A Primer on Virtual Real Estate
NFTs Representing Ownership of Property in the Metaverse
Virtual real estate is digital property (such as land, a house, an apartment, etc.) in the metaverse, or the virtual world. Virtual real estate has recently seen a surge in interest coinciding with the increase in interest in the metaverse, following Facebook’s rebranding to Meta and the company indicating its focus on the metaverse.
There is a long list of metaverse projects but two of the most popular ones include the Sandbox and Decentraland metaverses, where the value of virtual real estate has seen a surge. In the metaverse and on virtual properties, users can do things that they would in the real world but instead with an avatar in a virtual world (by using their desktops, virtual reality sets, etc.) such as hanging out with friends, having business meetings, going to a live music concert, or going to a museum (with NFTs on display).
Users can also own virtual real estate by purchasing non-fungible tokens (NFTs), which represent a specific virtual property. Some interesting facts:
- Sales of metaverse real estate topped $500 million in 2021, as reported by CNBC.
- One plot of land in Decentraland recently sold for $400 per square foot or roughly 1/3 the average price per square foot for real estate in San Francisco, as reported by Market Insider.
- The size of the metaverse real estate market is expected to grow at a 31.2% CAGR during 2022–2028 according to Brandessence market research as reported by Global Newswire.
Ownership of virtual land in the metaverse is represented by NFTs that are unique and specific to each virtual property, whether it be a plot of land, a house, or an apartment. Similar to property in the real world, there is typically a limited supply of virtual property in each project. As examples, in Decentraland, there is a total of ~91k unique plots of land, while the Sandbox has ~166k unique plots of land.
Virtual real estate can be purchased and sold as NFTs on NFT marketplaces (such as OpenSea or MagicEden). The limited number of unique land parcels in each virtual world, tied to unique NFTs, ensures individual ownership and helps to support the value of virtual real estate. For example, one user spent the equivalent of $450k on a virtual property in the Sandbox to be Snoop Dogg’s (a rapper/celebrity) neighbor.
Virtual Real Estate Prices Have Increased Significantly
Ever since Facebook announced its plans to “bring the metaverse to life” and rebrand as Meta, the metaverse and virtual real estate more specifically have drawn an increase in attention. Prices for virtual plots of land have soared as much as 500% since the announcement in some cases.
Virtual real estate tokens that are used within these virtual worlds, such as Decentraland’s MANA token and The Sandbox’s SAND token, also saw a dramatic increase in value as these metaverse projects benefit from increased interest. Recently, virtual real estate development company Republic Realm spent a record $4.3 million on a parcel of virtual land in the Sandbox. Republic Realm also sold 100 virtual private islands last year for $15,000 each, which are selling today for about $300,000 each — roughly the same price as the average home in America.
However similar to the cryptocurrency, virtual real estate is currently very speculative and should demand and interest for these metaverse projects decrease, so too will the price of the virtual real estate.
Some Companies are Buying Land in the Metaverse Too
In addition to virtual real estate investment firms buying up land in the metaverse, some corporations are also investing in virtual real estate and have shown increasing interest in its potential use cases for their companies. Shoe giants Nike and Adidas have both made forays into the metaverse — with Nike setting up an immersive virtual space within the Roblox gaming platform and Adidas acquiring a virtual plot of land within the Sandbox.
Moreover, PwC Hong Kong has also purchased virtual land within the Sandbox to construct a Web 3.0 advisory hub that will help facilitate the next generation of professional services. These corporate purchases of virtual real estate highlights the broader trend of institutions’ adoption of virtual real estate, along with the multitude of potential use cases it can have for these firms.