The race is on to grab a piece of real estate’s next frontier. Should you lace up your running shoes and venture into the metaverse?
Every single day, it seems that someone somewhere out there is talking about the metaverse. Revered media institutions, Twitter users with Bored Ape Yacht Club avatars, tech billionaires: the metaverse is at the top of all of their minds.
But what about you? You’re not The New York Times, Paris Hilton and Jimmy Fallon having an awkward conversation, or barbecue sauce fanatic Mark Zuckerberg. What does the metaverse mean to you, presumed real estate enthusiast perusing Corcoran’s official blog?
Things have only continued to accelerate since the last time we touched on the intersection of cryptocurrency and real estate—due in no small part to Zuckerberg’s October announcement that Facebook would henceforth be a metaverse-focused company called Meta. As prices skyrocket and people throw around phrases like “land boom,” it bears asking: Is it actually worth it to invest in metaverse real estate?
While it’s perhaps the most wishy-washy response imaginable, the answer is maybe—but also, maybe not. This entire space can be confounding and, at times, maddening: In May 2021, a virtual version of the Gucci accessory “Dionysus Bag with Bee” sold for more than its real-life equivalent by almost $800. Make that one make sense. Thus, it’s best to get a clear picture of things before emptying your savings into the void.
If you’ve made it this far but still feel lost, a metaverse is a shared virtual world focused on social connection. Work, play, education, commerce: all have potential applications in this (maybe) brave new world.
Some of the more popular metaverses currently available to would-be users are video game-adjacent platforms like Decentraland and Sandbox. They have economies and ecosystems that revolve around distinct cryptocurrencies. Essentially, each is a three-dimensional digital city where people’s avatars live and interact.
Such that they are, these games have no actual objective other than to create, share, and explore plots of virtual land, bought and sold as non-fungible tokens (NFTs). You may have heard of NFTs in the art world fetching exorbitant prices at auction; the general concept is the same in virtual real estate. Every NFT is a distinct entry on the blockchain, a digital ledger that transparently tracks and verifies transactions. That real estate NFTs are one-of-a-kind, combined with hard caps placed on the amount of virtual land in existence, makes them scarce commodities. And what industry knows more about turning scarcity into lucrative dollar value than real estate?
Soon after the Facebook-to-Meta name change, the trade value of Decentraland’s native cryptocurrency MANA increased 662% to $5.79 per token. If you think that’s a lot, Sandbox’s SAND went up 748% to a high of $8.40. Late in November 2021, a plot of land was purchased in Sandbox for $4.3 million, shattering the previous $2.4 million record for virtual real estate sales set earlier that same month.
A storied international auction house launched a virtual gallery in Decentraland—a replica of its London HQ—where a yellow ape and a dog wearing a hat greet you at the door. Elsewhere, Snoop Dogg partnered with Sandbox to build a mansion, exhibit his personal NFT art collection, and host general virtual merriment.
Sound excessive? Well, yeah, the whirlwind hype around the metaverse is making everything about it a bit excessive these days.
There’s Coin in Them Hills
Seemingly, the tune of the metaverse real estate world has tilted far from “let’s create together” territory into the “money: it’s nice to have” domain. Prices have soared, yes, but the potential return on investment is sizeable. Some have speculated the metaverse could grow to a $30 trillion industry, the next step in the technological lineage of personal computers, web browsers, smartphones, and apps. Who wouldn’t want a slice of that pie?
But how does the pie get baked so the crust is perfect and the filling is scrumptious? Or rather, what the hell do you do with a piece of virtual real estate? Don’t overthink it: The most straightforward route to take is to treat your digital property like it’s analog.
Creating the gravity-defying château of your dreams is definitely a tempting proposition, but probably not a practical or money-making one. Instead, to really make the most of things, you’d work with an architect to figure out your exact build. Then, you’d bring on 3D renderers and developers to translate that vision into a living, breathing, interactive entity. The benefit of the digital medium here is that, without the worry of inspections, zoning laws, strenuous manual labor, supply chain issues, inclement weather, etc., the time from conception to completion is shortened significantly.
From there, consider the approach of Tokens.com—a blockchain technology company dedicated to metaverse real estate and NFTs. Tokens is building a complex the company hopes will generate massive revenue from office leases, event space, and advertising from brands looking to capitalize on metaverse growth. If it sounds boring, take note that the place will look like what The Economist describes as “a cross between a nightclub in Ibiza and the Bellagio resort in Las Vegas.” In effect, Tokens will become the metaverse equivalent of everyone’s favorite kind of people: landlords.
