Metaverse Real Estate prices have been plummeting since the bear market started. But does this automatically translate to the end of this burgeoning market?
The emergence of digital real estate in the Metaverse presents a unique opportunity for the commercial real estate industry. At the peak of the bull market in 2022, MetaMetric Solutions said that real estate sales on four major metaverse platforms has reached $501 million in 2021, with this figure expected to double and reach $1 billion in 2022.
Janine Yorio, CEO of Republican Realm commented, “there are big risks, but potentially big rewards.”
Investors are facing setbacks during the crypto bear market. Notably, Decentraland and The Sandbox is down 97% from its November peak, according to WeMeta. Trading volume peaked at $229 million in November before falling to $8 million in June.
Total sales and the average price of land are also reflective of the gloomy future of the market. The total number of sales dropped from 16,000 in November to 2,000 in June. Meanwhile, the average price of land in June was $3,300, down nearly 80% from a peak of $16,300 four months earlier.
To put all this into context we need to answer question of what is Metaverse real estate and what does the future hold for it? If you want a bit more background on what exactly the Metaverse is, be sure to read our guide!
What is Metaverse Real Estate?
Metaverse real estate is made up of parcels of land in a virtual, interactive world. The most popular metaverse websites, like Decentraland, the Sandbox, CryptoVoxels, Somnium Space host space for buying, selling and leasing real estate.
How Much does Real Estate on the Metaverse Cost?
Prices vary between platforms and the day. Many metaverse platforms set a predetermined amount of real estate blocks to create value. Take the Sandbox Metaverse as an example, it is composed of a finite total of 166,464 LANDS, in a square map of 408×408. The values of Metaverse Real Estate fluctuate daily depending on digital assets’ worth and user demand.
Back in 2017, the price of a parcel of land in Decentraland was only $20 when the platform held its first auction. By 2021 this price jumped to $6,000, and at the start of 2022, they rose in price to a hefty $15,000.
How to Buy Virtual Land in the Metaverse
Buying land is usually done with cryptocurrencies, such as Ethereum. Using SAND and MANA, tokens connected to the Sandbox and Decentraland respectively, users can purchase their first parcel of land in the metaverse.
These platforms are the current favorites because of their well-established infrastructure and publicity generated by well-known landlords and celebrities that own land on the platform.
You can directly purchase land on either of these platforms. Sales and ownership of metaverse land is recorded via the transfer of an NFT, which requires wallets like Metamask and Binance to store them.
You can also opt to sell and buy land from third-party resellers like opensea.io and nonfungible.com.
What Can People do on the “Plot of Land”
Ownership in the Metaverse is absolute, and you can develop, lease, sell, or otherwise use your virtual real estate as you wish. You can construct office buildings, operate store fronts, lease property for events and erect billboards for advertising.
When you own a plot of land, you can sell it, build a skyscraper, create a dance floor, a public park or virtually anything. For many other users, land in the metaverse represents huge commercial opportunities to monetise virtual assets and experiences taking place within it.
The following stand as the most popular uses of real estate in the Metaverse.
You can resell a plot of virtual land for a mark up.
You can build a wide range of virtual properties, for yourself or for the broader public, including digital casinos, clubs, convert venues, NFT galleries, stores and much more.
Areas of the Metaverse with heavy foot traffic are increasingly becoming a valuable spot for advertising business. Recently, Travis Scott’s Astronomical Concert held in Fortnite was seen by 45 million people and grossed around $20 million, including sales of merchandise. It poses as an alternative platform for brands to advertise their products and services.
US brewer Miller Lite hosted its Super Bowl ad in the Metaverse as a rival brand had an exclusive tie-in with the NFL. The virtual bar built by the brewer inside Decentraland created a sustainable impact, with visitors to the bar spending an average of 20 minutes within the ad.
Traditional Real Estate Companies and Crypto-based Investment Companies
Major players in the real estate market have taken notice of the immense commercial potential of the Metaverse and have jumped on the bandwagon.
Everyrealm (formerly Republic Realm) purchased 792 parcels of digital real estate in The Sandbox for $4.3 Million and plan to develop some of the land in partnership with Atari.
Tokens.com seeks to develop its $2.4 Million purchase in Decentraland for fashion events and retail purposes.
J.P. Morgan Chase advertised its entrance into the metaverse by opening a lounge in Decentraland, complete with a tiger and a portrait of Jamie Dimon.
HSBC purchased digital real estate in The Sandbox, which is expected to be developed into a stadium to host virtual sporting events.
How will Metaverse Real Estate affect “Real” Estate?
The Metaverse will potentially bring some opportunities and challenges to the traditional real estate industry.
It can be used as a platform for real-world activities, such as trade shows, exhibitions, weddings, and other social gatherings. This could reduce the demand for physical properties used for these purposes.
It makes real estate available to a broader range of investors: Real estate in the Metaverse is available in a variety of shapes, sizes, locations, and price points. Because of the low cost and ease of access, almost anyone can invest in this type of asset.
It prioritises size and location over utility: Size, location, and utility are all important considerations in real estate. The goal of purchasing land in the metaverse is to develop it or lease it out.
As people seek new ways to interact with the brands they are loyal to, businesses will continue to innovate and blend the virtual and physical worlds – with the Metaverse likely playing a huge role in accomodating that.
Advertising spending is also expected to rise in this space. By 2022, in-game ad spending is set to reach $18.41 billion. With the potential return of the bull market, we might see the resurgence of Metaverse real estate as the next hotspot for investing.