Buying Real Estate in the Metaverse — The Pros, Cons, and How-To’s

Economists are not an agreeable bunch.

The old joke goes like this — if you put 10 economists in a room, they’ll come up with 11 opinions.

However, almost all economists (these ten and the discipline at large) agree on one thing — In the long(-enough) term, the value of land always appreciates.

For land more than anything, scarcity defines the demand — which defines the value. Buy a strategic piece of real estate in an upcoming metropolis, and you can become a very wealthy landlord.

Often, the ‘hefty purse’ requirement is the large barrier to entry for real estate — one that early-movers on the metaverse are unencumbered by.

The metaverse is a collection of finite-sized immersive ‘worlds’ and experiences, some of the more famous ones including platforms like Decentraland, Axie Infinity, Sandbox, Somnium Space and Upland. So what’s the big deal?

Well for one, several multi-million transactions involving land and other goods have already been traded on these metaverse.

• Republic Realm, a virtual real estate developer has broken all records by purchasing a $4.3 million piece of land in metaverse platform The Sandbox.
• Not too long ago, a Canadian firm called Tokens.com dropped a jaw-dropping $2.43 million on a piece of land in Decentraland — in what’s touted as the largest virtual land transaction of that time.
• Other notable transactions include the sale of artist Krista Kim digital house as a NFT (non-fungible token) for 288 Ether or approximately $500,000.

Even if you’re a meta-muggle, these numbers cannot be ignored.And if you think that only the upwardly-mobile tech enthusiasts and their flashy peers are dropping this kind of cash- think again. The buyers for virtual real estate are coming in from all corners — and interest amongst brands is picking up speed.

According to a recent report, PwC has recently picked up virtual real estate for $10,000 in the Sandbox. Lifestyle brands such as Gucci, Nike, and many others are exploring the space to set up virtual malls and immersive shopping experiences.

The Nike virtual shopping experience

(Many others, except H&M — turns out, that was fake news)

Getting in early in these virtual lands may end up saving them a lot of cash on expensive commercial leases (hah!) in the future.

So who does it make sense for? And why?

As digital natives, most of us spend a significant portion of our day online whether it is for attending work calls on Zoom, coordinating tasks on Slack or consuming content on social media. Each of these experiences and more will become more immersive and closer to ‘real’ as we step into the metaverse.

With their own publicly traded cryptos and native audiences of creators and brands, there’s a strong likelihood that people will spend a significant amount of time on newer platforms, for both entertainment and function.

This isn’t a prediction, this is already happening.

Epic Games’ “Fortnite” first started the concept of a VR concert with EDM star Marshmello — reportedly viewed by 10.7 million viewers. In one of the later shows with Travis Scott, the show had over 12.3 million viewers, grossing over 20 million dollars in ticket and merchandise sales.

Concerts in the metaverse will soon be commonplace in the future; Justin Bieber is the latest performer to have announced an upcoming show in the metaverse.

From co-working to working out, from meditating to watching 3D movies, from learning how to play music to attending VR concerts, from staying in a virtual house to buying the land it’s on — a real estate investment in the metaverse can potentially have many applications. Admit it, wouldn’t it be cool to be one of the exclusive few with a house next to Snoop Dogg’s, or an office next to Atari’s?

This exclusivity is what drives the price! The New York Times suggests that the Metaverse market for goods and services will soon be worth $1 trillion’.

So how do you make virtual estate, or ‘digital land’, scarce?

While the internet is infinite, a virtual world in the metaverse is not. The ‘scarcity’ or number of plots are fixed before release, and the value tends to appreciate at each resale.

Hence, buying real estate and developing your virtual land could work the same way that real estate investments do — to generate income via leases, advertisement, or purchase and sale.

Got some virtual estate and looking to make money from it? You could:

• Convert your digital plot into a marriage venue to lease out for digital weddings — after all, the world’s first metaverse wedding just happened in December 2021
• Set up a billboard outside your house and generate revenue by selling advertising spaces. If you found that house next to Snoop and have a billboard set up, Spotify would probably be giving you a call soon.
• Rent your virtual estate to brands looking to set up virtual shops — and this list of brands just keeps on growing (‘metastores’, anyone?).

While considering ‘future potential’ is a landmine of its own, digital has always been a good bet. We already spend a fair bit of our time online for both work and play; switching it up for the metaverse might just be the next step.

The opportunities are equal parts exponential and speculative. It’s a typical night in Vegas.

Factors to consider before a virtual-estate purchase

As the multi-million-dollar market for digital real estate heats up and grabs headlines, it’s anybody’s guess whether a virtual plot today will stay lucrative. Popularity of individual platforms, stability of cryptocurrencies and the world governments’ collective stand (or lack thereof) will be the deciding factors in the future.

Until then, It’s the wild, wild west out there. You’ll either get the gold rush or shot in the back — only time will tell.