Why Metaverse real estate investing demands CRE’s attention

In recent months, sales of properties in the interconnected virtual worlds of the Metaverse have started to involve real money, in large part.

Last month a record transaction – a sale for $ 2.5 million of 116 plots of “land” in Decentraland, a leading metaverse platform launched in 2017 – highlighted the influx of real-world investors and brokers into the market.

Tokens.com, a blockchain company, pays $ 1.7 million for a 50% stake in Metaverse Group, a pioneering virtual real estate company under a deal announced in October. Douglas Elliman’s New York celebrity brokers Oren and Tal Alexander recently partnered with Republic Realm, one of the metaverse’s biggest investors and brokers, to focus on “trophy properties.” The real deal paid off.

Questions the industry faces – after “What is the metaverse?” – what is the room for growth available and can the skills of those who build, buy and sell physical real estate translate into the virtual realm? Like cryptocurrency, which has billions of investments, what level of volatility will this new asset class bring, especially as different platforms compete for position?

“It takes a long time, you have to make up your own mind and read as much as you can,” said Gauthier Zuppinger, co-founder of NonFungible.com, which tracks sales of often used non-fungible tokens, or NFTs. . in metaverse real estate transactions. “Don’t trust what you read on Twitter or Discord.”

Zuppinger said his team are working with investors who invested in seven figures a few months ago and now have portfolios in excess of $ 100 million. Decentraland of packages that sold for $ 20 when the platform launched four years ago can now order $ 100,000.

Despite the hype surrounding the metaverse and unreal real estate, and questions about the speculative nature of investing in a totally new platform and means of digital interaction and commerce, its growing number of players and investors claim that this is not just a good investment, but one that is likely to grow significantly in value compared to traditional physical assets.

Location, always vital in virtual real estate, takes on a slightly different meaning in the metaverse. In many worlds, there are specific neighborhoods designed for different types of commerce, such as the Fashion District in the Decentraland. Zuppinger’s company hunted down approximately $ 17.6 million in sales on the sandbox, one of the main metaverse platforms, over the seven days ending December 14.

But the co-founder and CEO of Republic Realm Janine Yorio argued that, because players can essentially teleport to different coordinates within these virtual worlds, the traditional concepts of visibility and foot traffic are not as important. What matters are the “content clusters” and the ability to create something that encourages interaction and commerce, or to be alongside a development that does.

This lack of traditional physical boundaries, along with the lack of established traditional players, means the playing field is more level for new investors, Yorio said.

“Ingenuity and design matter more than location and budget,” she wrote in February. Editorial on CoinDesk. A spokesperson for Republic Realm declined to comment for this article.

“Buying land today in virtual worlds is a lot like buying land in Manhattan in 1750,” she wrote. “It is also isolated from the COVID-induced volatility of the real estate industry.”

Buying land on these platforms requires first creating a digital wallet and purchasing the type of digital currency accepted in a certain world, then purchasing land through an online marketplace. In Decentraland, potential investors can choose from one of 90,000 plots, measuring 16 by 16 “meters,” and pay with MANA, a crypto token set up for the game. Land purchases are recorded as non-tokens. fungible, and they are traded through larger NFT exchanges.

Years of games and platforms such as Roblox, Animal Crossing, and Second Life have established the viability of online commerce. Anshe Chung became a Second Life property tycoon 15 years ago and has been dubbed the “Virtual Rockefeller” for creating an online rental and development empire that grossed six figures a year.

The emergence of virtual real estate markets over the past two decades is why so many new and experienced investors are optimistic about developing and selling real estate in the metaverse. Recent announcements from tech companies, including rebranding and refocusing Facebook as a Meta and Apple’s planned release of augmented reality glasses in 2022, underscored investor belief that the technology has finally caught up with demand. .

Reserved area

Courtesy of SuperWorld

The buying of real estate on metaverse platforms such as SuperWorld has increased recently.

SuperWorld is a platform that mimics the real world and allows participants to purchase virtual versions of, for example, the White House or the neighborhood where they grew up. Founder Hrish Lotlikar said the average paying user buys around $ 3,000 of SuperWorld land and the company has sold “tens of thousands” of plots.

“It’s a very galvanized community,” Lotlikar said. “They are passionate about what they build and own places they love.”

Buyers and investors are often looking for an extension of what they have in the real world, Lotlikar said, as well as ways to create business connections between the metaverse and real world assets, to add physical world benefits. to virtual purchases.

The Swiss jewelry chain Camille Louise plans to sell real and virtual jewelry in SuperWorld and other platforms. Nike just announced that he plans to sell goods and deploy products in the metaverse, and Sotheby’s created a digital auction house at Decentraland. The big Decentraland sale of $ 2.5 million in November was for land in the fashion district, based in part on the idea that big brands will eventually want to lease this top-notch real estate for virtual stores. These are the kinds of opportunities that attract small investors.

Zuppinger suggests that potential investors should be careful before entering the market. Lotlikar plans to create a virtual multiple listing service so that real estate investors can have a centralized database of large transactions, sales volume and asset valuation.

Like many platforms, SuperWorld allows landowners to take a share in any business or activity that takes place on their land, build virtual homes and charge rents, or create virtual commerce opportunities. Rapper Snoop Dogg threw a party on the Sandbox platform, instructing attendees to see him perform in a virtual recreation of his mansion. He is one of the many celebrities who invest in the Metaverse and who, along with investors, seek to create events and concerts.

After years of quiet growth before the recent explosion in media coverage, metaverse real estate has moved beyond a fad or passing trend, Lotlikar said. Virtual real estate is unlikely to suffer as users move quickly to the next hot platform or consolidate on a dominant platform, he said. In the more decentralized metaverse, he argues, the economic benefits of ownership mean users will be less likely to bail out and turn a platform into the next Friendster.

“None of these metaverse is as decentralized as expected, because investors want them to be as attractive and as mainstream as possible for everyone,” Zuppinger said.


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