What is digital real estate and why should you buy it?

Digital real estate (also known as digital property) refers to any virtual properties or online assets that have monetary value. They can be bought, sold, leased, or monetised through other means, such as subscription-based access; and common forms of digital property include domain names, websites, and mobile apps. 

Increasingly, digital real estate is taking on a meaning that’s more in line with real-world real estate. Virtual land within metaverse platforms like The Sandbox and Decentraland is being snapped up by investors who recognise the value potential of owning pieces of the metaverse in the future. 

Back in 2022 we wrote about the virtual land that was being bought and sold for millions in the speculative rush to invest. Now, we’re revisiting the virtual property landscape to understand how the market has changed – and whether or not it’s a good investment decision. 

The digital real estate market in 2024

According to data from Expert Market Research, the global metaverse real estate market size reached an approximate value of USD $1.69 billion in 2023, and is projected to grow at a CAGR of 48.60% until 2032 – when it’ll hit $59.83 billion. 

And the consumer-facing aspect of the market has become more sophisticated over the last couple of years. Increasingly, users are able to explore virtual locations much like they would a physical property, allowing them to consider the design, layout, and ambience of the real estate before they decide to buy. 

While hype around the metaverse has calmed since 2022, digital assets and the ownership of virtual real estate have continued to rise in popularity. Businesses and solo investors are buying virtual land; and some enterprises are renting out their assets to others, for use cases including building virtual stores and organising digital events. 

Why should you buy digital real estate? 

Seven top reasons for investing in digital assets are: 

1. Investment potential. Investors are banking on the probability that digital real estate will appreciate in value over time, just like physical real estate does – with the potential for strategic investments to yield a strong ROI.
2. Opportunities to monetise virtual assets. When you own the right digital real estate, you can choose a number of different routes to generate income – including (but not limited to) advertising and affiliate marketing, renting out virtual spaces, and creating sponsored content opportunities.
3. Low barriers-to-entry compared with physical real estate. You can find digital asset investments to suit your budget, making them more accessible to investors starting out without significant capital to work with.
4. They exist in a global market. Unlike physical assets, digital assets exist in a global market – with potential market opportunities around the world. This means you’re not limited to a geographical location to generate income; you can access revenue opportunities anywhere.
5. Flexibility to adapt to market demands. Digital properties can be modified easily and at a low cost, so they can be adapted to suit market trends.
6. A chance to diversify your investment portfolio. Diversification is at the heart of a strong investment strategy, and digital real estate enables portfolio diversification into new asset classes.
7. Digital markets will grow. Buying virtual assets now means you’re tapping into a market with significant future growth projections – the digital world will continue to expand, and you’ll own a slice of it.

But there are risks to investing in virtual assets 

All investments carry risk – and digital real estate is no exception. 

The most important factor to consider when you’re deciding if virtual real estate investments will suit your personal risk tolerance is that the market can be highly volatile. At this stage, digital real estate markets are significantly less predictable than traditional real estate, and the picture is changing all the time. 

Shifts in tech markets and digital economies can ripple through the value of virtual assets very quickly. If you decide to buy virtual assets as an investment, you have to be comfortable with a relatively high level of risk that your ROI projections may not come to fruition. 

Managing digital properties also requires certain technological skills. It’s OK if you don’t have that expertise yourself – but you need to make sure you’ve got the right people on your team to maximise the potential of those investments. 

And as it stands, the digital real estate market isn’t bound by regulations in the same way that physical real estate is. You need to know how to adequately protect yourself from fraud and potential regulatory pitfalls moving forward. 

At LEAP, we connect with investors who recognise the potential of these investments and embrace the risks. If you’re considering investing in virtual assets, we recommend you connect with others too – seek trusted sources of information and build your knowledge before you start building your portfolio.