The Name’s the Game: The Rise & Rise of Branded Residences
The first branded residential development appeared in New York in the 1920’s, but the concept as we know it today did not catch on until the mid-1980’s. What is remarkable is that it took so long to become a mainstream model.
For most of the 20th century, branded residences were a niche segment of the luxury real estate market, targeted at privileged HNWI audiences. These homes were in the best locations and associated with leading hotel brands, all of which offered a range of ‘at home’ 5* services and amenities. Since the Millennium, global growth has been remarkable – not only in number but also locations and brands – and this is predicted to continue.
Driven by wide-ranging benefits for developers, brands, and purchasers alike, it presents an unusual “win-win-win” scenario.
For buyers, a brand’s involvement gives a level of comfort, providing reassurance that the quality, design, maintenance, and management standards will be commensurate with that brand. Inevitably, their motivations for investing in a branded residence span a broad range of criteria, which the report distils down into two principal factors: confidence and convenience.
A Brand Premium for a Premium Brand
In 2012, Knight Frank reported that branded residences commanded an average price premium of 30% over comparable non-branded schemes; despite numerous subsequent developments in this sector, this remains the benchmark figure (Savills research puts it at 31%).
Jumping on the B®andwagon
Unsurprisingly, the success of this formula attracts attention. Whilst the sector remains dominated by hotel brands (86%), the potential for a new revenue stream through brand extension encourages fashionable brands in other sectors to join the party:
- Fashion and jewellery: High-end consumer brands such as Bvlgari, Versace, Missoni, Fendi, Ferre, Baccarat, Moschino and Armani have licensed their names (and design expertise) to developers.
- Automotive: Examples include Aston Martin, Porsche, Bentley, Bugatti and Tonino Lamborghini.
- Interior designers: There is a sizeable list of top talent. The leader in this sector is YOO, with a stable of designers that includes Philippe Starck, Jade Jagger, and Kelly Hoppen.
- Architect/Master planners: The influence of ‘Starchitects’ as a major USP is well established. Furthermore, having a prominent practice like WATG, HKS, SAOTA or Gensler involved strengthens the offer.
- Developers: Companies with a track-record of distinctive high-profile projects behind them can become established as ‘the brand’. This is a good status to achieve as it can add a healthy premium to selling prices without having to pay license fees / royalties to a third party.
- Landscape designers: With increased focus on engagement with nature and the environment, the importance of landscape architects should not be overlooked in creating beautiful public spaces.
Other notable brand affiliations include spas and concierge services, and now restaurants are getting in on the act. Indeed, a new breed of luxury residences with celebrated restaurants attached further enhances the brand offer (e.g. Four Seasons has 27 Michelin stars in its portfolio, Mandarin Oriental has 17). With culinary experiences now ranked the #1 choice among HNWs (Savills research), expect to see more celebrity chefs adding flavour to the lifestyle offer.
New brands will certainly give hoteliers a run for their money, and there is little doubt that the list will continue to grow; we are already seeing media/entertainment companies branding homes, and even pop singer Pharrell Williams has thrown his hat into the ring.
Inevitably, each of these elements plays an active role in shaping the design and décor of the residences, as the completed units must accurately reflect the chosen brand and convey its values, for which the brand partner will generally provide guidelines to the developer and take a hands-on role in the design.
It Isn’t All About Luxury
Whilst historically the sector is dominated by luxury brands, as predicted in previous editions of this report, non-luxury brands now represent around one-third of the global pipeline. And why not? Luxury is relative, and there are some very good brands in these categories. They present a strong opportunity by providing broader market appeal, with lower costs for developers and lower purchase prices for buyers.
A Final Word…
Supported by a reputable luxury brand, it is well proven that a professionally planned and presented residential development attracts strong buyer interest. Nonetheless, there are key certainties for developers and brands to bear in mind, which are examined in the report. Above all, seeking expert advice from experienced professionals is strongly recommended; applying proven feasibility and validation processes help to de-risk a project - and this should be viewed as an investment rather than a cost.
Complimentary copies of the 64-page 4th Edition of “Branded Residences: An Overview” are available at www.gagms.com.