What the metaverse could mean for the commercial real estate market

COMMENT In 1995, US magazine Newsweek published a story about the internet which stated: “The truth is no online database will replace your daily newspaper… no computer network will change the way government works.” It went on to ridicule the idea of buying books online. It is, of course, easy to judge these predictions with hindsight, but they were made amidst a lot of noise and hype about a completely new and radical technology. Clearly the internet has gone on to shape all elements of our lives, including the property sector, so where does this leave us with regards to the technology buzzword of 2021 – the metaverse? Use of the term, first coined in 1992 novel Snow Crash, has grown rapidly in the past 12 months, prompted in no small part by Facebook changing its name to Meta. An exact definition of the metaverse is hard to pin down, but it essentially represents a virtual world. Yet, for all the noise around it, it is at times dismissed out of hand. Only last week in a real estate context, I was told in no uncertain terms that the metaverse was a ridiculous fad that would have no real-world impact. The same could have been said about the internet. It is therefore worth reflecting on some of the possible implications for the property sector, at least in the long term. See also: Join the metaverse land rush The concept of a virtual world in which we socially interact may seem alien, but in many ways it already exists. A lot of computer games are based on just this concept, with users plugging in to play and socialise virtually. Although gaming can seem like a relatively niche sector, according to NPD Group, in 2020 US revenue from gaming surpassed that of film and music combined. Fortnite, a virtual game environment, had close to 400m users in early 2021. Millions of people already interact with others in online virtual worlds and, for many, this is becoming a normal way to engage and socialise. There are several reasons why some believe a virtual world beyond entertainment is not really viable, but these are likely to be resolved over time. For example, the hardware required is expensive, “blocky” avatars are unappealing and the volume of data that needs to be transferred is often impractical on a large scale. But hardware costs are coming down, graphics are improving and bandwidth is growing rapidly. In time, these barriers will disappear. As we consider a new world where virtual land and buildings exist, there are a few things that we can take away from the noise around the metaverse for today’s real estate market: Change is the only constant While many people would not feel comfortable metaphorically jumping into a virtual world in a work context yet, others will be keen to try it. It may be several years before the metaverse becomes mainstream beyond entertainment, and it may be led by the next generation, but the virtual world is here and is only set to grow. The barriers of today will not be the barriers of tomorrow. People have different levels of tolerance of graphics, for example, some are comfortable with blocks, others want lifelike interfaces. Whichever your preference, we will get to the point where the technology is available to get over the current barriers. It is a question of when, not if. The role of offices will continue to evolve Against the backdrop of Covid, there is an ongoing debate about the future of the office. While views vary, the consensus seems to be that requirements will be more focused on people – whatever suits your employees best – and the role of the office will be to bring people together. It will be the place where informal conversations happen, meetings are held and brains are stormed. Zoom is good, just not the same as face-to-face. But what if it was, or at least much more like face-to-face? The debate about the future role of the office is far from over. The future will be data-driven All of this change is data-driven and for the real estate sector to keep up, we will need to become ever more adept at collecting, analysing and commercialising data. People will want seamless experiences between the real and the virtual places they live and work in. As they become more familiar with paying for on-demand services and being the target of advertising in the virtual world, the way they expect to pay for the real world may be the same. Is the commercial model for offices in the future not so much about charging fixed rents, but charging for individual services and commercialising the data collected about the building user more closely reflecting the experience of the virtual world? I believe we should be optimistic about the long-term future of the office, but we should also not dismiss ideas such as the metaverse out of hand. Questions about ownership, revenue models, ethics and engagement remain, but the next generation of office workers will have very different experiences, different hardware at their fingertips and want different things from their office. As time goes by, the office will continue to evolve to meet an ever-growing variety of human needs and increasingly work in harmony with technology. Ultimately it will need to be data-driven. Dan Hughes is director of Alpha Property Insight Photo © Telling Photography