Real Estate in the Metaverse Trails Behind Brick and Mortar Homes
The metaverse has yet to ignite a virtual land rush reminiscent of the volatile markets for cryptocurrencies and NFTs, yet the emerging field is proving valuable for real-world property applications. Combining augmented reality (AR), virtual reality (VR), and digital twinning, the metaverse offers powerful marketing and development functions for the real estate industry.
Before realizing this potential, the metaverse had to survive its “hype cycle,” as Luke Graham, head of research at London-based proptech venture capital firm Pi Labs, calls it. Although virtual land platforms have come off their high prices, Graham now sees increased adoption and interest in virtual tools, including digital twins and mixed reality.
However, real estate transactions in the metaverse still struggle to gain traction. Zach Aarons, co-founder of Manhattan-based proptech venture capital firm MetaProp, acknowledges that there is some activity, but the number of users remains limited compared to popular gaming sites.
Nevertheless, some real estate investors remain hopeful about their virtual land purchases, such as Daniel Yurcho, founder and CEO of Consult Web3. Yurcho bought land in The Sandbox based on speculation, expecting its value to increase over time. Although the market's ups and downs have been a roller coaster, he remains committed to his investments.
Traditional real estate companies have not shown significant interest in the metaverse, but some brands seek to capitalize on its marketing potential through virtual retail real estate sites. MetaProp’s Aarons points to Snapple’s store in Decentraland as an example of a brand using the metaverse for advertising and events.
The intersection of the metaverse with AR/VR technology may prove crucial for virtual real estate growth. Jyotika Singh, director of data science at Placemakr, highlights virtual property tours and property staging as emerging connections between the metaverse and the real estate industry.
Property location is essential even in the virtual world, with high-profile examples like Snoop Dogg's acquisition of land parcels in The Sandbox, dubbed "Snoopverse." A buyer paid $450,000 to become his virtual neighbor, illustrating the speculative nature of some metaverse transactions.
The metaverse is tentatively being utilized by architects, engineers, landlords, and developers to plan real-world projects. Aarons has noticed an increasing interest in using the metaverse to visualize projects before actual construction begins.
Aarons remains "neutral" about the future uses of the metaverse in real estate, seeing potential in the utility of virtual experiences but not actively seeking to fund or incubate companies involved in the field. The relationship between real estate, proptech, and the metaverse remains stagnant, with Aarons describing it as "the same amount of flux and not a lot of new stuff going on."