Virtual land in the metaverse is being purchased by investors for millions of dollars.

• In some cases, virtual real estate in the metaverse can fetch millions of dollars.
• In the virtual world of the Sandbox, the most expensive spots are located near where many users gather, as evidenced by a recent transaction where someone paid $450,000 to be Snoop Dogg's neighbor.
• But even proponents are warning would-be investors that this is risky business.

The real estate market is experiencing a surge, and the Covid pandemic is driving a new land rush. Some investors are paying millions for virtual plots of land, which are not located in New York or Beverly Hills.

The metaverse, a set of virtual worlds, has become a popular destination for tech enthusiasts. Prices for plots have increased by up to 500% since Facebook announced its commitment to virtual reality and changed its corporate name to Platforms.

Andrew Kiguel, CEO of Tokens.com, stated that the metaverse is the next evolution of social media.

Kiguel stated that you have the option to visit a carnival, a music concert, or a museum.

In virtual worlds, individuals engage with others as cartoon-like avatars, similar to a real-time multiplayer video game. Currently, these worlds can be accessed through a computer screen, but Meta and other companies envision a future where people will enter immersive 360-degree worlds using virtual reality goggles, such as Meta's Oculus.

In the near future, the digital world may become a $1 trillion industry, according to a recent report by crypto asset manager Grayscale.

Major artists, including Justin Bieber, Ariana Grande, and DJ Marshmello, are performing as their own avatars. Additionally, Paris Hilton DJ'd a New Year's Eve party on her own virtual island.

Kiguel's company invested nearly $2.5 million in a piece of land in Decentraland, one of the popular metaverse worlds. Prices have increased by 400% to 500% in the past few months, according to Kiguel.

The Sandbox is another popular metaverse world, where Republic Realm, a virtual real estate development company owned by Janine Yorio, invested a record $4.3 million in a virtual land parcel.

Yorio stated that her company sold 100 virtual private islands last year for $15,000 each. Currently, they are being sold for $300,000 each, which is the same as the average home price in America.

A risky investment

Miami-based real estate broker Oren Alexander tells CNBC that the digital world is as crucial to some people as the real world. According to him, the future determines the importance of the digital world, regardless of personal beliefs.

Kiguel claims that the metaverse is all about location, location, location, just like in the real world.

Kiguel stated that the areas in the metaverse where people gather are more valuable than those without any events.

To be sure, those heavily trafficked areas are reeling in big spenders.

Kiguel stated, "Consider the board game Monopoly. Recently, we purchased Boardwalk and its surrounding areas. These areas where people gather are highly valuable for advertisers and retailers to target that specific demographic."

Someone recently paid $450,000 to be Snoop Dogg's neighbor in Sandbox, where he is constructing a virtual mansion on a plot of land.

Yorio stated, "I believe it is crucial to have a good neighbor." He added, "It's true for most things. It's like being part of a club and wanting to surround yourself with people who share your interests."

Virtual land can be purchased directly from the platform or through a developer. Investors can then enhance their land by making it interactive, allowing them to modify, decorate, and renovate it as desired. "It's all code," Yorio explains.

But Yorio cautions that investing in digital real estate is risky business.

Yorio advises CNBC that investing in crypto is highly speculative and risky, as it is blockchain-based and highly volatile. However, he also notes that it has the potential to be massively rewarding.

Mark Stapp, a professor and director at Arizona State University's real estate theory and practice, concurs. "I wouldn't invest in this if I didn't care about losing money," he says. "If it continues on this path, it's likely to be a bubble. You're buying something that's not grounded in reality."