What you should know about virtual real estate in the metaverse
A total of 268,645 parcels are up for grabs across the 4 metaverse platforms.
Real estate developers seem to have found their next target location: the metaverse—a space which has proven itself to be profitable with parcels netting an average price of $16,258 (US$12,000).
With its attractiveness, the metaverse also comes with challenges, Abhishek Bajpai, Colliers' managing director, warned developers during his talk at the Real Estate Asia Summit 2022.
“One thing to note, is that, this will evolve.These are the challenges and the risks that we see based on what we know today. As the metaverse evolves, new ideas and software comes into play, some of these risks will stall immediately, while new ones will potentially come up,” said Bajpai.
A problem unique to the metaverse space is how the creation of virtual worlds and assets can affect established ones.
Currently, there are four virtual worlds, also called operating spaces, that exist—The Sandbox, Decentraland, Cryptovoxels, and Somnium Space. Collectively, they yield a total of 268,645 digital assets or parcels.
With the creation of new worlds and functions specific to these creations, the value of the digital assets can swing wildly depending on these factors.
The use of cryptocurrency as the main method of payment also echoes the same subset of problems due to the unit having the same volatile characteristics, according to Bajpai. Unlike transactions done in the physical world, the frequency of change in cryptocurrency’s value, compounded with the nature of the digital land, can see prices for these parcels slide up and down.
In terms of technology, one of the barriers preventing the adoption of the metaverse is the use of virtual headsets and the lack of access to them. These headsets are essential to access the metaverse, with ease of use, price, and availability also cited as possible areas for improvement.
Sustainability is one of the biggest challenges, as accessing and being a part of the metaverse require energy. Logistics-wise, this would mean more power consumption from the consumer end, such as hardware used to enter the metaverse, to the need for more data centres and power.
Whilst challenging, investing in the metaverse will be quite a triumph considering that it also presents a lot of opportunities.
The ownership of a simulated space carries its own benefits as, according to Bajpai, a new dimension is created in terms of the workplace. Establishments built in the metaverse can mirror those in real life, which also gives room to gatherings with avatars and holograms.
He cited brand presence through e-commerce as another area of expansion for businesses. This would bridge the gap between online and physical goods. Non-fungible tokens (NFTs) art can be used to advertise products, which can either be bought as a physical product outside the network or as a digital asset in the metaverse.
Developers also will not need to worry about profit in the metaverse. According to Bajpai, an estimated $54b has been spent on digital goods in the virtual space, almost double when compared to the amount spent on buying music.
Bajpai also cited that Second Life, the first-ever version of the online world, recorded a $650m gross development product, with over $80m being paid to creators.
Meanwhile, 200 strategic partnerships have been established to date with The Sandbox alone.
Adding to that value of computerised goods is the current status of NFTs, which have a market cap of $41b.
Once bought, the online space becomes a digital asset owned by the buyer and ensured through blockchain technology.
“Now is the time to be a part of the conversation, rather than following it. The more that we, as real estate experts, focus on understanding the value of the metaverse, the more we’ll be in a position to lead this discussion as it goes forward,” said Bajpai.
Bajpai expects these pros and cons of the metaverse, however, to continue evolving. This is mainly due to how young the metaverse is currently, and how other worlds can pioneer specific functions.
To watch the full event and learn more from other speakers, watch the full video below.