Few phrases evoke wonder, confusement, an occasional eye-roll, of course, and intrigue quite like “the metaverse.” This SciFi-sounding term may seem like fiction to most commercial real estate professionals, but it’s quickly becoming a legitimate investment option.
In fact, real estate in the metaverse holds great value for commercial real estate professionals due to the revenue potential alone. But is “digital land” really worth considering? Let’s take a closer look at the Metaverse technology and commercial real estate.
The Metaverse, Explained
If you’re familiar with city-building games like SimCiy and Minecraft, you have a general idea of what the Metaverse is all about. According to KBS Realty Advisors, “the metaverse is a virtual reality where users can create computer-generated environments to socialize or collaborate with other users (oftentimes as animated characters called avatars).”
Real estate in these environments is referred to as “digital assets,” and they actually have value—up to six figures in some cases. And this is how the Metaverse relates to real estate, with digital lots and buildings available to be purchased and sold. Many factors dictate their value (e.g., location in the game, availability, the popularity of the platform itself), but these assets obviously have low overhead and hold some intriguing appeal for CRE pros.
The Impact of the Metaverse on CRE
There is more revenue potential here for commercial real estate than you might think. In addition to profiting off of selling digital assets that you purchased for a lower amount, you can generate revenue in several other ways. These include:
- Setting up digital advertising in the Metaverse properties you own, based on (and paid for by) real businesses in the real world.
- Selling “admission” to a digital property or venue you own.
- Leasing out digital spaces to offices for meetings and remote collaboration.
- E-commerce sales for both digital and real assets.
- Other revenue experimentations.
Some of these investments intersect with cryptocurrencies and non-fungible tokens (NFTs), and this entire strategy is fairly unknown, but many early adopters have already experienced big windfalls from digital investments.
Pros and Cons of Metaverse Investments
One big factor in Multiverse investments is the platform you use. Its popularity, viability and scalability all will contribute to the soundness of the investment. Some of the most popular options today include Somnium Space, Cryptovoxels, Decentraland and The Sandbox—collectively known as “The Big Four,” according to Robb Report. Each of these platforms has an unpredictable future, but also offers unique benefits and drawbacks.
In general, though, here are some of the rewards and risks you can expect with Metaverse investments and digital asset investments:
- High profitability due to huge valuation swings.
- Short-term gains, thanks to the viral nature of the digital landscape.
- Low overhead, with minimal upkeep or other fees to worry about.
- Documented ownership with verified transactions.
- Minimal restrictions and tax burdens (for now, at least).
- Your property rights might be limited by the platform.
- Value is extremely volatile and often based on perceptions.
- Unregulated nature can lead to more scams and fraud.
- No collateral or other physical securities.
- Lack of laws, regulations and a centralized authority.
Payments for these assets are another gray area. Some involve cash, others involve cryptocurrency and still others only deal in NFTs, with no certainty about the ability to turn that into real assets. This is all very much in an experimental phase, which will always come with risks, but the revenue and profit potential is seemingly limitless.
How CRE Technology Can Help
There is still quite a bit of work to be done with the Metaverse—and when or if it becomes viable, the government is sure to get involved—but you can still be smart about your investments in this technology, especially if you utilize commercial real estate software like Quarem to organize, track and share data related to it.
Whether you just want to monitor where this goes, you’re an early adopter or you carry some skepticism, having the right tool can help you compare it to real-world commercial real estate investments and determine how deep you want to dive in. From tracking key dates related to digital asset transactions to management of related tasks and digital property evaluations, there’s potential for Quarem to help here. If not, the tool has already proven itself as a valuable addition to a commercial real estate professional’s arsenal for physical assets.
The Metaverse, like many aspects of commercial real estate, is complex and difficult to navigate and understand. That’s why CRE tools like Quarem are so valuable, as they can perform complex calculations and gather market data for you to eliminate one piece of the confusion puzzle. You’re then free to focus on simpler decisions, like which investments are right for your portfolio. To see Quarem in action for yourself, request a demo today.