How Real Estate Works in the Metaverse
The digital land boom is on! Here's how to become a virtual real estate tycoon.
It used to be that if you wanted to own land, you had to put money on a plot of earth. But times are changing, and the new frontier is the burgeoning metaverse, the immersive “universe” of the virtual world. While the metaverse is still in its infancy, there’s been a land rush in recent years, with users and investors paying real money for virtual real estate.
With countless startups now competing to deliver pioneering virtual worlds—Facebook (now known as Meta) invested $10 billion in metaverse technologies in just one year alone—there’s a world of possibilities beyond our physical reality. And that includes property that exists in the digital world. In fact, the metaverse’s virtual real estate market is expected to grow by $5.37 billion through 2026 alone, according to Technavio Research.
Before you dive into this crash course in cyberspace property development and management, make sure you’re familiar with a few key terms. If you’re looking for a quick primer, start with our guide to the metaverse, then check out our NFT explainer and Web3 explainer.
Why might you want to purchase virtual real estate?
Real estate can be a good investment in the real world, and people are betting that virtual real estate will have the same payoff. Currently en vogue with everyday enthusiasts and corporations alike, investing in virtual property gives you a home base in the metaverse.
But the primary reason it’s gaining steam has to do with the potential profits. Digital real estate may be a new and relatively young market, but as virtual reality advances and the metaverse grows, so too may the possibilities for digital property ownership.
Keeping up with the Joneses
Buy a plot of virtual land, and you could set up a shop, rent it out or sell it to a company looking to put down roots in your neck of the virtual world. As demand grows, those plots of virtual land could end up going for a good deal of money.
“Technology enthusiasts are increasingly flocking to online and virtual worlds, which has unsurprisingly also led to a boom in virtual real estate,” says Tim Rosato, president of management consulting and trend forecasting firm The Silver Lion Group. “As the popularity of digital universes grows and players continue to take up residence in them, they’re expecting these holdings to grow in value over time, just like apartments, condos and other real-world property investments.”
The corporation next door
Household brands like Acura (which recently opened a virtual showroom online), banking provider HSBC (which just acquired land in The Sandbox metaverse) and Forever 21 (which operates a store in virtual world Roblox) are all helping drive interest. With celebrities like Snoop Dogg and Paris Hilton increasingly joining the bandwagon, and buyers now ponying up hundreds of thousands of dollars for plots of virtual land, the market continues to boom.
Driven by fear of missing out on the next big opportunity, large corporations and even institutional investors like banks and hedge funds are acquiring virtual real estate at a blistering clip. Digital real estate is selling almost as fast as leading providers, such as Decentraland, The Sandbox, Somnium Space and Voxels, can create it. As a result, costs for metaverse real estate in extended reality, virtual reality and augmented reality universes are rising, with sales topping $500 million in 2021.
What can you do with virtual real estate?
Metaverse real estate takes the form of digital land that’s housed in virtual or online worlds. These parcels offer in-game spaces that you can customize, renovate or use for socializing, playing games or experiencing virtual activities. Depending on the platform, you can virtually landscape your parcel, build structures and dwellings on it, change its cosmetics and even host concerts, chats and online get-togethers of varying kinds.
Owning digital real estate effectively gives you a place in the metaverse that you can call home. You can use it as a central point from which to connect, communicate and interact with other players. Or you can monetize it by charging for access to or use of your metaverse holdings. Alternately, you can buy, sell, trade or lease parcels as a real-world real estate investor might.
“It may help to think of virtual real estate as your online home away from home,” says Rosato. “It’s basically yours to decorate, renovate, entertain friends within and otherwise customize to taste or do with what you will. If you can dream it, you can do it with virtual real estate, within the technical limits and design constraints of the virtual world.”
Companies, on the other hand, can use digital spaces to promote or sell products online, or create unique interactive customer experiences and destinations.
Where to find virtual real estate
The following companies specialize in metaverse property:
- The Sandbox is a popular platform for metaverse real estate, where “LAND” parcels can often retail for $5,000 or more (payable in the platform’s $SAND cryptocurrency). Its creators note that the person who owns the land controls 100% of the experience built on top of it.
- Decentraland is another well-known service that functions as a 3D virtual reality platform built on the ethereum blockchain whose LAND NFTs are bought and sold using ethereum or MANA (a currency native to Decentraland).
- Voxels is a virtual world that bears something of a resemblance to the popular video game Minecraft. You can own, build, develop and sell property within it, with transactions permanently recorded on the blockchain. A few years ago, it replaced its old $COLR cryptocurrency with the ability to purchase virtual land using ethereum.
- Somnium Space is a 3D virtual world full of VR experiences that’s built primarily by its own players, who can customize and decorate their holdings, and monetize these digital assets. The average price of a parcel of virtual real estate here recently topped $3,186.
