Sales of real estate in the metaverse amounted to $ 500 million last year and could double this year, according to investors and analytical companies.
Sales of real estate on the four major metaverse platforms reached $ 501 million in 2021, according to MetaMetric Solutions. Sales in January exceeded $ 85 million, the metaverse data provider said. It projects that at this rate sales could reach nearly $ 1 billion this year.
The recent increase in sales was caused by Facebook’s Oct. 28 announcement that it was rebranding as Meta to focus on the metaverse. Real estate sales rose nearly nine times in November, to $ 133 million, according to MetaMetric. Sales growth has since disappeared, yet the total sales total of January will still be more than 10 times the level of January 2021.
A report by BrandEssence Market Research found that the metaverse real estate market is expected to grow at a compounded annual rate of 31% per year from 2022 to 2028.
“There are big risks, but potentially big rewards,” said Janine Yorio, CEO of Republic Realm, a metaverse real estate investor and advisory firm.
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‘Big Four’ dominate the space
Republic Realm paid a record $ 4.3 million for land in the largest metaverse real estate platform, Sandbox. The company develops 100 islands, called Fantasy Islands, with its own villas and a related brand of boats and jet skis. Ninety of the islands sold in the first day for $ 15,000 each and some are now listed for resale for more than $ 100,000.
For investors, the big question is how to give value and risk to an asset whose scarcity is artificial and whose future lies empty. More than a dozen platforms now sell real estate in the metaverse, with new ones popping up almost every week. So far, sales of real estate have been concentrated on the “Big Four” – Sandbox, Decentraland, Cryptovoxels and Somnium. There are a total of 268,645 packages on the four platforms, all of different sizes.
Sandbox dominates the market, with 62% of the available land on the four platforms and three-quarters of all land sales by 2022, according to a Republic Realm report. Sandbox has 166,464 packs, each 96 feet by 96 feet, and each sold for the Ether equivalent of $ 12,700 in December.
Decentraland has 90,600 packs, which are 16 feet by 16 feet, and sold for the Ether equivalent of $ 14,440 each.
Location may still matter
A rush of companies, big markets and investors is pouring into the new land world, hoping to get on the ground floor of the next digital Manhattan or Monaco. Yorio said land value in the metaverse will be determined by what owners do with a property – such as designing a popular attraction, museum or function – instead of location.
“You can teleport anywhere, so location is not that important,” she said.
Still other investors say that just like in the real world, location in the metaverse is everything when it comes to real estate. Package prices at Snoop Dogg’s planned partnership and virtual world in Sandbox receive a premium, along with packages close to the Atari development.
Andrew Kiguel, CEO of Toronto-based Tokens.com, recently raised a $ 16 million fund to invest in metaverse real estate, almost all of which is dedicated to buying land and hiring staff. The company recently spent $ 2.4 million on land in the Decentraland fashion district, where the company plans to host fashion events and retail stores.
Kiguel said he is about to announce agreements with two North American clothing brands where he rents space on his property to develop storefronts as experiences. Kiguel said the real opportunity in metaverse land is commercial – renting space and hosting events for companies looking to advertise to a younger digital audience. He said he has been in talks with accounting firms, investment banks, podcasts and mutual funds to build a presence in the metaverse.
“We even talk to companies about placing digital billboards in virtual conference rooms where people can meet,” he said.
Tokens.com bought 12 properties on the water in Somnium that it thinks will increase in value due to its scarcity and visual appeal, Kiguel said.
Still others say that metaverse land is simply the latest iteration of the crypto-ponzi scheme, attracting ignorant investors into projects that may eventually prove worthless. While real land has natural scarcity – hence the old adage “They don’t make it any more” – virtual land is easily created with code. There is no limit to the number of new metaverse platforms it can launch. Even the large existing platforms can create more land, as Sandbox did when it decided to increase its packet size.
Many point out that earlier versions of virtual land grabs, as in “Second Life”, fell far short of their promises.
“Metaverse land sales is generally a pyramid scheme and has been around for more than 20 years,” said Edward Castronova, a professor of media at Indiana University. “The Metaverse is El Dorado for internet startups. They chase it into the jungle and die.”
While older investors may spot on metaverse land, Kiguel said, younger consumers and investors are immediately able to see the appeal.
“The problem that a lot of people have is that there are generations who have a hard time giving value to things that are digital, that you can not keep and that have no weight,” he said. Kiguel. “The younger generation has no problem with that. Like NFTs, blockchain technology lets something digital, irreplaceable and scarce. You can keep, store, display and sell it.”