The Virtual Real Estate Crash?

I’m not sure where to start, lots to cover. Maybe at the beginning.
On October 20th, Linden Labs announced the roll out their second “premier” zone called Nautilus. The first one, which had a big city feel, was called Bay City. The new one was decked out in an old world Greco-Roman decore as kind of a large fantasy land. Among the cool features of these premiere zones is that the property is more spread out, with every 1024m lot having at least one border side on public paths, and most have at least 2. The large amount of free land on these servers means lots can take twice as many prims on them. The only negatives are you can’t subdivide your land, or terraform it, but all land is flat to begin with.
I checked it out and put some bids on a couple of lots at auction, but the auctions are closing between 60,000L$ and 250,000L$ for each (depending on their strategic location), which is way out of my price range. Winners of these auctions are turning around and selling the lots for around 100,000L$, or trying to any ways. I have not seen a lot of new owners of lots for sale. These lots are a little cheaper than the huge prices on Bay City but not by much.
Mad Private Real Estate Barrons
So this new LL continent has made some of the private real estate barrons a bit mad. Linden Labs has been busy building lots of new continents in an attempt to drive real estate prices down. These “premiere” regions undercut what makes land on private servers special. The result is that it is no longer profitable to be a land barron. Here is a snippet from one angry land barron.
There is a fundamental pricing difference all the island owners have to pay, just to maintain a presence on the grid. In my own example, the bill I am paying breaks down like this:
Full sim island 1: $1250 setup, $195 tier
Full Sim Island 2: $1675 setup, $295 tier
Open space islands: 6 x $250, 6 x $75 tier = $1500 setup, $450 tier
Paid by other Open space islands: 2 x $250, 2 x $75 = $500 setup, $150 tier
Total bill each month: $1090 tier each month.The setup fees for all but 2 open space properties total $4425, of which i’ve made back $0. The monthly Tier fee collections are 99.95% funded thru rental properties and subdivided zones on these sims.
With the release of more of the mainland Continents, the overall value of land has dropped to a level where the comparable price of ML vs Island properties is so out of reach that most new members to the SL grid won’t be able to afford the cost of ownership of any Island properties. And with the real world economy falling rapidly, brought on by a similar situation in which there is too much supply, and too little demand, the actions of LL of opening a new continent of ML properties seem to me and other Island owners to be marking a point in which LL seems to be trying to kill off private island ownerships, and the talented builds many of them have created.
They have a point. If you have to lower your prices on the private sim to mainland prices, it may simply not be profitable anymore except to the largest real estate barrons, and even they may be seeing dropping profits.
But it gets worse…

The end of the above protest letter was a plea to lower fees. Linden Labs did the exact opposite late last night and raised setup and monthly fees on open space sims. Setup went from $250 to $375 and monthly fees went from $75 to $125. There will be no “grandfathering” of the old price on current users. This means that the above land barrons monthly fees will jump from $1090 a month to $1490.
A little info on the Open Space sims: They are only sold to people that own a private sim at full price. For each private sim, you can add four open space sims at a reduced rate for each. Open space sims share server space with other open space sims, while private sims have their own server. The primary negative of open space sims is the prim limit and avatar limit is considerably lower.
The primary reason for the change is that many open space owners have been treating them like they do with private sims: selling and renting lots to other players, making them very laggy at times, and when one gets laggy the other open space plots that share that same server also get laggy, which is unfair to the owners of those sims. Linden Labs is just trying to solve this problem.
But the fee increases are very unpopular. Open space servers are used in a myriad of ways to add land to play on: environmental terrain, open water, sailing areas, surfing areas, battlegrounds, etc. I found this excellent blog post that explains it all. Bottom line is this increase is going to seriously cut back on the number of open space sims, and will do harm to the whole SL community.
Today big protests were held on the Nautilus Continent and at Linden Estate Services server. Both getting big enough to shut down servers. You can join the protest in world here or sign the petition here.
What this is going to do is pretty much kill the real estate market outside of Linden Labs own land holdings. The future virtual real estate market will most likely be on open sim servers, which is cheaper, but very difficult for the average SLer to get to, hence no one wants to live there.
Viva la Revolucion!










