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The Metaverse is seeing a surge in real estate prices. Don't panic

Is Metaverse a boom or a bubble?

The Metaverse is seeing a surge in real estate prices. Don't panic
Concept of a virtual city in the metaverse HT Ganzo/ iStock

There is hardly a day that goes by without a mention of the metaverse. Since Facebook's brand name changed to Meta, the word has really caught on and everybody wants to be a part of it. 

Mark Zuckerberg may have drawn the world's attention to the metaverse but the digital world has been on the rise for quite some time. Minecraft, an online game, has been around since 2011, where not only does one get to stay in a digital world but also has the tools to build it around themselves. With their versions of the metaverse, what Meta and the others now want to do, is build up these worlds rapidly, so that people can just come and spend their time in there. 

Time is Money

If there is one thing the internet and the millions of apps have taught us once again is that time is money. The amount of time a user is willing to spend on your site or app is directly proportional to the amount of money you can make since you now have the user's attention. 

Since the metaverse promises a host of things to do in a three-dimensional space, companies want to occupy prime properties in the metaverse to showcase their products and services, much like the Times Square in New York. As of now, there are limited places that have the potential to be Times Square of the metaverse and they belong to companies like The Sandbox, Decentraland, Cryptovoxels, and Somnium Space who own the real estate in their digital worlds. 

Real estate in the metaverse

As more players want to enter the metaverse, the limited parcels of real estate are seeing their prices go rocket high. Last year, real estate deals in the metaverse grossed $500 million and are expected to double this year. 

Almost every globally known name has a piece of real estate in the metaverse. From celebrities to investment banks, fashion retailers to music production companies, everybody has put a foot in the metaverse, just in case, it becomes a big thing in the future. 

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As a commercial real estate broker told World Economic Forum, most investments are a result of FOMO or the fear of missing out. Valuations of metaverse business such as one from JP Morgan Chase that called it a $1 trillion opportunity, are likely to keep the tempo high for a while at least. 

Boom or Bust

The world of internet-based companies is no stranger to bubbles. Two decades ago, the Dot-com bubble saw trillions of dollars of market value wiped off in a matter of months. So, does metaverse also carry the same risk? 

Somnium Space's CEO Artur Sychov thinks so. Speaking to WEF he said, "While interest in virtual real estate has grown over the past six months, it is clear that most people do not yet fully understand the real use-case of those plots. The real monetary value should only be attached to virtual goods that provide real utility for their owners, otherwise, there is a huge risk of creating a speculative bubble that will hurt consumers and companies."

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While a lot is being made of the real estate booming in the metaverse, one must remember that as much as we would like to replicate it, the digital world isn't the real world. Real estate prices rise in the real world since the demand is against a  finite resource.  While land parcels in the metaverse might be limited now, there is no reason why they will stay finite. As user numbers grow, more destinations can pop up in the metaverse in a very short span of time. 

Unlike the real world, the metaverse does not involve a commute time to a new destination. Teleporting to a new destination would just be a matter of a few seconds and people will leave one digital world for another when a fancier yacht comes up in the new world.  

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So, the next time you hear a compelling story about the metaverse, may be from Mark himself, take it with a pinch of salt. 

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