8 minute read
VIRTUAL REAL ESTATE
E g
INSIGHT
— JOHN GOMES
THE NEW GOLD RUSH REAL ESTATE IS BOOMING
— VIRTUALLY ... IN THE METAVERSE
WHAT DOES THIS MEAN, AND HOW CAN YOU GET INVOLVED?
he year is 2030, or T sometime soon after that. The typical webbrowsing experience no longer exists, and the age of the metaverse has arrived. You can create digital avatars made to your specifications. You’ll be able to fly on a magical dragon, play hyper-realistic and mind-bendingly creative games, attend uniquely interactive virtual concerts, hang out and meet people from around the world, attend work meetings, buy land and build on it, shop for clothes and other virtual items, learn new things, go on quests, create experiences and more — all in immersive, 3D, virtual worlds. These worlds will be accessed through phones, computers, virtual reality headsets, augmented reality glasses which overlay reality, as well as potentially more options that haven’t been created yet. Many of these opportunities exist now, but in the future will become part of everyday life the way checking your social media status is today. Metaverse users will be more involved, more “in the moment” than they are with social media and the internet now; where it’s often more like a presentation, rather than an active experience. Last year, interest in the metaverse skyrocketed when Facebook rebranded to Meta. The idea has been in the works for decades. In 1992, writer Neal Stephenson released a novel, “Snow Crash,” in which his characters interact in a completely digital environment called “the Metaverse,” where appearances can be changed, and digital real estate is just as valuable as in real life. In 2011, in the science fiction novel “Ready Player One,” people in a dystopian 2045 seek to escape reality by retreating to a fictional world. What was fiction is now coming to life. The worlds are getting more sophisticated, though they still have a long way to go. One area that’s particularly hot is virtual real estate — it’s being likened to the dotcom boom. The possibilities and potential seem to be abundant; so, too, the risks.
The “metaverse,” which is still being defined, isn’t one place; it’s a massive convergence of worlds (or verses) that each have unique offerings and communities. “It’s a playground for imaginative and creative builders,” says Janine Yorio, cofounder and CEO of Everyrealm, an investor and developer in the metaverse and one of its most active players.
The thing is, as Eric Klein, the CEO and founder of MREIT, a full-service metaverse real estate investment group, says, “We’re at 1.0 right now.” A lot will change. Like many, Klein sees the metaverse as the next stage of the internet. A technical advancement that changes how we live life. “I compare it to when oil was first introduced and used,” Klein says. “And then we saw electricity. This is really what we’re seeing.”
FROM MILLIONS TO TRILLIONS: VIRTUAL REAL ESTATE IS IN HIGH DEMAND
With the word out about the metaverse, people and businesses are buying virtual real estate, and prices are rising exponentially. Virtual real estate is based on attributes, such as location, community, and other platform-specific traits and variables.
Sales of digital real estate topped $500 million in 2021. This number may double to $1 billion in 2022, according to some estimates. And by 2030, the metaverse has the potential to become a $13 trillion opportunity, with total users between one and five billion, according to investment bank Citi. Two other investment banks, Goldman Sachs and Morgan Stanley, both estimate the metaverse to be a $7 trillion opportunity.
Commercial real estate in the metaverse will be where much of the action is: for brands to have places to sell and create experiences, for ecommerce stores to have ads and digital stores for virtual clothes and other items, venues for virtual concerts, museums with digital-art NFTs and games that may have ads. Spaces will also be used for education and training, healthcare and digital manufacturing.
“The most exciting part about real estate in the metaverse isn’t the land itself; it’s the experiences that this land will unlock once developed,” Yorio says.
People in games and virtual worlds have long used clothes to establish their identity, just as they do in the real world. Many will want to have whole designer wardrobes for their avatars, with different clothes and accessories for different occasions.
Though fashion brands were slow to adopt the internet, more and more are embracing and celebrating digital fashion. A 116-parcel estate in the heart of the Fashion District of Decentraland, one of the most popular virtual worlds, sold to Tokens. com for $2.4 million. Parcels are what plots of land are called in the metaverse. Decentraland is made up of 90,000 parcels, each around 50 feet by 50 feet. In March 2022, multiple brands debuted their digital
“I don’t think everything we do is going to be virtual, What I’m seeing right now, and I think this is where the opportunity is, is A BLEND OF BOTH. How can we incorporate this into our real lives?” — KLEIN
stores in this digital Fifth Avenue, including Forever 21, Estée Lauder and Philipp Plein.
