From Bricks and Mortar to the Metaverse

Andy KM Yiu FCPA, CESGA Yiu | 5 August 2022

I was delighted to be invited as a panel speaker at RICS Hong Kong Annual Conference 2022, “From Bricks and Mortar to the Metaverse.” It was a great event meeting industry leaders and listening to the latest market intelligence and visionary insights that may shape the future of the real estate industry. I shared my first-hand understanding of the metaverse from my journey, changing from a real estate investment professional to a co-founder of a metaverse startup BOAX Limited.

What is metaverse?

The definitions of metaverse are many. My definition of the metaverse consists of three key elements: (1) a 3D immersive environment combining the physical and virtual worlds, (2) a creator economy and ownership of digital assets and identities, and (3) new ways for socializing such as gaming, shopping, working, educating, etc.

It is not surprising to think that investment in the metaverse would equal buying virtual lands on famous platforms such as The Sandbox or Decentraland. We have observed that some major brands, including Samsung, Sotheby’s, PwC, and Sun Hung Kai, have announced buying sizable plots of virtual lands for their future business activities.

In many ways, the virtual land sale is a way of fundraising by the metaverse platforms. The land value comes from expected utilities that can be performed on the virtual land in the future. It would also depend on a wide range of factors, including the degree of mass adoption of that particular platform, the perceived scarcity of that piece of virtual land, and the sentiment of the overall digital asset markets. One may consider buying the virtual lands as a call option on that platform to gain massive traction in future.

Metaverse is more than just virtual lands

I believe investing in the metaverse is much more than buying virtual lands.

The scope shall be much broader, including (1) Content & Experiences, (2) Creator Applications & Platforms, (3) Infrastructure & Hardware, and (4) Enablers such as Payments & Security solutions.

Investors have an optimistic outlook about the potential market size. According to some market data, the metaverse-related investments by venture capitals, private equities, and corporates have been increasing significantly, from US$ 29 billion in 2020 to about US$ 100 billion in the first five months of 2022. For example, JP Morgan estimates market size of over US$ 1 trillion. McKinsey suggests by 2030, the value of the metaverse could reach US$ 5 trillion.

Metaverse solutions for Smart Cities

Metaverse solutions are not confined to only the private sector. Earlier in 2022, the city government of Seoul announced its investment plan of nearly US$ 200 million into its metaverse ecosystem. The Ministry of Science and ICT has issued the list of potential use cases, which is broad. It ranges from access to government services to virtual tourism and cultural events. Meanwhile, Shanghai also outlined its strategy to cultivate a metaverse industry worth US$52 billion by the end of 2025. Meanwhile, Dubai said its metaverse plan is to create 40,000 new virtual jobs and add US$ 4 billion to the city’s GDP in five years.

Current and Potential use cases for consumers and businesses

Having seen so much money pouring into the sector, I always think about what the use cases could be. The top 5 likely use cases for consumer experience: (1) Shopping – purchasing physical or virtual goods, (2) Social – attending virtual events or games, (3) Fitness – doing physical exercises using VR devices with lots of friends online, (4) Dating – humans are emotional animals, and we have emotional needs even on a virtual environment, and (5) Education – conducting classes and learning events.

For businesses, we can see most of the current or intended use cases are around branding and marketing. To name a few, Gucci launched its Gucci Garden on Roblox, a centralized metaverse, for customer engagement. JP Morgan, a financial institution, has opened their Onyx Lounge in Decentraland, trying to build connections with those crypto-savvy new rich. Meanwhile, Ariva’s Wonderland is working to allow users to travel to virtual destinations.

Key challenges standing in the way

Despite all the hopes and hypes of the metaverse, some crucial areas need to be further developed to enable its full potential for user engagement, community building, self-expression, and e-commerce. For example, improving local hardware to make the immersive experience more comfortable and less costly would be a prerequisite for mass adoption. Standards for digital assets shall be set so cross-virtual-world transfers and usage can take place. Rules and regulations in the real world shall also apply to the virtual worlds, such as privacy, cyber-bullying, and harassment.

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Andy Yiu is a co-founder and Vice President of PropTech Institute. He is a co-founder of BOAX Limited, a metaverse startup company.?