The branded residences sector was set to grow by 100% between 2024 and 2031, according to Savills, with new brands and new geographies entering the mix on what is becoming a universally popular concept within our industry.
Hotel brands dominate, accounting for 81% in 2023 with two-thirds of those within the luxury segment. Non-hotel branded projects made up 19% of the market, however Savills expected that share to increase to 21% by the end of last year. Non-hotel brands in the market include Porsche, Versace and department store group Saks Global.
We are used to seeing brand bleed across industries, but, after the initial sale, what does a logo mean to a property and could it be more than just a familiar marque over the door? To consider that, consider the reasons behind creating a branded residence.
The first branded residence, the Sherry-Netherland in Manhattan, opened in 1927 and began life as apartments supported by a professional kitchen which could support all your banqueting ambitions. Now, the property remains in private hands, with the option to rent apartments for part of the year, keeping pace with current trends for branded residences.
The Sherry-Netherland structure did not catch on immediately, but recent years have seen a rapid expansion in branded residences for two reasons, the first of which is the financing market. Finding financing, particularly for developments, is challenging and putting a residential element into a mixed-use scheme has become a popular way to jumpstart a project.
Lenders are further reassured by the presence of a global brand, with the hope that it will give the property an edge when attracting buyers, which takes us to the second reason for growing demand for branded residences: the guest.
The number of high-net worth individuals around the world is growing, and growing with them is an appetite for luxury travel. Having an apartment which acts as your own personal high-end hotel is now de rigueur for this group, and in this environment, it is no great wonder that consumer brands have been moving into the sector.
A luxury brand gives a certain cachet to the consumer, but also to the sale price. According to research from Whitebridge Hospitality, the average price premium for having a branded project was 30% over the past 10 years, with premiums going as high as 100% against an unbranded property.
But what happens after the purchase, when the product has been taken down from the shelf? The developer looks forward to the long-term asset appreciation, bolstered by extra revenue from residents popping in to use the spa and restaurant at the hotel next door.
There is an opportunity to view branded residences as much more than just a stepping stone in a development and to see the brand as something more than a stamp on a fast-moving consumer good to help shift units.
Guests across hospitality are more demanding than ever before, particularly in the luxury sector, where the meaning of "high end" expands by the hour. A doorman in a marble lobby no longer checks the box; when a guest buys a luxury branded residence, they expect the experience to extend beyond the fittings.
Why should the developer care after the apartment has been sold? Today’s high-net-worth individuals are truly global and spread their time across a number of properties, all of which are likely to be part of rental schemes to ensure that they earn their keep when the owner is away.
In this, the branded residence model has moved away from being a one-off property play and is closer to the traditional serviced apartment model. This creates an opportunity to add value, making the choice of brand all the more important.
Yes, you are likely to be successful selling a unit under a clothing, car or shop brand, but while they can deliver on status, can they deliver on hospitality? At Cheval Collection, we have over 45 years of experience in owning and operating, with a particular focus on the high-net-worth guest’s desires.
When you rent a brand, it should carry on delivering that luxury dream long after the keys have changed hands. A branded residence need not be a one-off deal, but offer a lifetime of revenue. So think beyond that quick sale and about how to make that asset work harder, for longer.
Nick Pilbeam is chief commercial officer of Cheval Collection.
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