A bamboozling concept to some and mere stupidity to others, nothing quite garners such a dismissive response as the mentioning of Metaverse real estate in the CRE space. Mark Cuban stated that buying real estate in the metaverse is “the dumbest s*** ever” due to the traditional notion of land scarcity underpinning value being absent in the metaverse. Whilst in 2023 many news outlets, including the Business Insider and The Guardian, have firmly announced the metaverse as “dead.”
The crux of the divisive responses is largely due to the word “Metaverse.” The word alone seems to stir up the most impassioned of responses, whether it be vexation towards Mark Zuckerberg or a more macro angst at Silicon Valley’s increasing grip on our lives (and let’s not forget China in this equation). The Metaverse has become a battleground for the autonomy we have over a dystopian technology-led future that we cannot articulate but firmly view with a certain unease. It comes to the comfort of many to ridicule the clips of such a future that we do see, such as Meta’s Connect 2021 video release, which quite frankly, was deserving of such ridicule. Conversely, our views on the Metaverse should not cloud the fact that a thriving market for digital real estate exists. Within decentralised metaverses where free markets can form, market value has grown 80% year-on-year for the previous two years. Samsung, McDonald’s, JP Morgan and LVMH are just a handful of well-known companies to operate within decentralised Metaverses.
Growth relies on market participants who place value on their digital identity and consequently, it is Gen Z and Gen Alpha who will force the normalisation of the metaverse similarly to how Millennials normalised the use of social media. In total contrast to previous generations, Gen Z/Alpha are the first generations to have unlimited access to the internet, connected devices and social media since birth. As a result, they see the physical and digital worlds as a seamless continuum of experiences that blend offline and online information for entertainment, commerce and communication. Roblox and Fortnite, which are centralised Metaverses, have been critical in facilitating Gen Z/Alpha’s value in digital identity. Within Roblox you can earn, buy and create various items whilst a house acts as a core part of your identity and as such, social status. Similarly, status in Fortnite is displayed by your avatar’s skins which can be earned and bought. Do not underestimate the impact of these games; Roblox had 214 million active users in the month of November 2023 with approximately 75% of these under 18, whilst Fortnite recently broke its own record having seen 44.7 million play the game in a single day.
Digital real estate provides users the space to express their online identity, innovate for economic gain and enjoy social games with friends. It is drastically different from its physical counterpart in numerous ways and will always be more volatile, but at its core, if you can make a unique experience that is extremely popular with users, the potential is enormous. Created in November 2021, Nike’s purpose-built digital real estate space named “Nikeland” saw year-to-date visitor numbers of 21 million. Averaging 60,000 visitors a day, at what rent could Nike partially lease out Nikeland for?
Nike are one of three million content creators in Roblox. This enterprising bunch have managed to make $701 million within Q1-Q3 2023. That figure will comprise Muneeb’s income, a 19-year-old student who developed a digital department store for virtual fashion and has seen at least 1.6 billion users enter his store. These figures are only growing and it is important to note that transactions within these spaces, which includes a Gucci bag whose digital transaction value was greater than its physical counterpart, are fuelled by physical currency and are housed under a digital roof.
Forego the Metaverse and see beneath a nascent, but vibrant digital real estate market. It is too hard to say what the future digital world looks like, being so dependent on technology advancement, user preference and legislation. Regardless, a generation is coming that places a typically under-appreciated importance on digital identity, a generation that is growing up with digital houses, experiences and stores. You may be crazy to preach it, but you are certainly foolish to dismiss it.
