imitation plays a far more pervasive role in society than anyone had ever openly acknowledged.”
The metaverse and by association, NFTs that support these virtual developments provide a fertile ground for creating a tertiary field of mimetic desires. They are scarce and exclusive, and can evolve into a key component in the developer’s marketing arsenal over time.
III. Hotel Operators
Hotels work assiduously to stand out from the crowd. Reviews, competitive room pricing, promising location, strong branding — all help. But everyone is doing the same thing, more or less. The metaverse today offers a step-change in doing something different.
An example: While Fortnite’s metaverse concerts have consistently attracted 10+ million views and garnered significant media attention, what should not go unnoticed is Jamestown’s virtual recreation of One Times Square on NYE last year.
The digital asset was hosted on Decenatraland and featured live music and entertainment acts, a VIP lounge and immersive games, enabling users to interact with the property in a substantively immersive manner. It is perhaps the first significant example of how effective virtual platforms from the built world can drive brand recognition and visibility for their physical counterpart.
And that’s where hotel operators should seek inspiration from. A Four Seasons in Bali which hosts a digital wellness retreat and an afterparty has the ability to attract millions of views and construct a differentiated buzz online. Creating multiple digital imprints on people’s minds through thoughtful metaverse programming, has the ability to, over time, enable greater conversions IRL.
Conventional strategies can only go as far but the future looks something like this: a prospective guest is looking at Four Seasons closest competitor and reserves the Four Seasons instead, because of their digital familiarity and brand awareness with the resort, given the concert they had attended at the property virtually last fall.
IV. Summary
The rise of virtual worlds presents a compelling opportunity set for the built world, across asset classes. Though still early days, the confluence of talent and capital have the ability to drive adoption at breakneck speed, and there’s growing evidence of that happening in the metaverse. In our next part of the series, we will outline ways for stakeholders in real estate — developers, mall owners and hotel operators to get started, and also account for implementation risks. Stay tuned.
