Real estate in the metaverse: market trends, opportunities, and tips for technology enthusiasts

Metaverse real estate are parcels of land or commercial and residential buildings that exist in a virtual world. On that land, you can create all types of property — from advertising billboards to commercial districts and headquarters of companies that exist in real life. In the simplest sense, the metaverse real estate objects are pixels on your computer screen. But they are also programmable spaces on different platforms where people can socialize, sell non-fungible tokens (NFTs), play games, advertise their products and services, and even attend business meetings via 3D avatars. This is how Janine Yorio, CEO of Republic Realm, explained metaverse real estate in New Rules of Business podcast, “Metaverse real estate is an NFT. They are a JPEG or [digital file that] points to a specific file that is logged on the blockchain, which is this ledger that tracks who owns [each asset]. Much the same way that if you bought land in a town, you'd go to the town hall and open a drawer to find your deed. Instead, you're looking at the blockchain.” Since Facebook rebranded itself as Meta, in 2021, the value of real estate in the metaverse market has increased significantly, and it is predicted to continue rising at a CAGR of 31.2% from 2022 to 2028.

To buy virtual land in the metaverse, you first need to get hold of cryptocurrency. Some metaverse platforms provide their own coinage. For example, Sandbox trades its native cryptocurrency SAND, and Decentraland uses MANA. Sometimes, general-purpose cryptocurrencies, such as Ethereum, work as well. Even though the land is virtual, it is secured with a very real thing, NFTs. When someone purchases real estate in the metaverse, this transaction is recorded on the blockchain, and the corresponding NFT transfers into the buyer’s digital wallet. Metamask and Binance wallets are rather popular. You can buy virtual properties directly from your platform of choice, or you can benefit from third-party resellers, such as nonfungible.com, a platform that allows owners to list their property and buyers to negotiate the price.

Real estate in the metaverse costs are skyrocketing. Take, for instance, Decentraland. When the platform held its first auction in December 2017, it sold parcels of land for $20 each. By 2021, the cost of this commodity catapulted to $6,000, and it kept increasing to reach $15,000 by the start of 2022. Virtual land on the Sandbox, another metaverse platform, grew by 15,000% in 2021. Prices of virtual land plots can vary significantly based on their size, platform, and location. You can get a small parcel in Somnium Space for $6,362, while a lavish plot on Decentraland would cost you $2.4 million. When you prepare for metaverse real estate investing, don’t forget about all the accompanying expenses. Besides the parcel’s price, you are likely to pay processing fees, which can amount to 5% of the land price, in addition to gas fees for Ethereum-based projects. Also, some metaverse platforms require you to trade in their native cryptocurrency. If you don’t have those, be prepared to exchange one currency for another with all the losses that this transaction entails.

There are four commonly used metaverse platforms – The Sandbox, Decentraland, Cryptovoxels, and Somnium Space. The first two offer a well-established infrastructure and feature celebrities as landlords and tenants. The Sandbox is particularly popular with celebrities. According to Yat Siu, Co-founder of Aminoca Brands, the owner of the Sandbox, "What makes Sandbox land valuable is not the fact that they're blocky pieces of land. It's the fact that the most influential people in the space are building on it." This list includes Paris Hilton and Snoop Dogg, who owns a mansion and throws parties. The four platforms together offer 268,645 parcels of land varying in size. Below you can find a brief description of every platform. Some of them offer VR experience. We also enclosed a graph representing sales for a one-month period for each of the four platforms. All graphs are constructed for the same timeline, so that you can compare them for profitability.

Generally speaking, metaverse technology presents many opportunities for business leaders. There are several reasons to purchase land and other real estate objects in the metaverse:

Republic Realm, purchased land worth $4.3 million from the Sandbox. The company decided to develop 100 islands on the property with their own villas and boat market. Ninety of them were sold on the first day for $15,000 each, and some owners are listing their acquisitions for resale for over $100,000. Another large transaction comes from a crypto investor Tokens.com who acquired virtual property on Decentraland for $2.4 million. The land is located in the Fashion Street area, and the company is planning to host digital fashion shows with brands such as Dolce & Gabbana and Tommy Hilfiger. As Tokens.com CEO, Andrew Kiguel said, “We don’t want to sell the land, we want to continue buying land.” Property development companies also don’t want to stay behind and try to harness this new technology to gain competitive advantage. For instance, Magnolia Quality Development Corporation (MQDC), a leading international property developer, teamed up with Accenture to create a virtual real estate metaverse. Visit Malaisirirat, Chief Executive at MQDC said, "This approach has made us a technological pioneer to bring sustainable well-being to people and society in an era of digital transformation." According to Mr. Malaisirirat, the collaboration with Accenture focuses on providing MQDC’s customers with experience beyond imagination, opening opportunities for clients interested in the metaverse in the context of property development, and simply offering a space that connects virtual and real worlds, allowing people to have a hybrid experience. Other activities include:

Real estate in the metaverse sales amounted to $501 million in 2021 and already exceeded $85 million in January, 2022 alone. Going at this pace, this market could reach $1 billion by the end of 2022. Big companies, such as Meta, Nvidia, and Microsoft, are betting on the metaverse to become the next generation of the Internet. If this materializes, real estate in the metaverse will offer many opportunities for businesses and influencers to build new audiences, create and market new products and services. This excitement is supported by Accenture’s recent survey, which shows that 71% of global executives questioned by the consultancy report that metaverse will be beneficial for their business, with 42% believing this technology will have a transformational impact. However, there are factors that work against the metaverse. The Quarterly NFT Market Report shows that NFT sales volume in the metaverse is still rather modest in comparison to other NFT segments.