Investment firms and analytics companies predict that metaverse real estate sales could double this year, topping $500 million last year. In 2021, MetaMetric Solutions reports real estate sales reached $501 million on the four major metaverse platforms. According to the provider of metaverse data, sales reached $85 million in January. If sales progress at this rate in 2022, they will reach nearly $1 billion.
Sales spiked shortly after Facebook announced Oct. 28 that it was rebranding as Meta to emphasize the metaverse. MetaMetric reports that real estate sales in November increased ninefold to $133 million. Despite sluggish sales growth since then, January’s sales total will still be more than 10 times that of January 2021. From 2022 to 2028, BrandEssence Market Research predicts that the metaverse real estate market will grow at a compound annual rate of 31%. A metaverse investor and advisory firm, Republic Realm, explains the risks and potential rewards of a metaverse property.
Markets dominated by ‘Big Four’
Sandbox, the largest metaverse real estate platform, was acquired by Republic Realm for a record-breaking $4.3 million. The company is developing 100 islands with private villas and a boating and jet-ski market. The company will own 100 islands called Fantasy Islands. Almost all of the islands sold on the first day for $15,000. Several of the islands are now on the market for more than $100,000 each.
In terms of value and risk, it is a challenge for investors to assess an asset that is artificially scarce and whose future is unknown. With new platforms popping up almost every week in the metaverse, more than a dozen are now selling real estate. The “Big Four” – Sandbox, Decentraland, Cryptovoxels, and Somnium – have dominated the real estate market thus far. On each of the four platforms, there are 268 645 parcels of varying sizes.
According to Republic Realm, Sandbox controls 62% of all land on the four platforms and three-quarters of all land sales by 2022. In December, Sandbox sold the equivalent of $12,700 worth of ether to 166,464 parcels. There are two parcels of land, each measuring 96 meters by 96 meters (106 yards by 106 yards). In Decentraland, 90,600 parcels are available. Each of these 16×16 meter parcels costs $14,440 in ether.
Location of real estate is still important
New land is becoming a hot topic among investors, companies, and brands, hoping to make the next Manhattan or Monaco. According to Yoro, land value in the metaverse will depend on what owners do with a property, such as designing a popular attraction, museum, or feature instead of where it is located. She said that since teleportation is possible, location is not as crucial as it might seem.
Other investors believe that location is everything in the metaverse, just like in the real world. In addition to parcels near Atari’s new development, parcels near Snoop Dogg’s virtual world and partnership in Sandbox are fetching a premium.
Decentraland’s fashion district
Tokens.com CEO Andrew Kiguel recently raised a $16 million fund to invest in metaverse real estate, almost entirely for buying land and hiring staff. In Decentraland’s fashion district, the company has recently spent $2.4 million on land on which to host fashion events and open retail shops.
The company will lease space on its property to two North American apparel brands to develop storefronts or experiences. It is a real opportunity for commercial companies to rent space. And host events in metaverse land in order to advertise to a younger digital audience, said Kiguel. According to him, he has been in contact with accounting firms, investment banks, podcasts and mutual funds to establish a presence in the metaverse.
He said that the company is even considering putting up digital billboards inside virtual conference rooms so people can meet virtually. Kiguel said that tokens.com has acquired 12 waterfront properties in Somnium that it believes will increase in value due to their scarcity and aesthetics. Others, however, believe metaverse land is simply the latest ponzi scheme that lures investors into projects that may end up being worthless. Real land is limited by nature – hence the old saying “they aren’t making any more” – but virtual land can easily be created using code. Metaverse platforms can launch in an unlimited number. As Sandbox did when it increased its parcel size, even the largest platforms can create more land. Virtual land grabs, such as those in “Second Life,” have often failed to live up to their promises.
Metaverse land sales
According to Edward Castronova, professor of media at Indiana University, metaverse land sales tend to be pyramid schemes and have been for over 20 years. “The Metaverse is El Dorado for internet startups. They chase it into the jungle and die.” Kiguel said that while older investors may look down on metaverse land, younger investors and consumers see its appeal immediately.
“The issue a lot of people have is that there are generations that have a hard time appreciating things that are digital, that can’t be held, and that do not have any weight,” Kiguel said. “The younger generation does not have any issues with it. In a similar way to NFTs, blockchain technology allows something to be digital, irreplaceable, and scarce. It can be held, stored, displayed, and sold.”