Right about the time Facebook rebranded to Meta, the Metaverse became a daily fixture of the newsfeed.
Rather than just a gaming space where World of Warcraft and Fortnite players met to battle it out as avatars, this alternate digital world began taking on a life of its own.
There were concerts hosted by Ariana Grande, Snoop Dogg bought a block of land there, Douglas Elliman’s Alexander team announced they were set to sell property in the Metaverse and somewhere in Perth, an Australian buyer snapped up a virtual penthouse for a little over $1000 as an investment alternative to purchasing real property.
Welcome to the Metaverse where you can buy, develop, invest in and own a slice of real estate that doesn’t physically exist but commands actual value in the real world.
What is the Metaverse?
Aamir Sohail is the Co-Founder & Director of Blockchain Smart Solutions in Sydney. As the Metaverse receives more and more attention, his company now hosts training sessions on what the Metaverse is and how it works.
He explains Metaverse is a combination of two words – Meta, meaning beyond, and Verse, meaning universe.
“In other words, it’s beyond the universe as we know it or to put it simply, it’s a digital second life in a fictional world,” Aamir continues.
“It’s not a new phenomenon. It has been around for a while, but since Facebook rebranded to Meta the whole thing has exploded.”
Aamir explains the current digital Metaverse has its origins in gaming, with World of Warcraft, Fortnite, Sims and Second Life all tapping into the trend of a virtual world where people can create their own character, purchase items for them, and interact in the digital world.
Blockchain, NFTs, crypto and The Metaverse
Originally the Metaverse was separate to blockchain and cryptocurrencies, but Aamir notes that’s changed in recent years, with many Metaverse worlds now using blockchain and cryptocurrencies for the purchase and sale of digital assets.
An asset could be a new skin for a gaming avatar, a digital artwork, or a piece of virtual merchandise.
They are sold as a non-fungible token (NFTs) which are unique to each digital asset. When one of these NFTs is bought or sold, it is recorded on the digital ledger known as the blockchain.
A Metaverse turning point
Aamir explains the Metaverse enjoyed a major turning point last year when additional use cases such as entertainment, education and real estate began to be explored.
A case in point was Ariana Grande’s concert in early August last year within the game Fortnite.
It wasn’t the first concert staged on the gaming platform, but it was among the largest with a reported 78 million Fortnite users attending Grande’s show over the course of three days.
But how does that relate to real estate? Well, now you have a virtual space where celebrities are connecting with fans, and some of those celebrities are buying real estate there, which brings us to Snoop Dogg.
In September last year, entertainer Snoop Dogg purchased a block of land in the Metaverse gaming universe known as The Sandbox.
His intention was to set up a mansion there and create his own Snoopverse where people could purchase avatars, and buy things like limited ‘Snoop Dogg Private Party Passes’ that gave users VIP access to concerts, events, Q&As, and more.
“I’m always on the look-out for new ways of connecting with fans and what we’ve created in The Sandbox is the future of virtual hangouts, NFT drops and exclusive concerts,” Snoop Dogg explained at the time.
Soon after, he began auctioning off land in his personal Snoopverse neighbourhood.
The first wave of virtual land sales in the Snoopverse started on December 2, and included 122 parcels of digital land and 67 premium land-and-NFT bundles.
And his fans came to the party, with one NFT collector spending the equivalent of US$450,000 for the privilege of becoming Snoop Dogg’s virtual next-door neighbour.
Aamir explains purchasing land near Snoop Dogg taps into the curiosity factor, but it also caters to the traditional real estate concept of location as well.
The site is likely to enjoy increased foot traffic, and that means it has value for brands looking to gain exposure, while real estate around it will potentially increase in value due to demand.
Location, location, location
Over in Canada, GDA Capital is positioning itself as ‘the world’s first virtual real estate company’ courtesy of its Metaverse Advisory arm which facilitates developments, experiences and the sale of virtual land across numerous Metaverse realms.
Metaverse Advisory Vice President Matt Zanardo explains this concept of location is key to the Metaverse real estate trend.
In Decentraland, for example, there is a single point of entry in the middle of the universe, known as Central Plaza.
Land in this area can transact for the equivalent of over US$1 million because every person entering Decentraland arrives there.
He notes there are currently three types of real estate buyers in the Metaverse:
1. Experienced crypto investors who believe virtual real estate will increase in value and are speculating it is a type of NFT on the up.
