The current pandemic has confined our real-world presence to the boundaries of our own home. For many of us, our devices have become a window to the rest of the world. They have allowed us to work collaboratively with colleagues, stay in touch with relatives, or watch and discuss the latest shows with our friends. We are already seeing companies reconsider their workplace strategies with a greater prevalence of flexible working practices and greater reliance on virtual collaboration tools during enforced home working. But is it conceivable that the virtual workplace may one day entirely replace our need for the physical office?
CBRE’s recent Occupier Flash Survey suggests 40% of occupiers expect to review their locational footprint, while 88% intend to further invest in technology to support flexible working. The success of Teams, Slack, and others is clear to see. However, from the plethora of digital solutions available, few are capable of facilitating the most productive aspects of the office experience – spontaneous corridor collisions which enable knowledge sharing and enhance our creativity – while the unintended effects of ‘Zoom fatigue’ are becoming increasingly apparent.
But what if our phones and devices could allow our sense of presence to span both the physical world and multiple virtual ones at the same time? This concept is called 'The Metaverse' and would see us reimagine the boundaries of what it means to be online or offline, reality or fantasy, working or living. For many this will seem nothing more than an extension of the hyperconnected world we already live in, yet the opportunities to create new content, business models, and user experiences is unlimited.
The first entity to create a popular Metaverse will initially act as the gatekeeper to a virtual world with the ability to access millions of users, govern activity and extract (maximum) value. This has created fierce competition amongst tech companies as they compete to create an immersive ecosystem which elevates their brand above the rest. The most recent mainstream experiment comes from Fortnite, the successful online video game with over 300 million users.
Fortnite recently hosted what some have described as the most disruptive event in entertainment history - 'Astronomical', a virtual in-game concert featuring rapper Travis Scott, who had been due to perform at Coachella music festival until the recent outbreak. It was experienced by 27.7 million people across five separate showings. For comparison, the Oscars were watched by 23.6 million viewers earlier this year.
Since the success of Astronomical, Fortnite has sought to enhance its claim to the Metaverse by exploring unique forms of monetisation and offering players a new social hub mode. This is a safe space for friends to hang out without weapons or combat. The increasing popularity of this social mode could provide an interesting opportunity for the real estate industry. If the popularity of these digital spaces - created with no direct game objectives but simply for people to connect - continues to rise, could this new evolving digital third space compete for ‘footfall’ on the same scale as our physical spaces? If footfall acts as a proxy for location, one might predict that the payable ‘rent’ for a favourable location in Fortnite should be greater than that of London’s busiest promenades. For context, half a million people visit Oxford Street every day.
This potentially new asset class would democratise the ability for all to buy and personalise ‘space’ without the typical barriers to entry or asset illiquidity. Virtual real estate could be eminently scalable without significant capital expenditure, generating carbon emissions, or risk of dilapidation. Despite this, we should be wary of increased obsolescence, cyber security threats, and reduced quality of social connection.
Real estate is starting to take notice of this increased appetite for enhancing real-world experiences with digital aspects. The RICS recently trialled a virtual conference chaired by our very own Amanda Clack. It replicated aspects of a conventional conference in a digital world, featuring a stage and keynote speakers. It also included those important circulation areas, where attendees at an in-person conference would head to for refreshments and networking. As with a physical event, the attendees avatars were able to walk around the virtual conference freely, explore these circulation areas to make new connections from around the world, as well as sit and listen to the keynote speakers. While not a true representation of the Metaverse, as users are confined to one set building / conference, this is a great first step from RICS and exemplar in embracing the power of digital. However, such successful experiments will require greater consideration of the distinctive and valuable characteristics of the physical that the digital world cannot replicate.
Over time, it may be that a number of open Metaverses will be created and an ecosystem of interconnected worlds will be formed. This will allow billions of users to migrate between and add value to other worlds. While initially browser-based experiences, deeper integration with virtual reality hardware, neural interface platforms, and digital currencies may further increase our ability to enjoy fully immersive and frictionless user experiences in this emerging asset class spanning the physical and digital.
The next generation of talent will be the most digitally connected of all. They have grown up as digital natives and already have less desire for segregation between their work and lives). The war for this talent is fierce and occupiers are constantly looking for new ways to demonstrate their purpose and enhance their competitive edge. Those who succeed will need to look beyond the bounds of the physical workplace and place a greater emphasis on the digital, while assimilating the experience across both. As occupiers increasingly show a preference for buildings with ‘smart’ credentials and focus on technology investment, the Metaverse presents an opportunity for traditional landlords and investors to experiment and grow their reach beyond the physical. For those who integrate their brand into our virtual lives, it is likely that purpose and integrity will be increasingly visible for all to see.
Despite distance shrinking technology, proximity matters now more than ever. This would be true with a Metaverse where increased value could be attributed to more favourable locations within the ecosystem. How will this augment itself for real estate? It might comprise of many siloed landlord managed platforms, with occupiers paying rent to be part of a platform connected with the landlord’s other occupiers and able to interact with a mix of private and communal shared space depending on the type of work required. Or perhaps we will see a Metaverse tailored specifically to one occupier sector, e.g. financial or life sciences, with the locational benefits of clustering near complimentary firms. In both instances, the successful Metaverses will attempt to complement and enhance the serendipity and collaboration that many of us enjoy in the office.
Virtual real estate won’t replace our need for physical space, but as Fortnite and Astronomical have shown, the boundary between the two will likely be more blurred than ever before. Regardless of whether these Metaverses will be occupier or landlord led (or a collaboration between the two), for those who get it right, the rewards could include significant brand recognition, enhanced talent attraction and new revenue streams unlocked.
Contact CBRE’s Strategic Advisory team if you’re interested in discussing how digital can help you integrate the human and physical. We would love to hear your thoughts on what new opportunities the Metaverse could present and will explore these in future articles.