DOES METAVERSE REAL ESTATE HAVE VALUE?

DOES METAVERSE REAL ESTATE HAVE VALUE?

By: Phillip N. Coover

This article briefly addresses valuation of metaverse real estate.

Is there really a gold rush on real estate in “the metaverse”? I’ve been hearing that a lot recently. There are several misconceptions in that question. Initially, there is no one “metaverse.” There are several leading platforms which sell metaverse real estate, such as Sandbox and Decentraland. Purchasing a piece of metaverse real estate is essential to buying an NFT (i.e Non-Fungible Token) in a software platform, similar to a video game, which is a series of NFTs. These parcels of real estate exist in a meta world. And companies are gobbling up these parcels. The cheapest parcel on Decentraland was more than $10,000, last time I checked.

The intrinsic value in real world real estate is its’ inherent utility by being a tangible physical asset. You could always store something on your real estate, or make a garbage dump, even if it didn’t have a better use. You cannot use metaverse real estate in a tangible way. But when you start thinking about meta real estate, the questions and analysis are actually quite similar to real world real estate. Is this a good location where there will be increasing demand? Is there utility in this parcel of real estate? Can I turn this parcel into cash flow, either by leasing, selling goods, advertising on it, or even developing it (yes, you can have software engineers create buildings and other constructs on your virtual parcel).

My gut reaction to all of those questions is “no.” There is no utility value in virtual real estate, aside from betting on further demand (like a penny crypto coin). But I also realize that my initial answer may be shortsighted and obtuse. Did people 300 years ago realize that there was value in being on the end of Manhattan where you could build a skyscraper that is leased to hundreds of commercial businesses? It’s very possible that I simply do not have the foresight on utility and value in the virtual world. For now, I’ll be keeping my ear to the ground for real world real estate, but also have my head in the clouds for the virtual world.

Endnotes

1. Phillip Coover is a partner in Ice Miller’s Real Estate Practice, where he helps clients achieve their goals, find strategic solutions and maximize the value of their real property. Phillip is the founder and host of the widely popular “Real Estate for Breakfast” Podcast. On the show, Phillip interviews executives, CEOs, brokers, founders, owners, developers, financiers and other real estate professionals of all types about current real estate trends, issues and developments.

WINTER 2022 - eReport