- [Host] The latest big real estate market
isn't on scenic coastlines or in major cities.
It's in the metaverse, (quirky music)
where a growing number of investment firms
are spending millions to acquire digital property.
- Owning land now in the metaverse
is a little bit like buying land in New York 250 years ago.
- [Host] Metaverse real estate isn't all that different
from property in the real world.
It just exists digitally in 3D cities
where users can simulate real life pursuits,
like shopping, playing games or attending virtual concerts.
- There are houses that you can walk into,
there are shops that you can go into and buy things.
And this real estate in the metaverse
is increasingly for sale.
- [Host] The idea behind investing in digital land
is that once you own it,
you can make money by developing virtual property
and leasing it out.
- We bought it because we want to do
something very big there.
We want to do something that's immersive and exciting
and in order to do that,
you have to have lots and lots of space.
- [Host] Of course, digital real estate
is still considered a very risky investment.
So what exactly led to this virtual land boom
and what factors make it so valuable?
Right now the metaverse is an evolving space
that comprises multiple digital worlds
where users can interact with avatars.
Many of these digital spaces appear cartoon-like,
while others feel like virtual recreations
of the real world.
Andrew Kiguel is the CEO and co-founder of Tokens.com,
an investment firm specializing in cryptocurrency
and metaverse real estate acquisitions.
- Land in the metaverse looks a little bit
like a monopoly board in that you have these parcels of land
and you want to try and acquire
as many parcels of land on the monopoly board.
- [Host] There are only a few platforms
where investors can buy and sell real estate,
each with their own unique cryptocurrencies.
Each platform has a limited number of parcels
available for purchase,
which is tracked using blockchain technology.
In November Republic Realm,
a firm that buys and develops real estate in the metaverse,
said it paid $4.3 million for land in the world of sandbox.
It's the largest digital property sale publicized to date.
- The whole reason why it is a store of value
is because at the outset, each metaverse platform declares
exactly how many parcels there will be,
so they would be cannibalizing
the value of their own holdings
if they continued to mint more and more of it.
So that tenant of scarcity is what gives the category value.
- [Host] As in the physical world,
location is a major factor to consider
when buying digital land.
- Areas that are busier or have more visitor traffic,
like the downtown areas,
the parcels of land that are for sale there
would it be worth more
than those that might be in the suburbs.
Once you have this parcel of land
you can use various programming tools
to create things like an amusement park,
a casino, a museum, you can build whatever you want.
- [Host] Investors are betting that individuals
and companies will spend money on virtual developments
like homes and retail space
and as more people join these online worlds,
the properties will increase in value.
- You know, if you build a mansion,
you might sell it to someone who's very wealthy
and wants to spend thousands of dollars,
or hundreds of thousand dollars on a mansion
in the metaverse, or if you build a mall or an office tower,
you're going to lease out the space to companies
and you're gonna collect rents.
- [Host] Tokens.com said that it paid $2.5 million
for attractive land in Decentraland's Fashion District.
Decentraland is a 3D decentralized virtual world
that was launched in 2017.
- The long-term vision is that we want to turn
that property that we've purchased there
into the Rodeo Drive or the Fifth Avenue of the metaverse.
Our goal is to be the dominant
and leading metaverse landlord.
- [Host] Companies pay an architect
to design virtual homes or malls
and a game developer to build them.
Zoning rules limit what and where a company
can build in the metaverse.
But unlike the real world,
metaverse buildings can defy the laws of physics.
- So there's a point in the development cycle
where it looks nearly identical
to real world real estate development.
So you hire an architect, you come up with a mood board,
you pull images of other spaces and buildings
and designs you like and you figure out
what it is you're going to build
and then from that point forward,
it actually turns into video game development.
So then you hand it off to 3D renderers
and then to 3D developers who make it interactive.
- [Host] Some of Republic Realm's developments
include a virtual mall which it leases to retailers
selling fashion for avatars,
as well as a master-planned community of around 100 villas
on private islands that it sold to individuals.
- So in some ways, these immersive e-commerce environments
that we're building are really 3D equivalents
of marketplaces like Amazon, like Etsy,
where multiple different sellers and retail products
or experiences can be in one place
but not have to build all the tech themselves.
- [Host] Advertising and brand partnerships
are another enticing aspect of metaverse real estate.
Investors anticipate a future
in which digital property owners
can work with brands that want a presence
in these growing digital worlds.
- This is not just an opportunity
to continue to build their brand,
but it's a way to introduce their brand
to a whole new demographic of people
that are young gamers, into crypto,
and all of these types of things.
- [Host] Of course investing in digital properties
is still very risky and highly speculative.
Unlike in the real world,
the value of virtual properties could plunge
if the world they are in loses popularity
and people stop visiting it.
Prices can also be slammed
by the volatility of cryptocurrencies.
- It's really a third derivative investment of crypto,
highly volatile, highly speculative,
but the reason people are drawn to it
is precisely for that reason,
because there is the potential for outsized returns
and that volatility is what they came for.
- [Host] In order to reduce that risk
investors are buying land
in a number of different virtual worlds.
Republic Realm, for example, it says it owns
more than 3000 plots of digital land
across 24 different worlds.
- If you bought crypto five or 10 years ago
you're a very rich person now and people see that
and they're looking for other things like that
to replicate that growth
and so all these other blockchain based investments,
including metaverse real estate,
are appealing to people for that reason.
- [Host] Interest in the metaverse
and the properties within it accelerated
as people spend more time online during the pandemic.
It got an even bigger boost after Mark Zuckerberg
announced Facebook's name change to Meta Platforms Inc,
reflecting the company's focus
on creating online worlds in the metaverse.
- I think the light bulb just went off
in a lot of people's minds and said,
"Hey, this is something that's going to continue
"to appreciate and appreciate quickly
"if the trend of people congregating
"in these environments continues to grow."
- [Host] According to the digital currency investor,
Grayscale, the global market for goods and services
in the metaverse will soon be worth $1 trillion.
- So the next generation of tech users,
which is why Mark Zuckerberg anticipated this
and renamed his company, they're going to require
from technology an experience that's 3D and immersive
and they are not going to be content
with their parents social media or e-commerce experiences,
which are 2D and about scrolling.
They're going to want to go meet their friends
in what we now call a metaverse,
where they can interact in a way that feels much more human
and much more normal. (upbeat music)