Just the next hype or the future of the real estate industry? Virtual real estate has caused quite a stir in the real estate industry since the crypto boom and the emergence of the metaverse. Nevertheless, experts assess the influence of the trend as not yet very relevant. This is shown by the results of last year's edition of the Digital Real Estate Survey by pom+. Now we want to know from Dr. Joachim Baldegger, Head of Service Unit Future Lab, how he assesses the situation and whether the topic will remain reserved for first-movers and absolute pioneers for a long time.
Virtual exhibitions and avatars in the Metaverse instead of coffee in the office and queuing up to view the rented flat - virtual real estate has made many real estate investors think twice, especially since the Corona pandemic and with the rising popularity of hybrid working. The younger generation in particular is a strong driver of this digital wave. However, only a few, or almost none, of these new business models have been able to establish themselves as profitable. The hype around "virtual real estate" is still associated with high investment risks. After all, the property prices for virtual land on all blockchain platforms and also the number of visitors in the metaverse have fallen drastically.
After the initial euphoria, the question nevertheless arises: does the Metaverse have the potential to bring about changes in the physical world and are we perhaps already on the verge of the next step in the digital transformation? The survey conducted in 2022 among 200 executives and professionals from the construction and real estate industry reveals that the influence of virtual real estate is still very low and the trend is still in the development phase. In particular, the assessment of the influence on one's own activity remains restrained across all roles. It remains to be seen how the construction and real estate industry intends to profitably incorporate these new technologies and business models into everyday business.
Assessments of the expert
These results are not surprising. They show the currently rather low level of knowledge in the sector and reflect the lack of use cases and success models in the real estate industry. For many companies and experts, it is still unclear what influence the metaverse could have on their own business models or whether it could even be used to develop new value chains.
Due to the crypto boom of the last few years, driven by risk-averse and very speculative investors, virtual real estate has been hyped up. Only with the renaming of Facebook to "Meta" did the Metaverse become a household name to a broad audience and then made a name for itself primarily through spectacular land prices in the millions. The high returns that can be achieved by trading plots in the metaverse aroused the interest of real estate investors in diversifying their portfolios. The plots can be traded, held and rented out.
The Corona pandemic can also be seen as a driver, as it had an impact not only on the physical workplace, but also on retail trade in particular. With the ever-increasing popularity of online shopping, retailers can push the digital shopping experience. By leasing space for shopping or marketing brands, investors can in turn generate returns.
As the metaverse is still in its infancy and at the beginning of its development, many market participants and experts still disagree whether the metaverse is pure speculative hype with high risk or whether a benefit can be generated for companies in the real estate industry. Currently, there are almost no applicable and profitable business models for real estate companies and since many companies are still at the beginning or in the middle of the digital transformation, almost no or no resources are spent on it. Also, the metaverse remains heavily dependent on its popularity, and this has declined sharply over the last few months.
The possibilities of virtual real estate therefore remain exciting, especially for the workplace. For many employees, hybrid working is an important assessment point for the attractiveness of an employer, especially for younger generations. The metaverse allows for an exchange and constant collaboration that cannot be realised with today's predominant digital collaboration forms such as Zoom or MS Teams. It is therefore conceivable that the workplace or parts of it will shift to the metaverse in the medium term, especially in internationally active companies. Training or further education can be held in virtual space, for example, or meetings will become "phygital".
Overall, however, the impact on companies and the industry remains difficult to assess. Moreover, physical real estate will remain a key asset. However, large corporations such as Meta are already investing many resources in the development and expansion of (their) metaverse. In this respect, it can be assumed that there will be an impact on our private lives and the workplace. It may be difficult to ignore this technological development. As a real estate company, it is advisable to wait for further developments and to weigh them up as soon as there are profitable and feasible business models. Until that happens, it is important to build a digital foundation of business operations and a structured data base to enable smooth implementation and linkage to the metaverse.
About the survey
The Digital Real Estate Survey has been surveying the status of the digital transformation of the construction and real estate industry in Switzerland annually since 2016 and for Germany since 2019. The whitepaper presents the current situation in the two countries based on the assessments of various executives and professionals from the industry and is supplemented by the expert knowledge of consultants from pom+Consulting AG.
The study can be downloaded free of charge.
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