What do London, Istanbul, the Algarve and Montenegro all have in common? Well, they are all forecast to be key growth markets for the development of branded residences, according to research from Savills. Aside from the presence of high-net-worth individuals (HNWI) in these diverse locations, there are other important trends in play, according to Rico Picenoni, head of Savills global residential development consultancy. “Those who acquire branded residences are really buying into a lifestyle, backed by trust in the brand. But they are also often looking to combine personal use and rental potential. If you are in a resort location, you can plan to both spend time there as a second home, but also place that residence into a rental programme with the hotel operator the rest of the time. It’s a great value proposition,” Picenoni notes.
Real estate investors with an affinity for beds – on both the residential and hospitality sides – are increasingly curious about this asset class, which originated in North America but is now displaying important growth metrics across Europe. While definitions vary, most agree that a branded residence is a residential property available for purchase which is affiliated - both in terms of design and services -with a recognisable and reputable brand. Although hotel groups traditionally dominated the branded residence sector, a rising amount of non-hotel brands launching residential products has assisted the swift expansion of the phenomenon, and its increasingly global potential.
Growth prospects
The concept started to appear in EMEA around 20 years ago, and has not looked back. Growing from seven schemes in the region in 2005, the sector now accounts for 209 schemes and is forecast to expand a further 83% by 2030, according to Savills data. And the same research highlighting the growing development frenzy in the likes of the Algarve, Istanbul, and even the Alps underlines the fact that this concept has the potential to explode in a rather diverse range of territories.
“What we have noticed is that there is somewhat less appetite for branded residences in northern Europe,” Picenoni says, although he adds that London tends to be an exception to the rule. “We have had discussions with agents, investors, nationals in these countries and it appears that brand association isn’t necessarily such a high priority for users in northern Europe. Markets like the Nordics for example would be interesting to investors but we don’t see huge demand, although we are confident there is potential.
“The Iberian Peninsula, Turkey and the likes of Montenegro are a different story. Take Bodrum, a popular resort destination where the buyer can happily use the residence for personal use and then rent it out.” Despite that, cities like London and Vienna still have potential as ‘labelled living’ second home spots, he notes, “for the diaspora of nationals that spend a lot of time abroad.”
Alpine region
Cain International is one real estate firm which has successfully developed branded residences in Europe, working with Six Senses, for example, to launch a branded residence in Courchevel in the Alps in December 2015. Cain also tried to help the Oberoi Group debut in Europe more recently, agreeing an operating deal t for a slate of Oberoi-serviced residences in its 17-22 South Audley Street development in London’s Mayfair, although the pandemic saw the hotel group step back from the deal. Cain CEO Jonathan Goldstein is however optimistic about the sector, suggesting that the post-Covid mood means that a rise in “community living will strengthen, with wellness and walkable amenities becoming increasingly important. We expect secondary homes with access to these preferences to be used more frequently as a result of the new hybrid working model.”
Goldstein also predicts that there will be “lots more non-hotel brands entering the sector – there are many already – meaning all brands will have to elevate their offering to compete, and hotel brands will dominate less and less”.
It’s a sentiment echoed by Picenoni, who references the proliferation of a broad range of brand types in the world’s leading markets for branded residences, namely Dubai and South Florida. “There are roughly 180 brands in the game,” he says. “From fashion, through to lifestyle including cars – even Disney has a concept in the works.” The first Storyliving by Disney community will be built in Rancho Mirage, in California’s Coachella Valley — a location where Walt Disney himself owned a home and would spend leisure time with his family. Additional locations in the US are under exploration for future development, according to the firm.
Brand appeal
Could a European city ever rival Dubai or Miami in the branded residences market? “Brands will go where they want to go,” Picenoni reasons. “They need the right critical mass of potential buyers, and they need to match specs to the end users.” Some of Europe’s leading fashion brands – including Bulgari, Armani and Versace – have already found global success with their branded residence options. The penthouse in the Bulgari Lighthouse in Dubai sold for a record AED 410 million (£88 million) in February, making it one of the most expensive off-the-peg penthouses ever sold in a city of billionaires. Yet as the likes of Bulgari expand across Europe – the brand opened its second Italian hotel in Rome on 8 June – they will be surely eyeing opportunities for further lucrative tie-ups.
Investors, too, are monitoring the markets. “There’s a broad range of investor types in the market now, from sovereign wealth funds to private equity real estate. Institutional investors are likely to get into the space once the product is operative,” he adds. “There is also an interesting niche of high-net-worth individuals who have an affinity with a certain brand and look to license that for a personal project.”
While many of the new schemes in Europe will see hotel brands consolidate their presence, there are also fresh names on the block. Greek developer Mirum Group recently unveiled plans for the 138-acre Elounda Hills residential resort in Crete, marking the island’s first branded residence and the debut of US brand 1Hotels in Europe. It seems likely that other international names will follow.
Interested in branded residences? The Resort and Residential Hospitality Forum will take place between 9-11 October at the EPIC SANA Lisboa Hotel, Portugal. Confirmed speakers include representatives of Azora, Bain Capital, Covivio and many more. You can register here.