The number of virtual real estate deals is rising as quickly as their real-world value.
Republic Realm, an investor and developer of virtual land, paid $4.3 million on Tuesday for property in The Sandbox, a popular metaverse oriented toward gaming that launched this week after four years of development, according to the website NonFungible.com.
That easily tops the $2.4 million that Tokens.com, which facilitates investment in digital assets, paid for an estate last week in Decentraland, the other dominant metaverse. Toronto-based Tokens is also building an 18-story skyscraper there to be leased for meeting, events and advertising space.
Some 4,400 sales, valued at a cumulative $70.6 million, took place in the past week in The Sandbox alone.
It may be too soon to say if the speculative frenzy surrounding digital real estate — conceived by futurists and crypto specialists as the mall, playground and meeting place of the future — is a bubble or the start of a whole new asset class. Virtual land within many emerging metaverses is still significantly underdeveloped.
Republic Realm will partner with Atari, the seller and one of the earliest and largest landholders in The Sandbox, to co-develop the property, which includes several parcels, including a 24-unit-by-24-unit estate that’s among the largest in the virtual world. Each one-by-one plot is the real-world equivalent of 96 meters by 96 meters in length and 128 meters in height.
Republic Realm, perhaps best known as the creator of the Fantasy Islands NFT project, a luxury, master-planned real estate development in The Sandbox, doesn’t yet have firm plans for its new purchase. Janine Yorio, co-founder of the company, said any project will probably be aimed at play-to-earn games in which players compete for cryptocurrency.
Yorio’s company also developed a shopping mall in Decentraland called Metajuku, where it currently leases space to digital-only fashion brands DressX and Tribute Brand. Rent is based on a percentage of sales of NFTs such as digital wearables.
“People have forgotten that the metaverse has to be entertaining,” Yorio said. “It’s not just about making money. It’s about making content that makes people want to come back over and over and over again, like social media does.”
Before venturing into financial technology, Yorio spent several years as a portfolio manager at NorthStar Realty Finance, where she specialized in hospitality. Building an entertainment venue in the metaverse is like building a great hotel, she said.
“It’s not enough to put a pool in a bar. You have to have events, the right music, the right people showing up, and designers that make you feel cool,” she said.
Digital property has attracted more than just gamers and the crypto rich. Hedge funds, family offices and other traditional real estate market investors are also scouting the market, Yorio said. They typically find the metaverse easier to understand than crypto finance.
“There are so many crypto projects, it’s very hard to figure out what their business model is and why the token should be valuable,” she said. “This is much easier for people to wrap their head around.”