One of the real estate industry’s fastest growing sectors, the branded residences concept is attracting increasing numbers of developers, hotel operators, investors and buyers across the globe (the market in the Far East alone is valued at over $16 billion) – in spite of the fact that they sell at an average 30% premium over comparable non-branded residential real estate products.
Traditionally, the association has been between developers and hotel operators. It’s an obvious good fit – developers can tap into offering a proven range of 5* hotel-style amenities and services, while the subsidy revenue from residential property sales can help to offset the challenging economics of building new luxury hotels.
The key to the success of hotel branded residences is that they work for all parties - the developer, operator and buyer. As Muriel Muirden, Managing Director of Strategy at international architectural firm WATG says: ‘It’s a win-win-win situation. It offers developers attractive price premiums and accelerated sales velocity, while the hotel operator gets rewarded for the marketing muscle their brand brings to the development.’
The very first branded residence is generally agreed to have been the Sherry-Netherland Hotel on New York’s Fifth Avenue, which operated in the 1920s alongside its own serviced apartments. The main players today are Four Seasons and Ritz-Carlton, with over 50 worldwide locations between them, but and others in the market leading operators include Starwood, and Fairmont, Kempinski, Aman, St-Regis, Hyatt Regency, Six Senses, Soneva, Banyan Tree, W Hotels, Shangri-La, Taj, Viceroy and Mandarin Oriental, all each bringing their own individual flavour to the mix.
Although the branded residences market remains dominant in North America, the Middle and Far East are gaining ground. Conversely the European market is relatively small but is growing. According to property development advisory firm Maxmakers, the number of hotels offering branded residences globally increased a staggering tenfold in the decade to 2012 and recent research by C9 Hotelworks revealed that the market in Southeast Asia has topped US$16bn in value (and still growing), in which Thailand leads the way with branded residences accounting for 37% of total projects.
Exotic locations like the Maldives, Caribbean or Seychelles have proved natural settings for ultra-luxury branded resorts; however, the growth of branded residences is now being seen in urban locations, with the majority of properties being in major cities; indeed, around 60% of properties in the Four Seasons portfolio is urban versus 40% in resort locations.
‘Prime urban branded developments have greater appeal because they are perceived as less risky,’ observes Robert Green, Managing Director of Sphere Estates, adding that ‘brands like Four Seasons are turning their attention to European destinations. We expect both urban and resort branded residences to grow over the next five years in Europe, but also in parts of Africa and South America where there are currently very few available’.
Branded residences offer the ultimate property investment, offering the reassurance of an established luxury name whose standards remain the same wherever they are in the world. The advantages are clear: branded residences are usually in prime locations; offer cutting-edge interior design, technology and architecture; come with professional management providing hassle-free ownership; and offer a secure environment and access to a luxury lifestyle. Increasingly with international resort and hotel groups, owners can also exchange use of their residences with similar quality properties elsewhere in the group’s network.
Branding brings differentiation, which is crucial in both mature markets as well as emerging ones where buyers are seeking something unique. ‘Buyers have different reasons for where they buy, but ultimately they want something unique that is likely to appreciate in value,’ says Robert Green. And with experiential luxury now becoming more important than mere clothes and baubles, new experiences are among the latest bragging rights - and a branded residence is the ultimate purchase.
As in the fashion world, different brands appeal to different buyers. ‘Clearly it is important for a developer to partner with a brand that will resonate with the desired target audiences and align with their lifestyle aspirations,’ says author Chris Graham. For example, at one end of the spectrum W Residences promotes its brand as ‘vibrant, inspiring, iconic, innovative and influential’, citing its ‘passion for fashion, music and design, while at the other Mandarin Oriental promotes ‘the comforts of a private home combined with the unsurpassed amenities and legendary service of Mandarin Oriental’.
Interior designers are a natural fit with property too, a fact recognised by developer Yoo, having collaborated with Anouska Hempel, Philippe Starck, Jade Jagger, Marcel Wanders, Kelly Hoppen and even supermodel Kate Moss. CEO John Hitchcox observes: ‘Consumers are more home and design conscious than ever before. They want to work in creative spaces and to holiday in beautiful hotels, and they want that design aesthetic to continue through their personal lives into their homes.’
Luxury real estate developers are also turning to fashion designers. At the turn of the millennium Armani and Versace were pioneers of fashion-branded lifestyle projects: in 2000 Armani launched Armani/Casa and subsequently diversified into hotel-residence in the world’s tallest building, Dubai’s Burj Khalifa; similarly Versace launched a housewares range with German porcelain-maker Rosenthal and the 72-condo Palazzo Versace opened in 2000 on Australia’s Gold Coast (and later also in Dubai). The trend is now taking off in the USA, where the Baccarat Hotel & Residences is a landmark in mid-town New York and several branded projects are springing to life in Miami:
- Residences by Armani/Casa in Sunny Isles features interiors from Armani/Casa. The $15 million penthouse will be designed by Giorgio Armani himself.
- The Fendi Château residences feature interiors designed by Fendi Casa. Developed in partnership with Château Group, units range in price from $6-25 million.
- Missoni Baia’s waterfront tower in Edgewater is home to its first-ever branded residences, furnished throughout by Missoni Home.
Cutting-edge designers are also jumping on the bandwagon: for example, the 195m Porsche Design Tower in Miami’s Sunny Isles features 132 exclusive residences, of which some showcase the owner’s car as a work of art outside their unit (NB Damac in Dubai did the same with their intriguing Bugatti villas)!
Chris Graham believes all these benefits can be distilled down to two things: confidence and convenience. ‘For many buyers, the most important factor is the trust associated with buying into a reputable brand, since this offers reassurance in the delivery and quality of the development, as well as its ongoing management and potential resale value,’ he says. ‘Wealthy individuals are typically cash rich and time poor, often with homes in several locations around the world. They certainly don’t want to worry about maintenance and security – and when they are in residence, a 24/7 concierge service allows them to enjoy a hotel lifestyle in their own homes.’
Graham points out that inevitably there can be a downside to partnering with a third party: “If the individual or brand associated with your development is involved in a scandal or controversy, or falls out of favour with the public, this can have a detrimental effect on the popularity – and therefore value - of the residences.” For example, Trump-branded condominiums have consistently outperformed comparable residences, but a 2016 study by US real estate brokerage firm Redfin (commissioned by Yahoo Finance) found that condominiums bearing the Trump name no longer enjoy as strong a premium as they did before his somewhat polarising presidential run. "It’s pretty rare to see a home with an actual brand name on it," commented Redfin’s Chief Economist Nela Richardson, "but just like with any other brand, if its reputation becomes tarnished its stock tends to decline.”
Ultimately, it is the whole package offered by branded residences that drives the market, says Robert Green: ‘The concept has evolved from simply providing 5* services and facilities for wealthy, time-poor individuals to a greater focus on architecture, interior design and lifestyle.’
Chris Graham concludes: “As in any sector, a successful real estate development must be driven by satisfying – or indeed exceeding – customers’ requirements and desires, which have been shifting with growing impetus towards the convenience, security and confidence offered by branded residences. From the evidence presented in our report, this trend looks firmly set to continue.”
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