Real Estate in the Metaverse: to invest or not to invest
The built world has always been comprised only of physical assets, and real estate careers and investors were limited to buildings, land, and active development. During my time working at Alpaca VC, a multi-stage venture capital fund that focuses on property technology investments, I was able to build an understanding of the expansion of real estate opportunities into digital, and the digitization of the built world and the assets within it. From AI-powered property management to smart buildings, real estate has undergone massive transformation in the new age. Now, with the Metaverse, there is even more revolutionary change that lies ahead.
The metaverse is a very broad and general term to describe how we interact with technology. It includes virtual reality — completely virtual worlds that people can visit and be removed from the human experience — or augmented reality, which allows for people to engage with a product while still maintaining a connection to the physical world. The metaverse includes games, virtual worlds, learning modules, events, products and more that can all be accessed virtually through Meta’s platforms.
Virtual real estate also exists in the Metaverse, and it allows for investors and businesses to own these virtual properties. Metaverse real estate is fairly new and constantly evolving, and the process for buying it may not be familiar to everyone. Real estate in the Metaverse is bought with cryptocurrency, and the unique piece of blockchain code that comes to the purchaser serves as that person’s deed that they own that property. Anyone interested first must set up a digital wallet, and then can make transactions on the platform. The digital wallet must be linked to the Metaverse account for the purchaser. There is then a database of properties available to anyone browsing the Metaverse, similar to a Zillow. Buying is not restricted; anyone can purchase in the Metaverse, making it a good option in today’s environment, when interest rates are soaring and home prices are excessively unaffordable, given that property is generally cheaper in the Metaverse. Metaverse purchasers will also go through brokers and agents to make a home sale, similar to outside of the metaverse. However, none of these brokers need a license before facilitating in these transactions. The cost of real estate in the Metaverse is generally cheaper — typically priced anywhere between $6K and $150K.
Whether or not buying property in the Metaverse is a good investment will be highly dependent on several factors. Currently, prices have risen rapidly in the Metaverse and it seems like it would offer strong return on investment. However, there are concerns around security, as well as concerns around how long the crypto / digital currency market will last, especially after the bankruptcy of FTX. However, there is still massive growth expected in the space — the Metaverse real estate market is expected to grow by $5.37B by 2026. Currently, much of the land in the Metaverse is owned by global corporations, including Adidas, Atari, and Warner Music Group. These companies have invested in Metaverse real estate with the hopes that they can entice fans visiting the Metaverse to come to their headquarters for shopping or events. These corporations are not the only notable names buying real estate in the Metaverse. Rapper Snoop Dogg has also purchased land in the Metaverse — several parcels of land — that together he is calling the Snoopverse. Buyers are now paying massive premiums to live by him as neighbors, even in the virtual world. As such, there does appear to be some legitimacy in the world of Metaverse real estate.
After the growth Metaverse real estate has already seen, there is reason to believe that the Metaverse can offer strong returns to digital real estate investors. In late 2021, after Facebook became Meta, land in the Metaverse because extremely valuable, climbing into the seven figures. Additionally, artists and notable architects are also placing bets on the Metaverse. Notable Metaverse technology and infrastructure company Everyrealm has formed a partnership with artists to create a neighborhood in the Metaverse called The Row, in which the (digital) homes are all extremely futuristic and artistic, with floating structures and unique angles. These homes truly are a work of art — even being displayed at an exhibit at Art Basel. The company’s CEO anticipates each home will sell for $75,000 once the homes are listed for sale in the Metaverse.
There is tangible, monetizable opportunity in the Metaverse for real estate investors who want to venture into the digital world. Additionally, physical home builders are venturing into the virtual world; as the New York Times has reported, KB Home recently unveiled their own virtual showroom where buyers can come in and explore customization in model homes, offering yet another use case for Metaverse real estate. As such, there is clear, visible opportunity in the Metaverse for investors, but there could also be consequences. The largest concern, of course, is around privacy and how much data will now be stored online. Additionally, the main consequence to society might be that the Metaverse may start to limit physical interactions in the “real” world as people give more time to their online identities.
