The creation of a metaverse capable of piercing the veil of real life is an interesting concept for real estate, a sector that has not only witnessed the direct effects of the evolution of technology but has also effectively incorporated this technology into its activities. Until fairly recently, potential buyers of real estate properties generally got their information from specialized publications. A description and price range were enough information to generate interest, and final decisions were made on the basis of plans and designs, without a detailed analysis of the land to be developed, the urbanization plans surrounding the property, or even renders that would offer a precise picture of what they could expect from their investment. Only models, or site or model home visits, could offer a clearer idea about the distribution of the spaces or the quality of the materials and finishes that could be expected. But as technology has evolved, the real estate sector has incorporated innovations that have completely changed the way it does business.
The company Meta (formerly Facebook) recently announced its intention to dedicate greater effort to the creation of a metaverse of its own, publicly revealing an ambition of the large technology companies that will surely spur new real estate trends and change the sector.
A vital part of digital marketing strategies, the Internet has been a source of radical change already. Today, clients have applications and real estate software that allow them to see floorplans in 3D, contact sales teams before and during construction, virtually visit a construction site from anywhere in the world, and be informed in real time about the project’s evolution. In some cases, the future owner of a real estate asset can remotely request changes in decoration or materials that are to his liking, without having to travel to check what these changes will look like.
Future metaverses promise to go further, moving from Internet browsing to a total immersion concept, allowing people to build and maintain relationships with other people or companies entirely within the digital environment. In this virtual world, it will not only be possible to socialize, enjoy leisure time or carry out work tasks, but also include activities such as tourism and business. In this collective digital universe, people from all over the world will continuously move in different settings and private or public rooms to interact with their family and social circles, co-workers, friends and strangers, as well as attend events and visit remote sites in search of new experiences. In this complex infrastructure, companies like Meta that are strongly committed to these types of projects want to involve as many social, political and economic actors as there are in the real world.
Investment in virtual properties
The dimensions and the scope of Meta’s plans have drawn worldwide attention, but the metaverse concept is not new (not even in real estate). In fact, its features are already gradually being incorporated into business generation tactics. Metaverse Assets are virtual assets that are traded within virtual cities. Companies like Decentraland, Sandbox, Upland or Somnium Space have reported sales of virtual properties for millions of Dollars, with these properties currently being dedicated to recreational activities within their metaverses. In these virtual environments, often developed with the use of Blockchain databases, economic transactions are usually carried out with cryptocurrencies. The pandemic saw sales of virtual land multiply. Sandbox, one of the most popular Blockchain-based games, has generated more than 1.5 million Dollars thanks to sales of these properties, marketed in the virtual environment as NFT (non-fungible tokens). According to different specialized media, the principal buyers are not metaverse users but investors or companies that are accumulating these properties to later make a profit through rentals, resales or other uses. The prices of these properties are significant: plots in Decentraland have sold for more than $250,000 dollars and over $500,000 in Somnium Space.
As in the real world, the properties in a metaverse are put up for sale in limited quantities, and their profitability depends on the classic factors: their location within the virtual city, and their dimensions and particular attractions. Sales are usually made through auctions, and as sales of the assets are finalized, the metaverse developers generate new cities or buildable environments to expand the sales or rental possibilities.
Virtual negotiations for real properties
Although currently the use of these metaverses is very limited, and they are primarily game or recreation spaces where users spend free time, the number of users is constantly growing.
Mark Zuckerberg’s idea to expand and popularize the metaverse concept by leveraging the large user base of his Facebook, Instagram, and Whatsapp social networks, is of great interest to the real estate sector. Whether or not sales of digital assets become massive, there is great potential in the use of this metaverse as an innovative sales tool for real-life real estate assets and in the continuing acceleration of the industry’s digital transformation.
The metaverse will not only open new channels of direct communication with potential clients around the world, but will also generate new virtual marketplaces and allow real and virtual real estate transactions to be carried out through the use of cryptocurrencies and digital contracts. Sales teams can schedule virtual visits to real land and properties, offering Smart Contracts to investors looking for homes, not for personal use but for turning a profit, offer consulting services related to these investments, etc. The management of purchases of real-world plots can be integrated into the metaverse, and the process of designing buildings and facilities, the monitoring of construction, the maintenance of real estate assets – the entire real estate value chain – will potentially be affected by large-scale use of the metaverse. Large multinational technology companies will be one driver, but another is that our society has become increasingly accustomed to digital relationships, digital products, remote work, and online shopping. Really, the “new” metaverse is nothing more than another version of what we currently call the Internet. And if the existing Internet has changed our lives, the next version will do it again, with companies capable of digital transformation becoming the greatest success stories.
In parallel to changes in real estate, the digitization of the banking industry has proved unstoppable, and this will have direct effects on property purchases. In this future, the product we currently call a mortgage will probably become a vintage concept. Credit risk analysis, endorsements, bonds, registries… the Blockchain technology on which the new metaverses are being built have the potential to change everything. At Arum Group we’re closely following these developments so we can adequately adapt our services and products to the new needs of builders, developers and buyers. There’s still a long way to go to bridge the gap between the real and the virtual, and there are still many phases of real estate business deals that require physical presence to close (like the signing of deeds). But virtuality is not an illusion without future. Since March of 2020, 34 states in the United States have legally approved notaries’ use of video calls for official purposes, and they can also validate documents with a digital signature in a procedure known as Remote Online Notarization. The shift towards further digitalization has already begun, and we’ll be watching to see what happens with this real estate innovation.
