The idea of spending millions on non-existent land may sound ludicrous – but feverish predictions of a virtual reality future are pushing investors to bet big on digital real estate.

Last week, New York-based company Republic Realm announced it had spent a record-breaking $4.3 million on digital land through The Sandbox, one of several “virtual world” websites where people can socialise, play games and even attend concerts.

That came hot on the heels of a $2.4-million land purchase in late November on a rival platform, Decentraland, by Canadian crypto company Tokens.com. And days before that, Barbados announced plans to open a “metaverse embassy” in Decentraland.

Such websites bill themselves as a prototype of the metaverse, a future internet where online experiences like chatting to a friend would eventually feel face-to-face thanks to virtual reality (VR) headsets.

“Metaverse” has been a Silicon Valley buzzword for months, but interest soared in October after Facebook’s parent company renamed itself “Meta” as it shifts its focus towards VR.

The Facebook rebrand “introduced the term ‘metaverse’ to millions of people a lot faster than I would have ever imagined,” said Cathy Hackl, a tech consultant who advises companies on entering the metaverse.

According to crypto data site Dapp, land worth more than $100 million has sold in the past week across the four largest metaverse sites, The Sandbox, Decentraland, CryptoVoxels, and Somnium Space.

For Hackl, it’s unsurprising that the market is booming, spawning an entire ecosystem around virtual real estate, from rents to land developers.

“We’re trying to translate the way we understand physical goods into the virtual world,” she said.

And while it may be some time before these sites operate as true metaverses, transporting us elsewhere with VR goggles, digital land is already functioning as an asset just like real land, said Hackl.

A child wearing virtual reality goggles and playing a game in an arcade in Beijing in September. AFP

“They can build on it, they can rent it out, they can sell it,” she said.

Fifth Avenue of the metaverse

Tokens.com has bought a prime patch in Decentraland’s Fashion Street district, which the platform hopes to develop as a home for luxury brands’ virtual stores.

“If I hadn’t done the research and understood that this is valuable property, it would seem absolutely crazy,” admitted Tokens.com CEO Andrew Kiguel.

Kiguel spent 20 years as an investment banker focused on real estate. He insists the Decentraland plot makes exactly the same kind of business sense as it would in the real world: it’s in a trendy area with high footfall.

“That is advertising and event space where people are going to congregate,” he explained, pointing to a recent virtual musical festival in Decentraland which attracted 50,000 visitors.

Luxury brands are already venturing into the metaverse – a Gucci handbag sold on the Roblox platform in May for more than the real version – and Kiguel hopes Fashion Street will become a shopping destination akin to New York’s Fifth Avenue.

As for how the land could be used to make money, “it can be as simple as having a billboard, or it can be as complex as having a storefront with an actual employee,” he said.

“You could walk in with your avatar and have 3D digital representations of a shoe that you can hold, and ask questions.”