Investors snap up metaverse real estate in virtual land boom

Investors snap up metaverse real estate in virtual land boom

A tower in Decentraland that Tokens.com hopes will generate revenue from leases and advertising. Digital realms may appear as cartoonish, gummy-coloured fantasy worlds, or digital applications of places we know.

(NYTIMES) Justin Bieber performed at a live concert last month, but the show wasn’t in a stadium or arena.

Like recent performances from Ariana Grande, the Weeknd and Travis Scott, this concert was held in the metaverse, the online world that stretches the corners of the Internet into immersive, four-dimensional experiences.

Fans from all over the globe watched Bieber’s avatar sing songs from his hit album Justice.

Investors were watching, too.

Preparing for a digital land boom that appears just months away, they are snapping up concert venues, shopping malls and other properties in the metaverse.

Interest in this digital universe skyrocketed in October when Mr Mark Zuckerberg announced that Facebook would be known as Meta, an effort to capitalise on the digital frontier.

The global market for goods and services in the metaverse will soon be worth US$1 trillion (S$1.37 trillion), according to digital currency investor Grayscale.

The metaverse comprises multiple digital realms. Each is like a 3D virtual city where avatars live, work and play.

But real estate investing in the metaverse still is highly speculative, and no one knows for sure whether this boom is the next big thing or the next big bubble.

Technologists believe the metaverse will grow into a fully functioning economy in a few short years and offer a synchronous digital experience that will be as integrated into our lives as e-mail and social networking are today.

Money in these digital worlds is cryptocurrency, as finance in the metaverse is powered by the blockchain – a digitally distributed public ledger that eliminates the need for a third party, like a bank.

Anyone entering a virtual world can buy or trade art, music and even homes as non-fungible tokens, or NFTs, which are blockchain-based collectibles that are digital representations of real-world items. The NFT serves as proof of ownership and is not interchangeable.

And in recent months, the volume of transactions for commercial real estate in the metaverse has ramped up.

In October, Tokens.com, a blockchain technology company focused on NFTs and metaverse real estate, acquired 50 per cent of Metaverse Group, one of the world’s first virtual real estate companies, for about US$1.7 million.

Metaverse Group is based in Toronto but has virtual headquarters in a world called Decentraland in Crypto Valley, which is the metaverse’s answer to Silicon Valley. Decentraland also has districts for gambling, shopping, fashion and the arts.

“Rather than try to create a universe like Facebook, I said, ‘Why don’t we go in and buy the parcels of land in these metaverses, and then we can become the landlords?” said Mr Andrew Kiguel, a co-founder and the chief executive of Tokens.com.

Since that acquisition, Tokens.com has broken digital ground on a tower in Decentraland. Louis Vuitton, Gucci, Burberry and other luxury brands have already entered the metaverse via NFTs, a move that makes company executives optimistic that the Tokens.com tower will soon generate revenue from leases and advertising for brands like these.

For those wondering why a company would want to invest in a virtual office in the metaverse, Metaverse Group co-founder Michael Gord said that sceptics should look at the trends catalysed by the pandemic. “As more people participate, it’s where you’re going with friends, where you’re having experiences like conferences and concerts,” he said.

“It’s inevitable that the metaverse will be the No. 1 social network in the world.”

The Metaverse Group has a real estate investment trust, and it plans to build a portfolio of properties in Decentraland as well as other realms, including Somnium Space, Sandbox and Upland.

The Internet may be infinite, but virtual real estate is not: Decentraland, for instance, is 90,000 parcels of land, each roughly 15m by 15m.

Among investors, there is a sense that there’s gold in those pixelated hills, said Mr Gord.

“Imagine if you came to New York when it was farmland, and you had the option to get a block of SoHo,” he said.

“If someone wants to buy a block of real estate in SoHo today, it’s priceless; it’s not on the market. That same experience is going to happen in the metaverse.”

Last month, Tokens.com closed an even larger land deal in Decentraland’s fashion district for roughly US$2.5 million. The company, which says the real estate transaction was the largest in metaverse history, plans to develop the area into a virtual commerce hub for luxury fashion brands, a la Rodeo Drive or Fifth Avenue.

Many of these digital realms appear as cartoonish, gummy-coloured fantasy worlds, while others are digital applications of the planet we already know and love.

SuperWorld, a virtual real estate platform mapped over the entire face of the globe, offers 64.8 billion plots of land – each for sale as an NFT.

The Taj Mahal is available, as is, most likely, your childhood home. Owners can buy plots for reasons sentimental or savvy, but either way, once they buy the NFT, they get a share of any of the commerce that happens on that piece of property.

“You can buy locations that you love, whether it’s Central Park or the Pyramids in Egypt,” said SuperWorld co-founder and chief executive Hrish Lotlikar.

“What you’re buying is the virtual land that covers the earth at those locations.”

There are only a handful of digital realms in which investors can buy and sell real estate, and all of them use their own cryptocurrency. Decentraland’s is called Mana, for instance. Decentraland also has a marketplace where people can browse NFTs, including plots of land for sale.

Wave, an entertainment company that stages interactive concerts, including Bieber’s, earns a profit from virtual merchandise and brand sponsorships for the shows, which are held in neutral zones rather than a digital arena.

The company is not yet monetising real estate, but co-founder and chief executive Adam Arrigo said he was researching possibilities.

“These platforms like Decentraland and Sandbox are pioneers in credentialing these plots of lands, these storefronts,” he said.

“Over the next few years, what we do is going to become a lot more mainstream.”

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