Or, just sit on the parcel and wait for its value to appreciate before selling for a massive profit. As of writing, the cheapest plot available in Decentraland is 4,175 MANA ($10,187), while the average price of a plot in Sandbox increased nearly $10,000 as of December 21. Given all that, flipping your asset doesn’t exactly seem like too bad a strategy. Unless, of course, the metaverse remains a niche that never achieves mass adoption, major companies sunset their products in the space, and your investment becomes beyond worthless to the point you take a substantial loss. Wait, what?
Pardon the pseudo-philosophy, but “the” metaverse does not actually exist yet. There’s no single entity like how we refer to the Internet. Decentraland, Sandbox, and the like don’t overlap. Neither do VR apps like Meta’s Horizon Worlds or Microsoft’s Mesh. Considering how corporations generally behave, it’s difficult to envision them or any organizations coming together in a mutually beneficial agreement where none triumphs over any other. When you invest today, you’re not so much opening a stake in the future of digital real estate as you are in the future of a specific company’s technology and marketing.
Proponents of the space tend to tout purchasing land in the metaverse as the equivalent of buying up a spot on the Upper East Side when it was still all farms and wetlands. Except there are multiple Upper East Sides in this case, so you better make sure you bet on the correct one. Though the respective values of MANA and SAND haven’t crashed to zero, they have gradually fallen to $2.44 and $3.19 as of writing after their late 2021 surges. Is that part of the natural, highly unpredictable cycle of the market? Or is it emblematic of a slow, inevitable drip to the bottom?
The question of mass adoption is undoubtedly crucial. Will the general public perceive the metaverse as the new frontier of social interaction or pay it as much mind as the ill-fated Google Glass? Given that the barrier for entry to some of these standalone metaverses has drastically increased in the form of rising real estate prices—though the games themselves are often free to play—people may simply not buy in.
In our prior piece, we stated that the idea of “location, location, location” being a driver of value was irrelevant when it came to real estate—this has been proven to not be entirely accurate. After all, a Sandbox user dropped $450,000 to be Snoop Dogg’s next-door neighbor. Lately, it appears that if your nonfungible chunk of metaverse isn’t near to something notable, investing may not be worth your time and money.
Reports of activity in Decentraland suggest that not much is going on outside its main hub. However, even that central area was described by Wired as more akin to a movie set than an actual bustling neighborhood—all style, little substance. You’re incredibly likely to stumble across idle avatars, the digital representation of a user who forgot to turn the game off before leaving to do something more exciting. If there’s limited participation from the people who are supposed to provide the engagement that entices the brands and advertisers that bring in the money for property owners… let’s just say the situation doesn’t exactly sound ideal.
There’s an inherent danger involved in any sort of investment venture. Still, the risk feels even more pronounced when cryptocurrency is concerned. Notoriously volatile, the crypto market rises and falls and rises ad nauseam, seemingly on a whim. Combine that with a nascent space that has yet to actually prove its value proposition, and perhaps metaverse real estate isn’t the breakaway slam dunk it’s hyped up to be. The path appears clear, but for all you know, you could accidentally hit your head on the rim on the way up.
Here We Are in the Future?
If you’re still feeling like this whole metaverse real estate thing is for you, please be smart about it. Diversifying may prove to be critical. Republic Realm—one of the foremost metaverse investors—is active in over 20 digital worlds. Put all your eggs in one basket, and you run the risk of being left with not much beyond a sad avatar holding an empty sack of money.
At the end of the day, these virtual worlds we’ve been discussing are akin to games, and games have limited life cycles. Inevitably, people will get bored and move on to something else; it’s the nature of things. There will come a day sooner rather than later when you no longer see dozens of Wordle results being shared across your social media feeds.
Instead of striving to become the next great virtual land baron, an alternate method to metaverse madness could be investing in the companies putting resources into this digital frontier. Nothing bad ever happened to anyone who invested in the stock market, unless you count Meta’s recent $230 billion dip in market value—a record one-day loss for a U.S.-based company.
On the other hand, one could argue that constant new development, the ability to attend events like concerts, and burgeoning e-commerce will keep metaverse platforms in a state of perpetual freshness. Time will tell. We’re becoming more digitally-minded every day—why can’t the metaverse be the next technological leap?