How the Evolution of the Metaverse Will Impact CRE
The world has progressed from a period where tech and real estate sporadically intersected to a point now at which they are almost fully integrated. Each tech innovation further erodes real estate’s independence from the digital realm. Today, the stage is set for the metaverse, another technology to transform our industry as we know it.
The metaverse has been a hot topic within the tech and real estate industries recently. News of real estate sales in the metaverse topping half a billion dollars in 2021 and major CRE firms migrating some of their operations into the virtual space demands an exploration of its impact on the sector’s future.
In this article, we investigate how the emergence and advancement of the metaverse are poised to revolutionize commercial real estate.
What is the metaverse?
The metaverse is a network of virtual realities where people connect through virtual 3D spaces. It is similar to the internet but represents the next stage of our digital evolution. Web 1.0 was the dot-com era, in which the modern-day website became functional and accessible to the public.
Web 2.0 ushered in the social media era, introducing radical ways for people to interact with colleagues, family members, and friends — mediums that transcended physical proximity. Conceptually, the metaverse is Web 3.0. However, unlike its predecessors, it encompasses an entire world that exists digitally.
Further, the metaverse has enabled many organizations to create cyberspace for themselves that exists exclusively online and is distinct from the real world. In the metaverse, visitors can exchange their real-world dollars for digital coins and currencies relevant to each space and use them to buy virtual land, clothes, and other intangibles.
But its application is still in a rudimentary stage, with experts predicting several years for us to harness its full, crystallized potential. In the interim, though, companies across the whole spectrum of markets are vying for a stake.
Commercial real estate brokers, private equity firms, investment firms, and more have joined the metaverse race, grabbing as much virtual real estate as possible and inking million-dollar deals. The metaverse is currently hosted across different platforms, with the top three being Decentraland, the Sandbox, and Somnium Space. Interestingly, Facebook renamed itself Meta so that its main operations are aligned and synonymous with the advancements in the metaverse.
Jumping into the metaverse isn’t a huge leap
Life in the metaverse is not a huge leap for the average person. For starters, metaverse-like platforms, such as Fortnite, Minecraft, SecondLife, and World of Warcraft, have long existed. But visualizing these platforms in a non-gaming dimension, we begin to have a clearer picture of the trajectory and scope of the metaverse and its potential to remold our traditional notion of living and working.
Additionally, the emergence of the metaverse today is somewhat fortuitous considering recent trends. Since the onset of COVID-19, consumers have grown accustomed to operating within a digital world. According to the United Nations Conference on Trade and Development, more than half of people across the six continents use the internet for shopping, healthcare, and entertainment.
Even the prime target audience for the metaverse, those aged 30 and under, have already adopted all the foundational habits of life in a metaverse. Live streaming concerts, presenting quarterly updates on Zoom, and catching up with friends via social media are a few examples of humanity’s fondness for digital interaction.
Investors buying into the virtual realm
Real estate companies are committing millions of dollars to transform the metaverse from concept into reality. But why bother with cyberspace when we have real-world properties as tradable commodities? Because humans unceasingly demand space in real life and in the virtual domain.
In anticipation of future demands, formerly traditional businesses are diversifying. This level of activity informs analysts’ projections that commercial real estate’s next notable growth in the coming years will be recorded in the virtual universe. Owners and operators are developing faith in the convenience and fascination that the metaverse offers.
Fundamentally, the metaverse is expected to facilitate certain experiences previously exclusive to the real world. We anticipate replicas of restaurants, entertainment venues, apartments, offices, meeting rooms, convention centers, schools, etc., on virtual reality platforms.
One implication of creating these “digital twins” is that real estate owners in the virtual world will be able to rent to, lease to, and develop spaces for a global audience. Indeed the potential for CRE growth in the context of the metaverse is limitless. Major commercial real estate firms are already seizing the opportunity. Last year, the first ever metaverse real estate investment trust earmarked $15 million to buy, lease, and sell virtual real estate.
A frontier worth exploring
The revolution of virtual apartment tours and showings by Zoom will pale in comparison to the impact the metaverse will have on commercial real estate. For CRE firms looking to stay in touch and step with their clients, adopting the metaverse will be a must.
The metaverse presents implications that will completely change the way consumers shop, seek entertainment, and even live and work. Needless to say, no matter what niche your firm specializes in, the metaverse is a frontier worth exploring.