Real estate in the metaverse: A new dimension for the real estate industry
For the real estate industry, the year 2023 has not been easy so far. Rising financing costs and a negative price trend are burdening the market and presenting new challenges for even established real estate agents.
The good years are over
The past decade has been prosperous for the construction and real estate industry, which led to more of a “business as usual” approach instead of a push towards the future, not to mention the adoption of digital trends. The impending shift towards a buyer’s market is now posing new challenges for real estate agents and project developers, raising questions such as: What does the future of real estate sales look like? How can business processes be optimized? How can the sales experience be enhanced? How can one differentiate oneself from the competition?
Those who fail to keep up with the times will be left behind
The key to overcoming the new market conditions could lie in digital transformation. The „Emerging Trends in Real Estate“ report for 2023 by PwC paints a picture of cautious optimism among the surveyed companies. The current crisis is being used as an opportunity to reposition themselves in the market, identify new target markets, reduce costs, and reassess their own efficiency. This includes implementing a suitable digitization strategy and utilizing new technologies such as Generative AI and Immersive Technologies in the real estate industry.
Companies are leveraging the metaverse as a growth strategy
According to Statista, the entire metaverse market is still in its early stages, and the market volume in Germany is expected to multiply from the current 2 billion euros (2023) to nearly 19 billion euros in the next seven years. Given this, it’s no wonder that technology-savvy companies are discovering the metaverse as the next big platform for themselves and starting to realize their own solutions and concepts.
Figure 1: Metaverse market development forecast until 2030 (Source: Statista)
Particularly, the high interactivity and interoperability provide added value compared to existing two-dimensional platforms. From users communicating and interacting with each other to shopping and trying on clothing, the possibilities in a three-dimensional environment are endless and offer a natural extension of reality. Some examples from the past show that a well-executed metaverse strategy can achieve great success despite the young market. For instance, Adidas sold 30.000 NFTs for over 23 million dollars within seconds with its digital NFT collection „Into the Metaverse“. The unique aspect of the campaign is the coupling of the digital token with a physical product. The owners either receive the products directly at home or can pick them up at the store by presenting their NFT as proof of ownership. Adidas’ biggest competitor, Nike, has generated over 185 million US dollars with its NFT collections through the strategic acquisition of the company RTFKT, making it a leader in the commercialization of its metaverse strategy.
The growth of the metaverse is driven by technological innovations such as mixed reality, artificial intelligence, blockchain, 5G, and edge computing. Factors such as the proliferation of metaverse platforms, the popularity of virtual activities on social media and gaming, personalized user experiences, the use of virtual currencies, and new business models also contribute to this growth. Live streaming and online transactions further foster this growth. Experiments and advanced hardware such as VR/AR headsets and haptic devices will significantly shape the future of the metaverse. This notably includes the progress made by Meta (formerly Facebook) in developing the necessary hardware, as well as the upcoming release of Apple XR-Brille Vision Pro.
The real estate industry can only benefit from these developments by integrating these technologies and developing new business models. For example, the use of virtual and augmented reality can enable virtual property viewings, while blockchain and virtual currencies could promote secure and transparent real estate transactions. Personalized user experiences can help present potential buyers with tailored real estate offerings, particularly opening up new opportunities in the new construction market.
Gold rush in virtual real estate trading
In recent years, a thriving market for virtual real estate has emerged on platforms such as Decentraland and Sandbox. Users can buy, sell, rent, or lease virtual properties, similar to the real world. This market is largely driven by non-fungible tokens (NFTs) and cryptocurrencies, which offer a high level of security and transparency.
Currently, Decentraland is perhaps the most well-known modern metaverse utilizing blockchain technology and providing users with a platform to buy and sell digital properties, explore them, interact with them, and build virtual buildings and experiences. The Decentraland Foundation was established in 2015, and the project’s Initial Coin Offering (ICO) in 2017 raised around $26 million at the time. Today, the market capitalization exceeds $717 million. Due to its relatively high level of maturity, Decentraland has attracted many speculators in the past and brought the real estate brokerage business into the metaverse.
On November 25, the company Metaverse Group purchased a piece of virtual land in Decentraland for $2,43 million dollar to hold fashion shows and provide a platform for the growing digital fashion industry. Since then, Decentraland has hosted an annual Fashion Week where renowned brands such as D&G, Prada, Gucci, Chanel, Nike, Hugo Boss, and Tommy Hilfiger showcase their virtual collections.
A new reality for real estate agents
However, the metaverse can not only be used for marketing virtual real estate but also offers the opportunity to market physically existing properties in combination with a new buyer experience. For example, a fully personalized virtual tour can be provided through the digital twin of a property. This tour is not only highly detailed and interactive but can also be conducted from any location in the world at any time. The traditional real estate agent conversation takes place in real-time within the metaverse. In the meantime, potential buyers can modify furnishings or room layouts according to their preferences, allowing for a deeper sense of connection with the property. Contract signing could also take place in the metaverse using smart contracts and cryptocurrencies.
The benefits for real estate agents and customers are evident: communication is simplified, the customer experience is enhanced, and new customer segments can be tapped into. In the metaverse, property viewings are no longer limited by geographic boundaries or schedules, and it offers nearly limitless possibilities for personalization and interaction.
However, to leverage these potentials, the real estate industry must evolve and be willing to adopt new technologies and business models. The introduction of virtual and augmented reality, cryptocurrencies and blockchain, artificial intelligence, and the development of a metaverse strategy require significant investments in terms of finances, time, and education.
Despite the challenges, it is clear that the metaverse will revolutionize the real estate industry. Those who embrace the digital age and recognize and capitalize on the opportunities presented by the metaverse can look forward to an exciting and lucrative future. After all, history shows that those who recognize the signs of the times and embrace new trends in a timely manner come out as winners in the end.
Therefore, the metaverse holds enormous potential not only for large companies but also for real estate agents and project developers. It opens up new paths and possibilities in the marketing and sales of properties and allows for the establishment of a new type of customer relationship based on interaction and individual customization. At the same time, it can contribute to a more efficient and transparent real estate industry where digital innovations and business models become the standard.