The Metaverse: How Real Estate Became the New Frontier


Talk to people who work in the metaverse and one descriptor follows: “It’s like the Wild West.” Do whatever you want. Is it a new frontier for people seeking their fortune? Lawless land? A place characterized by the unknown, removed from the rest of society? Maybe all of the above. But one thing’s for sure: people in the Wild West weren’t dropping $650,000 in cryptocurrency on a digital yacht.
The metaverse — the increasingly immersive world of virtual networks in which users live and play — has become the hotbed of real estate speculation. Investors are betting on being part of a possible paradigm shift in the way the Internet is used: a decentralized version called Web3 that supporters say will wrest control of the web from big tech companies and return power, privacy and security. to the users
According to consulting firm McKinsey, corporations, venture capitalists and private equity invested $120 trillion in the metaverse between January and May 2022, more than double the $57 trillion invested in 2021.

But real estate values ​​have had a rocky ride. Land prices on four major metaverse platforms, The Sandbox, Decentraland, Cryptovoxels and Somnium Space, have fallen between 50 and 80% this year, according to Winston Robson, CEO and co-founder of metaverse analytics company WeMeta. He noted that problems with the real-world economy and the cryptocurrency market are contributing to the decline.

Look beyond the numbers, however, and you’ll find entire professions shaking up, from architects and designers to developers and real estate agents. And far from being isolated in the metaverse, the adventures there are already affecting the real world.

Building for the future

George Bileca, CEO of Voxel Architects, studied architecture and design, and was working on car design when he was given some Cryptovoxels land to play with. At the start of the pandemic, he used it to build a dealership to sell NFTs (non-fungible tokens) for digital cars designed by his friend. Two years later, Bileca has a team of 25 people working full-time in the metaverse.
Portugal-based Voxel Architects has designed and built more than 100 metaverse projects, the CEO said, including galleries for auction house Sotheby’s, fashion week venues and an NFT manufacturing plant for American artist Tom Sachs. Next up: The Official Elvis Presley Experience at The Sandbox and Decentraland.

At Sotheby’s Decentraland, designed and built by Voxel Architects. The building is modeled after a real auction house in London’s New Bond Street. Credit: courtesy Voxel Architects

Initially, the design process for buildings in the metaverse is similar to the real world, Bileca said. An architect or designer consults with a client and sketches ideas, either on paper or on the computer. Once a design is agreed upon, it is modeled in 3D, using traditional design software, but conforming to the design specification of the metaverse it will fill (different metaverses use different building blocks and have different textures and color ranges).

Then the coding begins. “The building is just an empty corpse,” Bileca explained. “We add functionality on top of that shell, being able to open doors, interact with artwork…to create custom (user interfaces), gameplay quests, and many other interactive elements.” Once completed, it expands into a metaverse.

Voxel Architects designed Auroboros, site of Metaverse Fashion Week in March 2022.  Recording artist Grimes performed a concert at the event.

Voxel Architects designed Auroboros, site of Metaverse Fashion Week in March 2022. Recording artist Grimes performed a concert at the event. Credit: courtesy Voxel Architects

The studio charges an hourly rate for its work, with some projects paying hundreds of thousands of dollars — the most expensive being about $500,000 to design, build and expand a development at The Sandbox, says Bileca, who declined to disclose. client.

Brand ambitions

Some are buying properties for recreational use; others are trying to generate income from their land. Some are building retail spaces or ticketed experiences; others lease their land to brands trying to reach consumers in the metaverse. According to McKinsey, e-commerce in the metaverse could impact a $2.6 trillion market by 2030.

LandVault claims to be the largest land developer in the metaverse, leasing its land to brands and developing campaigns for them. Don’t call it advertising, insists CEO Sam Huber. “In Web3 … the word has no place,” he said. “What we’re building is not advertising. It’s brand experiences, which are very different.”

He gave the example of playing a game in the metaverse, inside an arena with a Mastercard logo. “You can still play your game. That’s not advertising. That’s not annoying. That’s just like real life,” he argued.

“(Online) advertising as we know it, intrusive… compromises user data and so on — that has no place on Web3.”

Developer LandVault metaverse has created brand experiences for the likes of Mastercard.

Developer LandVault metaverse has created brand experiences for the likes of Mastercard. Credit: By LandVault

Just like in the real world, location has a big impact on the rental price. Being in an area with a lot of pain, near a much-loved game, or near a prized possession can be important. But some say good design has value too.

