For the past few years, Metaverse (1) has gained a strong foot in the tech industry. It is predicted to be the next revolutionary version of today's internet, that will supposedly change how the users interact through the internet. With a vision of living in a virtual three-dimensional world(2), where most of our daily activities will be shifted to virtual reality.
The users would most likely use their digital avatars to interact with the virtual world.
These avatars (3) would be the virtual manifestation of the users. They would be performing all the physical activities that any normal human can perform in the real physical world. In fact, the digital avatar would be even more capable. They might be able to function even beyond the limitations of the human body.
This means we would no longer be restricted by our physical capacities, which means we would be able to achieve what is considered impossible for us today. Distance would longer be a problem, you won’t need to travel long distances. Because living in the virtual world would remove the issue of distance altogether.
You might even be able to do extreme sports because there would be zero chances of actual harm to your real body.
So that means you can now overcome your fears and freely go skydiving, bungee jumping, etc.
As these avatars are the virtual manifestation of ourselves, they would need their own space to thrive. One reason why many people have been interested (4) in buying land in the metaverse is to create their own homes. So, what are the other reasons you might ask?
Reason to Buy Virtual Land/Real Estate
Following are a few reasons why people invest in Metaverse Real Estate:
- To earn big profits. One of the most obvious reasons is the fact that investing in virtual land had promised big returns to many investors. Especially after Meta revealed its intention to work toward the development of the metaverse project, the prices of virtual land have experienced a new high. To the point, they can be as expensive as the real-world land/house or even more.
- The land could be used for business or any other purpose since it would be like a domain name. That means you can build your own virtual office, museum, meeting area, shop, house, etc.
- The land could also be rented to others, in this way the holder could ensure a continuous passive income.
- In the future, these lands might also be used by social institutes like educational institutes, etc.
- The virtual marketplace is not a new concept, but in the future, we might get to experience a 3D virtual market, where we may buy clothes, shoes, and many other necessities and accessories.
- These are not the only reason, many globally listed brands (5) have also invested their money in metaverse real estate, they anticipate establishing their own showroom and buildings in the virtual world.
All of these things might convince you to believe that since the metaverse real estate is going to become gain popularity in the future, it might start affecting the commercial real estate industry. Well, this is in fact true to an extent, the commercial real estate industry might be affected by the rise of metaverse real estate. Whether these effects would be beneficial or harmful is something not yet decided.
Commercial Real Estate (CRE) and Metaverse
Commercial real estate is not a stable industry, trends keep on changing and the technology keeps on developing. Adapting to the changes is the best way to survive. As Darwin had said “Survival of the fittest”. Therefore, for the commercial real estate industry to survive it might have to start adapting to the changes if it already hasn't.
One major change that could have a big influence on the CRE industry is the uprise of Metaverse (6). Recently metaverse has created a lot of buzz with Facebook changing its name to Meta and the surge of many startups and tech giants working on the metaverse project. People have now become curious about the metaverse and how it might affect their future.
Therefore, many people following the example of major brands, companies, and celebrities (7) have decided to invest in the metaverse project. Metaverse has already proved to be a fruitful investment for many investors.
One issue that many have raised regarding the metaverse land is the issue of its scarcity. Since the virtual land is a digital asset there is no stopping the companies from creating an infinite number of digital lands. What would be the value of something that is so abundant and can be easily created, one might wonder? To be honest, it won't be much.
Hence many have called buying virtual land a waste of resources especially if you are buying them at the same price as the real one.
If the companies create an infinite number of virtual land they would devalue their worth. Therefore, they have agreed to maintain the artificial scarcity of virtual land. But artificial scarcity is not real (8) and that is a fact we can’t deny.
One reason why the land in the real is expensive is because of its scarcity. The reason why the price of land varies is also because of the limitation of land available.
Have you ever wondered why buying property in a metropolitan city is so expensive? Well, the reason is that many people are competing for that particular land property because of its scarcity. And nobody would want to lose an opportunity to live in a highly facilitated and advanced city with a lot of benefits and opportunities.
Therefore, investing in land is considered so profitable. But the metaverse land has encountered many skeptics who find buying land in the metaverse risky (9). The reason why? Because it is not corporal and is very volatile. But what you can’t deny is the potential of the concept itself.
We have imagined living in a virtual world for a long time. Evidence of this would be the vast range of sci-fi novels that basically explore these concepts. The fact that the term metaverse was coined by Neal Stephenson in his book Snow Crash (10) is a piece of great evidence.