Dolce & Gabbana sold a nine-piece virtual collection for a record-breaking $5.7 million. A virtual Gucci purse sold for more than the same bag in the real world. Nike built Nikeland in the Roblox gaming platform to allow people to try on virtual sneakers.
Art is expected to be huge as well. Auction house Sotheby’s was the first to create a gallery in Decentraland to sell virtual art. Their first NFT sale brought nearly 3,000 new buyers to Sotheby’s and made over $17 million in sales.
Concerts are already massive, largely drawing younger generations. Justin Bieber, backed by a gorgeous virtual world, performed a live concert in November 2021 for 10.7 million people. Ariana Grande was reported to earn $20 million for a Fortnite show. Paris Hilton DJed a New Year’s Eve party on her virtual island. An anonymous
person paid $450,000 to be neighbors with Snoop Dogg in The Sandbox, another popular virtual world. The experiences and items being bought are unlike what can be had in the real world: from being able to see all angles of a concert to fashion that isn’t possible in reality.
With virtual real estate, a question that’s worth asking is: what happens if a world fails? What happens to the real estate you own, the digital art you collected, and the fashion and other items you bought? Klein says the platforms are developing interoperability: where you’re able to take things, like shoes and clothes and what you build, to other worlds.
HOW TO BUY VIRTUAL REAL ESTATE IN THE METAVERSE
There are no barriers to entry with digital real estate. It’s an option for everyone, including people who don’t qualify for traditional real estate mortgages.
Buying digital real estate can be easier than you may think. Here’s one way: 1. You’ll need a cryptocurrency wallet, a type of technology that stores your digital money. Metamask and Binance are two popular options. 2. From there, you can visit a world, like Decentraland or The Sandbox, and connect your digital wallet to it. 3. Once you’ve decided on a parcel of land, or multiple, you’ll can purchase with cryptocurrencies, like Ethereum, or with the coins from each world. Decentraland uses MANA tokens. The Sandbox uses SAND tokens. 4. Then, you’ll bid on the land, or buy it outright. 5. If the purchase is successful, the virtual real estate is transferred in the form of an NFT, which uses blockchain technology to record and verify transactions and ownership.
Metaverse real estate can also be bought through third-party NFT marketplaces, such as OpenSea and NonFungible.com. Individual worlds usually offer information about the parcels, like pricing, popular sites nearby, business districts, roads and more. Third-party sites offer all that data, as well as information about historical sales and properties currently for sale.
Another option is metaverse real estate agents. Although no licensing requirements currently exist, they can help you navigate the process and find a buyer or renter.
Getting a mortgage is also possible. Though, it’s more like a small business loan, because applicants must make a case for their plans to monetize the virtual land.
Additionally, companies like investment group MREIT are full service. They buy land and help brands imagine and develop their presence.
REAL VS. META
In this not-so-distant future, will everything and everyone exist in the metaverse?
“I don’t think everything we do is going to be virtual,” Klein says. “What I’m seeing right now, and I think this is where the opportunity is, is a blend of both. How can we incorporate this into our real lives?”
Concerts and events will still happen in real life, but there will be the option to attend virtually. The metaverse will be convenient and save time. Everything we do might have a digital option.
This information is not tailored to the investment needs of a specific investor. Investing in digital real estate is speculative and could carry a high level of risk. Investments fluctuate over time and you may gain or lose money. Past performance does not guarantee future results.
SIGNS OF (SECOND) LIFE
Is the age of the metaverse possible? The transition is already happening. And, with so much invested, and the pace of technology always moving forward, there is likely no going back.
• Second Life, one of the earliest virtual world platforms, created in 2003, still had a million active users in 2021.
• An estimated three billion people worldwide are gamers, who are already used to spending time in virtual worlds. According to a report from the Deloitte Center for Technology, Media and Telecommunications, 82% of those attending live in-game events also made a purchase because of the event: 65% purchased digital goods and 34% purchased physical merchandise, reinforcing the steady blurring of lines between real and virtual worlds.
• A study conducted on behalf of Protocol by the Harris Poll found that 53% of millennials agree that the metaverse would be more fun than real life, and 51% agree that the metaverse would make their lives better.