2. Brands seeking to create a commercial space where they can offer experiences to their customers.
3. Traditional investors looking to diversify into virtual real estate, just as they would purchase stocks or other assets.
And yes, Matt confirms interest in Metaverse real estate has skyrocketed in recent months and the value of property there is rapidly trending upwards as well.
In September last year, it cost 0.78 Ethereum (a cryptocurrency) on average to buy land in the Metaverse, by November it had increased to 2.9 Ethereum and in March this year it cost 4.4 Ethereum.
“There has been a continuous upward trend since the end of last year,” he says.
To put the increasing interest into further context, MSNBC recently reported real estate sales in the Metaverse exceeded $700 million in 2021.
Some experts predict that number could double in 2022, and a recent report by BrandEssence Market Research predicted the Metaverse property market could see its value increase at a compound annual rate of 31 per cent a year from 2022 to 2028.
Some big names selling in the virtual world
The past few months have seen numerous headlines about people buying in the Metaverse, and some of these properties are commanding big price tags.
In December 2021, virtual land developer Republic Realm bought a block of land in The Sandbox Metaverse from video games company Atari for US$4.3 million.
The record sale came a week after crypto investor Tokens.com bought a virtual block of land in Decentraland for $2.4 million.
These high-value transactions have prompted some of the most high-profile real estate agents in the world to sit up and take notice.
In December last year, Douglas Elliman’s Oren and Tal Alexander announced they were seeking to become the first luxury brokers of the virtual real estate world.
Known as the Alexander team, the pair partnered with Republic Realm with plans to develop and sell property in an “architecturally significant master-planned community”.
“We believe heavily in this Metaverse digital real estate world,” Oren said in an interview at the time.
“The world has changed, society has changed people — especially the younger generation, who are not only gaming in the digital world, but to some extent living in the digital world.”
And they are not the only real estate agents indicating an interest.
Late last year, Million Dollar Listing NY star Ryan Serhant told Elite Agent his interest in the Metaverse was increasing as businesses became hyper-focused on the blockchain, NFTs and the concept of Metaverse integration.
Offering an insight into why the Metaverse had attracted his attention, Ryan said it provided an opportunity to “to sell more real estate”.
“If I’m going to sell the most real estate in the Metaverse, then sign me up, give me a one-way ticket. Let’s go.
“Why would I want to go walk somewhere or get in a car and sit in traffic to go sell a piece of real estate if I can sell it from my phone?”
In Australia, the real estate industry has been a little less enthusiastic about embracing the Metaverse, but some agents are keenly observing the growing trend.
Area Specialist founder Michael Choi is among them.
“Everything finds its way to Australia when we’re ready,” he states.
“It’s a bit like Facebook, I see everyone doing it at some point in the future. It might be within the projects division, or there could be a virtual division within an agency specialising in doing Metaverse transactions.”
Although Michael says he’s not actively pursuing the idea of selling in the Metaverse at the moment, it is something he is keeping a watchful eye on and researching.
“I am very aware of it,” he says.
“However, if we were to embrace it, our strategy would be to come in second, so we could learn from others’ mistakes.”
Real estate use cases
Back in Canada, Matt agrees the Metaverse trend is very like social media.
“Ten years ago a corporation would never have considered Instagram, but in the next couple of years many major brands will be using the Metaverse to advertise,” he says.
And he notes the real estate industry use cases for the Metaverse extend far beyond just transacting property.
He also explains it could prove the ideal space for agents to showcase a development.
Potentially agents could use it as a marketing tool, purchasing a virtual block of land, creating a mockup of the property and inviting prospective buyers to virtually wander through and immerse themselves in the surrounds.
As for traditional real estate skills, he notes they readily translate to the Metaverse.
“Traditional real estate agents have a network of wealthy buyers. They could be the gateway, bringing those investors into virtual real estate and showcasing the investments available,” Matt explains.
Aamir agrees, and says agents should be aware of how the Metaverse works and what it means.
“By the time it hits the mainstream, it will be too late,” he says.
“A couple of years ago people weren’t taking blockchain seriously. It was the same thing with the internet and it was the same thing with email.
“Real estate agents have the potential to become specialists for selling unique properties in the virtual space.”
But he notes there is one key difference between physical and virtual property that will never change.
“It’s all about considering the objective when buying. People need to buy physical property to live in. Virtual property is all about investment.”