As "Metaverse" has gotten much attention after Facebook’s name change to "Meta" and its new goal of making the metaverse a reality, here, commercial real estate is also going to play an important role in real estate business on the global level in the upcoming years.
In 2021, Tokens.com for purchasing a 50% share in Metaverse Group’s digital real estate portfolio signed a letter of intent. Even though Facebook CEO and founder Mark Zuckerberg claimed that the Metaverse is the future, others believe that the future has already begun. Neal Stephenson, the Science fiction author, coined the term “Metaverse” back in his 1994 novel, “Snow Crash.” In the novel, the main character, Hiro Protagonist, navigates through the virtual world.
Again, since 2003, millions of people have also worked, played, and socialized in the Metaverse within the online Second Life world. While the game, with a heyday in the first decade of the 2000s and featuring some blocky graphics is a far cry from the modern Metaverse vision laid out by companies like Meta and Microsoft, the idea of a virtual metaverse where people interact is not a new idea.
In this article, we are going to discuss Metaverse in real estate and some important yet interesting facts!
At present, Decentraland is the most well-known modern-day metaverse, which incentivizes a global network of users to buy and sell digital real estate, explore, interact, and play games.
The Decentraland Foundation came into existence in 2015 and the project’s initial coin offering (ICO) in 2017 netted about $26 million at the time. While Decentraland is expansive and features plenty to do, the platform has drawn many eyes to the lucrative, and ever-growing digital real estate industry. Similarly, on November 25, 2021, media reports revealed that the nonfungible token (NFT)-based Metaverse Group real estate company bought a plot of Decentraland “land” for $2.43 million to help with plans to get into the digital fashion industry.
Metaverse Monetization Revolutionizing the Real Estate Industry
The Metaverse Group believes that a public listing could come in 2022 or 2023. The popularity of buying and selling digital property means companies like the Metaverse Group work, for the most part, on the same type of tasks related to buying, selling, and marketing as a traditional real estate company.
As prices rise and buyers seem frenzied over virtual land, some express skepticism that investing in digital real estate will prove to be prudent down the road. Yet despite the high prices, interest in metaverse real estate continues to grow, especially as the COVID-19 pandemic has driven more people online and made them more apt to virtually socialize. Those interested in metaverse real estate also have competition, namely celebrities who have not been shy about touting their digital real estate activity.
As per reports, in late September, The Sandbox announced a partnership with legendary rapper Snoop Dogg to set up his mansion and NFT collection in the metaverse. In the next month, Paris Hilton struck a partnership with Decentraland and Genies to serve as one of the main artists of the first Metaverse Festival that took place in late October.
What Should You Pay for Metaverse Real Estate?
Knowing what to pay for a parcel in the metaverse platform(s) of your choice is kind of a gamble, but it should not be. Just like real-world real estate, there are several things to consider when determining how much to offer for a piece of metaverse real estate, all of which can help you better determine a fair market value for the land you want to buy.
Most of the same factors come into play when pricing virtual real estate as you would use to price real-world real estate. For example, it's important to know how much the lots around yours have sold for, as well as the commercial potential of the lot you've purchased, if any exists.
Lorne Sugarman, the Chief Executive Officer of Metaverse Group, a Tokens.com subsidiary, said:
"We look at prices using OpenSea and other marketplaces. We look at location. We look at what we think foot traffic can be, at what we think we can get as yield. We're looking at all traditional metrics that you would see in the real world and determining the right price."
Why Investors are Paying Real Money for Virtual Land?
Nine months ago, the Miami-based venture capitalist and a group of associates calling themselves the MetaCollective DAO used a virtual real estate broker to buy 23 parcels in The Sandbox, a user-generated, blockchain-based virtual world, for prices starting at 1ETH (about $3,000). A nearby property sold for about 42ETH ($130,000).
Many of the early buyers of real estate are doubly invested, in the platforms themselves and through personal plays like DAOs buying and developing new land, so their bullishness is ultimately self-serving.
According to CNBC, virtual property prices have gone up as much as 500% since Facebook’s much-hyped transition to Meta. Already, plots in some virtual worlds are just as expensive as a real-world house.
Digital real estate will develop and extend as the Metaverse grows and expands. Buyers and investors who are ahead of the curve should believe that the metaverse real estate boom will continue.
Thus, investment firms are dipping their toes into the Metaverse and continue to learn more about how they can get involved.