With the rapidly developing digital world slowly making its way into the mainstream, you might start wondering if Metaverse would threaten CRE.
Can Metaverse Threaten CRE?
While many believe that Metaverse real estate might threaten the CRE industry, the commercial real estate companies have instead adopted the technologies to work for their own advantages.
For example, virtual tours might become a thing!
Let's say you want to buy a house in the real world and due to some circumstances are not able to travel too far, maybe you are short on time. In this kind of situation being able to virtually tour the houses from the comfort of your own home would be the most convenient thing ever.
So, if the CRE companies start providing the facilities of virtual tours using VR and AR technologies (11), it would become a very convenient option for the buyers. In the future, this might become a real experience. It might even become possible to buy both the virtual and real counterparts of the space through CRE companies.
Then you can use both of them according to your own need.
Some virtual platforms sell the digital version of the actual real estate. Platforms like SuperWorld closely mimic the real world, allowing the users to buy land and even landmarks (12).
Brokerage firms and brokers would likely shift their work into the metaverse if it successfully integrates itself into the daily life of humans. Sotheby has already started working toward this direction by opening a virtual version of its London headquarters (13).
Shifting work to metaverse is something many have already been contemplating on. While there is work that requires physical presence and physical labor, there are jobs that do not require physical presence like teaching, etc.
It has been proven especially after the pandemic that online teaching is possible. Also, the fact that the metaverse project has also gained a lot of attention during this period of a pandemic where we were confined to our homes for a long time.
Therefore, people have been quite interested in virtual space and its future potential. For now, the CRE has its own potential in the Metaverse. They can use the virtual space as their office, meet with their clients and give them a virtual tour of real estate properties that actually exist in the real world (14).
In the virtual world, the purchasing and selling of land are mostly done through metaverse marketplaces and platforms like OpenSea, etc. Hence, removing the need for third parties, but this might change soon with the launch of more virtual real estate companies.
People might feel that the future of CRE is in danger because of the rising popularity of metaverse real estate, which they might be right about to an extent. Many CRE investors have found investing in metaverse land attractive, so there is a possibility that commercial real estate might lose some of its investors.
Shifting the world to a virtual world would also mean less requirement for office spaces in the real world. This means less business for the commercial real estate industry. But this does not mean people will not need a house to live in.
It's true that the metaverse is where people would be spending most of their day in the future, but that does not imply they would replace the real-world experiences. That is impossible, therefore there is no way that metaverse real estate would be able to push out CRE.
So, How will that Turn Out?
Following are the changes that might take place in the future:
- Traveling to visit the properties is very time-consuming and cumbersome, so the option of virtual touring will save a lot of time for both parties.
- It would be cost-effective
- You can invest in out-of-state properties.
- You can easily scout off-market properties
- You might even be able to access information about the property. Since, everything would be digitally managed, which means records would be easily accessible and accurate.
- Finding and investing in property would become an easy process.
- It might be possible to buy and sell virtual properties.
Does that mean the Commercial Real Estate might even sink its claws into virtual real estate?
Virtual Real Estate Business is a Good Option
Two North American companies have launched the first-ever virtual real estate company called Metaverse Property (16), the main focus of this project is the virtual housing market.
Metaverse property is a joint venture of Wolfest Woods and GDA Group. The company is focused on managing, developing, marketing, consulting, buying, renting, and selling virtual properties.
The company is a great example of how much potential virtual real estate holds. There are even speculations that in the future virtual real estate and commercial real estate may merge, where these companies could assist the users in acquiring properties in both the real and the virtual world (17).
How will the Metaverse Disrupt Real Estate?
After understanding how the metaverse could have a significant impact on real estate, let us now, focus on how the real estate could be disrupted by Metaverse. Metaverse will alter how we look at selling and buying properties in the real world.
Many believe metaverse to be a phase that might pass, but many also believe it is here to stay.
Metaverse has opened a whole new world of virtual land and property. People who have already anticipated living in a three-dimensional world have already started investing their money in these virtual properties. Commercial real estate to be honest won’t have as many problems as some might expect (18).
There is no way possible that metaverse would be able to push CRE out of the picture. Commercial Real estate has survived and adapted through many changes and the same will go for the metaverse.
The evidence of this change is the real estate businesses that have already started moving part of their work to the virtual platforms. Another piece of evidence is the start of a virtual real estate company called Metaverse Property. The CRE industry is more likely to adapt and thrive off of the metaverse technologies.
With the rise of demands for virtual land, it is a matter of time before CRE would fully immerse itself in this new world of Metaverse.