In some ways, it’s the ideal real estate investment. Prices are relatively low. Zoning laws are virtually nonexistent. And the views are pretty much whatever you want to make them.
But, of course, there’s one small catch: The land doesn’t actually exist.
Nevertheless, a slew of companies, from entertainment conglomerates to banking behemoths, as well as early adopting individuals, are scooping up virtual territory in the metaverse — also known as Web3 — as this new immersive version of the internet slowly starts to take shape (see our previous guide to the metaverse).
Planet Hollywood is building a virtual Hollywood, where, its press release promised, users will be treated to a “first-of-its-kind backlot experience.” Sothebys is developing virtual galleries and even museums to house NFT collections of digital art (which they started to auction last year). Bud Light is constructing a virtual clubhouse for gatherings during the Super Bowl; HSBC announced it would be developing a stadium for virtual sporting events; and Warner Music Group has plans to open a concert venue of its own to host virtual events, along the lines of Travis Scott and Ariana Grande’s concerts on the popular 2D VR game Fortnite.
Even J.P. Morgan is getting in on the act, creating a virtual “lounge” that may eventually serve as a virtual bank. “In time,” J.P. Morgan noted in its metaverse report, “the virtual real estate market could start seeing services much like in the physical world, including credit, mortgages and rental agreements.”
The possibilities are endless, because once these companies have purchased the land they can choose to develop whatever they want on it: malls, museums, concert halls, the surface of Venus. Not even the sky is the limit anymore.
Right now, real estate purchases in the metaverse involve four major Web3 platforms — Sandbox, Decentraland, Cryptovoxels and Somnium — which have together already racked up $501 million in 2021, with sales projected to double to $1 billion this year, according to analytics firm MetaMetric Solutions. But a dozen more platform-building companies are springing up, likely adding tens of millions more to those sales figures.
For now, the big four platforms are offering some 200,000 parcels — as real estate units are referred to in the metaverse — with prices ranging from $3,100 to $11 trillion on the high end (depending on the platform, “location” and the audacity of the seller). Those parcels are being limited in number in order to ensure their value remains stable. Decentraland, run by a foundation as a nonprofit, is the biggest platform, offering some 90,600 parcels. But, of course, since it’s all ones and zeroes anyway, there’s theoretically no limit to how much land could ultimately end up for sale in the metaverse.
And, by the way, you don’t have to be a media or banking conglomerate to buy those parcels. Anybody who wants to join the land grab and start homesteading in the metaverse can purchase property through a real estate broker (yes, they exist), obtain a metaverse mortgage through a service like Terra Zero, or buy the land directly from a platform. Transactions are handled through cryptocurrency, such as Etherium, and are recorded by blockchain technology.
Visiting the land, though, will be a bit trickier. It’ll require a VR headset, at least if you want to experience metaverse property ownership in its full, 3D immersive glory.
“You can use a house in the metaverse to host virtual parties with your friends,” suggested Erin Sykes, a real estate advisor for Nest Seekers International, which is brokering metaverse property sales. “Or build your dream home and simulate how it functions prior to investing in a real-property project.”
One new denizen of the virtual world, science fiction writer Rob Dixon (who discovered the metaverse while researching a story), now owns eight parcels on Decentraland and runs his own amusement park, which includes an attraction that lets visitors ride a digital dragon. “I am convinced of the potential [of the metaverse]. It’s definitely there,” he told the Los Angeles Business Journal. “But we are definitely in the early days.”
So early that Disney hasn’t yet announced any plans to build its own amusement parks in the metaverse — a much-speculated about possibility for the future. In the meantime, the media giant is only dipping its toe in the virtual water, making vague noises about developing “next-generation storytelling” in Web3. Like a lot of companies, Disney presumably doesn’t want to be left out of the metaverse land rush, even if it doesn’t yet have any clearly articulated plan for what it might do in the space.
“It’s going to take all the great things that we as a media company have… and use that as a platform for the metaverse,” is about the best Disney CEO Bob Chapek could come up with during an interview with CNBC. “But at the same time, we have something that no one else has, and that’s the physical world, a world of our parks. And so, if the metaverse is the blending of the physical and the digital in one environment, who can do it better than Disney?”
For individual digital entrepreneurs, real estate in the metaverse could turn out to be a savvy capital investment. “Investors hope to profit by advertising on their land, renting it out, or by flipping it to another buyer when the value has increased,” noted Baruch Labunksi, CEO of the IT firm Rank Secure.
Don’t have enough crypto for a parcel to call your own? You can always rent. Real estate group Metaverse Properties is offering land lots as well as homes and commercial spaces on several platforms (“waterfront” locations will cost you extra). Meanwhile, on Decentraland, a group called The Tokens Tower is renting space in its virtual office building, conveniently located in Crypto Valley, one of the more bustling, already-built-up districts on the platform. It’s being pitched as the perfect virtual space for tech startups and venture capitalists to get in on the ground floor of the metaverse boom.
But beware: Renting on somebody else’s land could turn out to be risky. “One potential issue that could come up is if they pull digital real estate out from [renters] and work with another program,” noted Travis Cloyd, professor at Thunderbird School of Global Management at Arizona State University. “In that situation, we don’t have the governance and policy in place” to protect renters. He said at this point in the game, buying is the smart move: “I predict the prices will rise and virtual worlds will expand beyond the imagination.”
He’s hardly the only one bullish on metaverse real estate. “People’s lives are more invested in their digital identities than ever before and the value of virtual real estate appreciation can make it a worthwhile investment, especially for organizations looking to capitalize on the advantages of being an early adopter,” said Scott Absher, CEO of jobs platform ShiftPixy.
Added Brajesh Jha, global head of media, publishing, and entertainment at Genpact, a tech consulting firm, “When more and more people with headgear want to get teleported, the surrounding spaces are likely to rise in value. Investors with foresight would move in early and turn the assets into investment properties.”
Still, don’t expect a quick turnover. Most experts say it’ll be at least a couple of years before homes in the metaverse will be move-in ready. For now, living in the virtual world would likely be a bit lonely.
“Buying land in the metaverse today is like buying land two hours outside of a booming metropolis,” said Quynh Mai, founder of the tech marketing agency Moving Image & Content. “Brands hope that people will move there, but right now it’s just empty fields and an occasional visitor.”
Brian Welk contributed to this report.
This is part 4 of a WrapPRO special series: The Metaverse UnWrapped.
Monday: How to Lose a Billion Dollars in the Metaverse and Other Mysteries of Web3
Tuesday: Why Film Producers Are So Excited About the Metaverse: ‘Everybody’s Dream Can Come True’
Wednesday: Why VFX Companies Want to Craft Your Hyper-Real Avatar for the Metaverse
Thursday: The Next Real Estate Boom: It’s in the Metaverse