Author Image Robbie King

Robbie King

Mar 3 2024

How Real Estate in the Metaverse Differs From Physical Real Estate

two different colored houses
If you’re new to the Metaverse, you may be surprised by the extent that digital space inside a computer can behave like the world’s oldest asset class. Whether physical or digital, real estate can be traded, rented, developed on, and used as the platform for many of life’s core activities. But as we’ll see below, real estate in the Metaverse can also behave very differently from the asset we’re used to.
In the following blog we’ll cover the key differences you should be aware of. It should go without saying that we’ll be talking about the core metaverses like Decentraland and The Sandbox; there could easily be points made below that don’t apply to some more fringe platforms. Also, these differences could easily change as the platforms do. So as we go, we’ll point out any potential for metaverse real estate to shift course.

Physical real estate can be used for any industry or activity

If you take away anything from this blog it’s this. Metaverse real estate has limitations on its use cases. Meanwhile, without stating the obvious, physical real estate can be used for anything from habitating to working, socialising and more. Anything that is physically conceivable (and legal).
Currently, real estate in the Metaverse is mostly a space for experiences. Activities like growing corn or surfing won’t be quite as rewarding in the Metaverse, yet!

In the Metaverse, regular physical constraints do not apply

Probably the second biggest takeaway. With no health hazards and unlimited raw materials, if you can conceive of it existing in 3D virtual space, you can do it. All you need are a few designers and developers.
Again, this is platform-dependent. We could see more metaverses mimicking real life and implementing limitations. But for now, the main metaverse platforms let you build the craziest of shops, nightclubs, etc. Plus you don’t need to think about plumbing or whether you’ve got enough money for concrete. You only need the design and dev resources. This could present highly creative brands like
high fashion houses
with new opportunities to flex.
Gucci vault
Source: Gucci

You can’t teleport to physical real estate

In Decentraland and The Sandbox, along with several other popular metaverses, travel is much less of a hurdle thanks to their teleportation function. This means metaverse real estate values hinge less on location than physical real estate does. Buying a plot of land in the middle of nowhere isn’t nearly as isolating since you can jump to where the action is with a few clicks.
Let’s of course note that this depends on metaverse teleportation policy. In a few years, both new and old metaverses could seek to boost the significance of land location and only allow rapid navigation/teleportation via key areas – similar to flying or taking the train. We’ll have to wait and see how teleportation develops.

Physical real estate has centralized governance behind it

All physical property, in developed nations at least, will be formally recognized and recorded by the government. Right now, real estate in the Metaverse doesn’t have the same legitimacy.
This will mean different things to different people. Many might want the legitimacy of a government recognizing formal ownership. Others might be glad that their government has little interest in this asset and be more comfortable with a DAO like organization recognising ownership.
This ties into a point we’ll outline below regarding regulation. To repeat a common theme, this could change; certain governments could start recognizing and regulating metaverse real estate in much the same way they do with physical real estate. Dubai is currently a market leader and ahead of the curve thanks to its
adoption of a blockchain system for recording its real estate
transactions. Seeing this foresight extending to metaverse real estate in the coming years isn’t beyond plausibility.

Typically, physical real estate has far lower liquidity

Physical land and physical buildings take ages to trade. This is mostly down to the fact that physical property often relies on inefficient and lengthy paperwork, typically navigating laws that can be hundreds of years old. There is also the matter of price point, with many pieces of physical real estate being so expensive that they require well capitalised investors that are capable of trading them.
Metaverse real estate is much more fluid since it’s recorded digitally, often on a blockchain. Usually, the right funds and a few clicks are all that’s needed. That said, the physical real estate world is also starting to use blockchain to drive efficiency. We outline what that looks like in our blog on
blockchain real estate
. In short, things like tokenization and recording physical property as an NFT could give physical real estate new levels of liquidity.

Physical real estate is more heavily regulated

And, currently, metaverse real estate is in its infancy stages. Trading and renting metaverse real estate doesn’t exactly require lawyers and contracts. There’s no health and safety regulation since nobody’s physical well-being is in jeopardy (yet). And in the Metaverse, although there are size limits, there’s very little in the way of planning regulation, although it
does feature in places

Final thoughts

For now, it's probably better to view real estate in the Metaverse more like a versatile media space than real estate. The experience that’s created is more important than the land itself. It’s essentially the Web but immersive.
In the same way that all businesses eventually realized they needed websites, we should see more businesses getting involved. Especially as technology matures and regulation takes hold. Regulation will also help the market mature, reducing volatility and risk.
At VerseProp we’re aiming to create an environment for metaverse real estate buying and selling that minimizes and professionalizes in a sea of uncertainty. Our investment platform, launching in beta at the end of December/early January - and our advisory service - launching in Q1 2023 – offer new levels of insight and analysis. This knowledge can help you navigate the metaverse real estate landscape.
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