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Expert Talks | Real Estate In The Metaverse

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Augmenting reality: The metaverse opens a world of real estate without limits


Ready or not, the metaverse is already a force to be reckoned with. This fast-evolving network of virtual spaces is not just defying physics – it’s set to redefine real estate as we know it. 

The metaverse is a network of virtual spaces where people can socialise, play, work, and even own property. On this platform, billed as the next iteration of the internet, just about anything is possible – owning a Grand Slam tennis court in pixel form, becoming the virtual neighbour of millionaire celebrities, or acquiring a stake in a digital shopping mall selling high fashion.

But can virtual worlds generate tangible value for occupiers and investors? According to our experts, the answer is an emphatic yes.



“The metaverse is going to take off. There’s no doubt about that. The exact direction it will take is still undetermined, but the possibilities are massive.”

Abhishek Bajpai, Managing Director, Occupier Services | Asia



 

With names like The Sandbox and SuperWorld, virtual communities are beckoning investors, developers, occupiers and an entire generation of digital natives that have grown up inhabiting avatar-filled online games such as Minecraft and Roblox. Despite the nascency of the concept, the metaverse is on the cusp of fomenting a real estate revolution, with sales of virtual land exceeding USD500 million in 2021 alone and expected to double in 2022.

Just as technological advances took us from dial-up modems to blazing-fast broadband, we see the immersive nature of the metaverse as the logical next step in the ongoing evolution of the internet. With Covid-19 encouraging people to shift more of their lives online, recognition of the metaverse’s potential to transform everything from the retail experience to office interactions is growing.

“People are very curious at the moment and are asking: ‘What’s so special about the metaverse?’,” says Hannah Jeong, Head of Valuation & Advisory Services | Hong Kong. “The answer is that it’s a place where no matter who or what you are, you can do just about anything. It is accessible to everyone.” 


 

Businesses everywhere are also eager to understand what the metaverse means for their operations and how it can be best harnessed. Because virtual properties are relatively easy to create, experiment with and upgrade, developers, as well as landlords and occupiers, can explore the metaverse to complement their offerings in the physical world, according to Jeong.



“While it won’t replace physical real estate, just as e-commerce hasn’t entirely displaced brick-and-mortar retail, the metaverse adds a new layer of potential opportunities for businesses and investors.”

Abhishek Bajpai, Managing Director, Occupier Services | Asia.



Given that the supply of virtual land is unlimited, metaverse assets are going for a fraction of the cost of physical land, prompting companies and investors around the world to rush into the space. Developers, meanwhile, are keen to deploy it as a marketing tool, building communities to attract a new generation of clients that may struggle to afford physical property. Furthermore, real estate investment trusts (REITS) are looking to capitalise on opportunities to acquire, create and lease digital assets in the metaverse.

Jeong notes the metaverse also promises to take the virtual tours that developers and investors have relied on to continue dealmaking during Covid-19 to an entirely new level. With cutting-edge virtual reality (VR) and augmented reality (AR) tools, it’s become possible to inspect the features and finer touches of properties, even entire neighborhoods, in any corner of the world without traveling a step.



“This confers huge benefits especially for the residential real estate market, as it opens up a whole new world of choices to potential buyers, and helps them make informed decisions.“

Hannah Jeong, Head of Valuation & Advisory Services | Hong Kong



“While nothing can replace face-to-face interaction, the metaverse can make the virtual interaction much closer to physical interaction than any technology we’ve had previously,” agrees Bajpai. The metaverse is set to have significant impact in the retail sector, in particular by providing companies an interactive platform to advertise and market their products, which will help enhance sales in the physical world. Additionally, it will create fresh revenue streams by enabling firms to monetise digital versions of their physical products in the form of NFTs, Bajpai says.

 

 

As businesses look to exploit the metaverse’s vast potential, it’s important to bear in mind some key caveats.

For starters, the metaverse has no significant barriers to entry, which is a plus when it comes to inclusion, but also allows for the kind of crowding and speculation that leads to volatility, notes Bajpai. And while it’s currently dominated by platforms like Decentraland, the landscape could change over time with the entry of other players – just as internet pioneers Netscape and MySpace were completely displaced by Google and Facebook.

Bajpai notes it’s also crucial to understand that while location and footfall may not play as big a role in the metaverse as they do in the physical world, they will remain key considerations in asset appreciation.



“You don’t want to be in the desert equivalent of the virtual world even if it’s cheaper. The places where people are going to congregate will naturally be much more sought after.”

Abhishek Bajpai, Managing Director, Occupier Services | Asia



The ever-present technology risks of privacy and cybersecurity are exacerbated in the metaverse, which, for now, is an unregulated space. The fact that cryptocurrencies feature heavily in metaverse transactions adds an additional layer of volatility, and sustainability concerns given the vast computing power and energy consumption they require.

However, Jeong notes regulators and private entities in Asia Pacific and elsewhere are already working to address these challenges. “Many countries are looking at this issue closely, and trying to regulate the crypto market and change market behaviour,” she says. “The cryptocurrency community is also putting together plans to reduce their carbon footprint and become more ESG-friendly.”

In the years ahead, a combination of technological advances in areas such as 5G, VR, artificial intelligence and blockchain, as well as the rise of a digitally native generation, will push the metaverse further into the real estate mainstream. This means every industry player will have to formulate a metaverse strategy of some kind.

“There’s a lot of opportunity in the space,” notes Bajpai. “That’s why we’re really focused on building our technical advisory capability, so we can outline to clients the advantages and the challenges, and guide them through the process if they decide to take the plunge.”

While the metaverse will never replace real-world assets, our experts see it becoming more and more capable of cultivating synergies with the physical world, and underpinning exciting new solutions and business models for owners, occupiers and investors.



“The metaverse will propel the real estate market forward and bring more creativity to the world - especially as more of the potential risks are mitigated and we have a more stable platform in place.“

Hannah Jeong, Head of Valuation & Advisory Services | Hong Kong





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Abhishek Bajpai

Managing Director | Asia

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Abhishek Bajpai is Managing Director, Occupier Services | Asia at Colliers.

Based in Singapore, Abhishek is responsible for accelerating the growth of Colliers’ Occupier Services business across Asia, in close partnership with his counterparts in Australia and New Zealand, by focusing on building scale across the region. He also collaborates closely with Colliers’ global heads of Occupier Services to harness new client opportunities and deliver innovative services, while expanding client relationships.

Abhishek has more than 20 years of extensive commercial real estate experience, including more than 15 years at Colliers, with a proven track record of delivering exceptional results across Asia. He has most recently been driving the growth of Colliers’ Enterprise Clients business in Asia and has built an enviable portfolio of both local and global Fortune 500 clients.

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Hannah Jeong

Head of Valuation & Advisory Services

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Hannah Jeong has extensive valuation & advisory services experience over 15 years including property investment and development projects specialising in valuation, development consultancy, financial analysis and feasibility studies. Project’s geographic coverage span across Asia Pacific and Middle East, in particular Hong Kong, China and Korea. She has started her career with Colliers since 2006 and is now heading our Valuation and Advisory Services - Hong Kong Office with over 40 professionals.

Hannah has strong client coverage on major financial institutions including global real estate funds and private equity firms.

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