Tulip Bulbs Anyone?

Expedio is an industrial property investor. We specialize in industrial property – not residential, retail, office, or any other facet of the property market.

But that doesn’t mean that we don’t also study trends in other parts of the wider property market. We have delved deeply into the economics of build-to-rent, and storage sheds, hotels and motels, and even student housing. Whilst we know what we know, closing eyes to other investment opportunities has never seemed sensible. There is always something to learn from the way other industries go about their business.

And so recently when headlines touting that “metaverse real estate is booming” caught our eye, we thought it deserved more than a passing study. As our primary understanding of industrial real estate is centred around the physical utility of land and buildings, first we needed to attempt an understanding of why people would invest in metaverse real estate. And naturally the first question that came to mind was: Are they bonkers?

You don’t need weird looking headsets to enter the metaverse. You can (in some cases) just use a desktop computer and a mouse. But the metaverse is not something you can touch, stand on, or plant a garden in. Except in your imagination. We understand that people interact in the metaverse through the use of avatars. Sort of like an imaginary fancy dress party. Which has it’s advantages. It’s hard to do physical damage to other people if it’s all in someone’s imagination.

But back to real estate in the metaverse. One of the advantages of real real estate , i.e. the type you can touch, stand on and  build real buildings on, is that supply is always limited – or at very least constrained.

So when demand exceeds supply, prices will rise. And the reverse of course. But is the supply constrained in the metaverse? The answer is yes and no. In the metaverse of Decentraland, there are only 90,601 parcels of land. So the concept of supply and demand will, as long as real people want to purchase imaginary land in Decentraland, have an upward pressure on prices. The problem is, that although there may be a limited supply of land in Decentraland, there is not a limited number of metaverses. It seems there are hundreds of different metaverses.  Decentraland is just one of those metaverses. Which means that for your investment to have any long term value, the metaverse you choose has to have long term relevance. In other words you have to pick Facebook rather than MySpace. Or choose VHS rather than BetaMax. Because if you choose the wrong metaverse, and pick one that loses it’s relevance, then your investment is worthless. Kind of like buying a section on an island that sinks into the ocean.

After that sank into our understanding, much of the rest of our study of metaverse real estate was superfluous. We did learn that at the most recent Super Bowl Miller Lite opened a virtual bar in the metaverse and 20,000 to 30,000 avatars visited over the day. I can only guess they stopped by to drink virtual beer. We also learned (thanks to JLL) that Metaverse is driving a hyper-connected, digital interaction-led transformation with increased interest to invest in virtual real estate. Figuring out what that might mean will help get us to sleep tonight. And CBRE is piloting a program to test out metaverse collaboration tools for onboarding, training and hybrid work. So metaverse real estate is obviously a real thing to some people.

But ultimately the more we learned about metaverse real estate, the more we were reminded of the Greater Fool Theory. And of Dutch Tulip Mania. Count us out.