One advocate is Janine Yorio, CEO of Everyrealm. The metaverse development company formerly known as Republic Realm has raised $66 million to date and is backed by celebrities such as The Weeknd, Will Smith and Paris Hilton. His luxury projects have created headlines. In November 2021, Everyrealm bought 792 plots of land in The Sandbox (equivalent to about three square kilometers) for $4.3 million, still a record purchase. At the same time, he sold the $650,000 superyacht, Metaflower, complete with DJ booth, helipad and hot tub for discerning buyers.

The company’s latest venture is The Row, an invitation-only community of 30 homes. Everyrealm invited artists including Daniel Arsham, Misha Kahn and Alexis Christodoulou to create designs. Along with neoclassical buildings and giant cantilevers are alien forms, fulfilling the promise of digital architecture, unbound by the laws of physics.

“We really give the artists freedom,” Yorio said. The main driver, he added, was “architecture so important and exclusive that it becomes something that people think of as a kind of high watermark.”

Rendering of a property designed by Barcelona studio Six N. Five for The Row Everyrealm project.

Rendering of a property designed by Barcelona studio Six N. Five for The Row Everyrealm project. Credit: courtesy of Six N. Five/Everyrealm

Yorio cites Everyrealm’s Fantasy Island project — 100 private islands in The Sandbox were sold in a single evening in August 2021 — as an example of how these assets are valued. Sold for roughly $15,000 each, the CEO said they now sell for around $100,000, down from $250,000 at the peak of the cryptocurrency and NFT market boom in late 2021.

Buyers of property in The Row will purchase architectural plans in NFT form, allowing them to build and expand on different platforms.

Alexis Christodoulou Studio has made a name for itself in 3-D design and has clients including Kenzo and Microsoft.  He's now working on digital property, including this rendering of a house on The Row.

Alexis Christodoulou Studio has made a name for itself in 3-D design and has clients including Kenzo and Microsoft. He’s now working on digital property, including this rendering of a house on The Row. Credit: courtesy Alexis Christodoulou/Everyrealm

“We want to fit in with the ethos of decentralization,” Yorio said, but the sales model also speaks to the uncertainty that comes with investing in the metaverse. “It’s very difficult to know which metaverse will be the most popular in a year or five years,” he said.

With a development name inspired by Manhattan’s Billionaires’ Row, Everyrealm has enlisted the services of elite New York real estate brokers Oren and Tal Alexander to oversee sales.

The Alexander brothers are currently looking at potential buyers, Yorio said, with private sales expected to begin in September. “We want to make sure the art goes to the right types of collectors, and not to people who want to buy and flip and create this NFT hypercirculation dynamic,” he explained. Prices were not disclosed to CNN.

Yorio argued that The Row was an example of the metaverse moving towards social stratification. “This is about owning one of the first major works of three-dimensional live art in a new medium. And I think it’s a very different conversation than (this one), ‘We’re building a country club where only 30 people can fit in,'” he argued. .

The search for stability

The long-term value of the metaverse property may determine whether users decide to work and play in it.

Pallavi Dean, CEO of Dubai-based design studio Roar, is already doing so, having bought the company’s space in Decentraland. Dean wanted to show Roar’s work to customers and in January 2022 bought four lots for a total of about $60,000. “You have to have skin in the game before you can convince other people,” he said. “I’m writing this as a marketing buck.”

He has already moved some of his business operations into the metaverse, hosting client meetings in Roar’s virtual office. In the next few months, he plans to conduct a training course from his metaverse meeting room.

Dubai-based design studio Roar has established an enterprise space in Decentraland.

Dubai-based design studio Roar has established an enterprise space in Decentraland. Credit: Roar

Roar is also looking to generate revenue in the metaverse by building an NFT gallery, a retail space, and floating ships that can be turned into hotels. While Dean admits he’s still waiting for his first lease and first NFT sale, he remains optimistic about future growth.

Given the metaverse’s short life and rapid acceleration, the long-term outlook is risky, especially as the property market experiences growing pains. But can real estate in the metaverse ever be as reliable an investment as bricks and mortar? Or could this be the Web3’s equivalent of the dot-com bubble?

“It’s hard to know if the internal real estate (metaverse) will be stable… At least we are, and we’re very much into it,” said Yorio.

Many outsiders are watching the long-term outlook cautiously. Understandably, some people working in this booming industry remain bullish.

“It’s very possible that real estate in the metaverse will be a stable investment in the future,” Robson, of analytics company WetMeta, said in an email.

“This is not a bubble,” Huber insisted, as he distills the metaverse into a combination of two trends: gaming and blockchains, neither of which can be called fads. “There is an element of hypo if you start to scale up – the price of land has tripled in the last six months. It is obviously driven by speculation. But this is a short shock and has now been corrected.”

“There is a lot of anticipation (in the short term),” he added. “But that’s not what I’m interested in. I’m interested in macro, and macro is definitely here to stay.”