How do you buy and sell virtual real estate?
If you want to purchase and sell virtual real estate, you will need a digital wallet, and not the type that stores and lets you use your credit cards. You’ll need the sort of digital wallet that secures your cryptocurrency holdings. Which means you’ll need to sign up for and acquire crypto using real-world funds. (You can also transfer preexisting cryptocurrency holdings, if you have them, into your digital wallet account.)
The type of cryptocurrency that each metaverse platform uses may differ, though: You may need to acquire a specific type of digital currency from the metaverse real estate provider itself or buy it on secondary crypto exchanges such as OpenSea or Binance.
Steps for buying metaverse real estate
Buying virtual real estate is a little like purchasing an NFT—your virtual ownership deed effectively takes the form of blockchain code. To do it, you simply perform the following actions:
- Use your computer, VR headset or mobile app to browse your chosen metaverse platform, looking for a preferred digital real estate parcel.
- View market prices on your chosen platform, or research them on third-party resellers like OpenSea, NonFungible or Rarible, to get a sense of comparables and general pricing.
- Open a digital wallet to hold your digital assets and the cryptocurrency you’ll use to purchase virtual land parcels. Keep in mind: This digital wallet needs to support the specific cryptocurrency your preferred platform accepts.
- Purchase the amount of cryptocurrency you need to buy your virtual land using real-world funds or preexisting crypto holdings. Remember, different virtual worlds use different world-specific currencies (The Sandbox uses SAND, while Decentraland uses MANA).
- Register for an account with your chosen virtual platform.
- Link the digital wallet with your preferred metaverse property platform, choose a parcel and begin buying.
- Receive the NFT of your metaverse real estate holding.
Selling a virtual property is fairly simple. You simply list the parcel for sale and wait for another buyer to transfer cryptocurrency to your digital wallet via a similar process as described above in exchange for the NFT.
What is your virtual property worth?
As virtual real estate isn’t backed by real-world holdings, its worth largely comes down to what others are willing to pay for it. The most expensive virtual real estate purchase occurred in December 2021, when a parcel of metaverse land in The Sandbox was acquired for a whopping $4.3 million.
You can get a more practical idea of how much digital real estate is worth by checking each virtual world’s marketplace or by looking on secondary market exchanges like OpenSea, where virtual real estate often goes for upward of $1,000 a parcel.
As with real-world real estate, the more desirable and unique your holding, the higher the price it’ll command. Prices will also vary by metaverse platform. Many high-end parcels of digital land in Decentraland, for example, now sell for $10,000 or more apiece.
What are the risks involved with virtual real estate?
Buying and selling physical real estate is generally a sound investment, but virtual real estate is a bigger gamble. Pricing can fluctuate wildly on digital properties, as can the value of cryptocurrencies in general. Risks are also associated with digital real estate platforms themselves, which may be subject to different rules, regulations and oversight than traditional real estate providers.
And nobody truly knows what the future holds. Will the future of AI revolutionize the metaverse until virtual worlds are as much a part of our lives as the internet is today, or will many virtual worlds tank? Should a virtual world shut down, property may effectively become defunct and/or worthless.
As with real estate purchasing and development in the physical world, virtual real estate purchasing and development is highly speculative in nature. You may encounter additional risks if user or player bases move on to other virtual worlds, if neighboring parcels or surrounding areas of metaverse land lose their curb appeal or if interest wanes in the space in general.
Caution is the name of the game when it comes to virtual real estate.
“The value of online real estate is in many ways the same as real-world real estate in that it’s worth whatever someone else is willing to pay for it,” says Rosato. “However, the difference is that it’s not backed by any physical plot of land or dwelling, owners enjoy limited regulatory and legal protections, and the market for it can be prone to wild fluctuations. If you’re considering buying into virtual real estate, be sure to study the online landscape carefully and proceed with caution.”
The rule of thumb here is buyer beware: Interest in metaverse real estate tends to go through boom and bust periods (as does real-world real estate), making it important to do your research and homework, and buy low and sell high wherever possible. Virtual real estate has been flying high for many years, and experts anticipate it’ll continue to do so for some time to come.
Just remember: Especially when it comes to the Web 3.0 world, what goes virtually up may eventually come down as well.
- Tim Rosato, president of management consulting and trend forecasting firm The Silver Lion Group
- Cision PR Newswire: “Metaverse Real Estate Market Size to Grow by USD 5.37 Billion, Market Driven by Growing Popularity of Mixed Reality & Cryptocurrency”
- Acura: “Acura Enters the Metaverse with Integra NFT and First-Ever Virtual Auto Showroom”
- The Sandbox: “HSBC to Become the First Global Financial Services Provider to Enter the Sandbox”
- Roblox: “Forever 21 Shop City”
- NFT Stats: “Somnium Space VR Statistics”