Research article

The rise and rise of branded residences

The branded residence sector has come a long way since the very first branded residence opened in New York almost a century ago

In a crowded marketplace for prime property, the distinction of carrying a brand has become recognised as a valuable USP. The number of branded schemes has grown by 198% in the last decade. Over 65 new projects will open by the end of 2019, a new record. This is due to be broken again in 2020 when nearly 70 are scheduled to complete.

The players: movers & shakers

Growth is being driven by the hoteliers. Hotel-branded residences account for 85% of completed schemes, but 96% of pipeline projects. Marriott International is the market leader and set to remain so (see Brand profiles), but Accor is rising fast and now has a large pipeline that will push it into second place in coming years, ahead of YOO, Four Seasons and Hyatt (see chart below). Both Marriott International and Accor benefit from a large portfolio of brands that they can deploy to suit different markets.

Emaar Hospitality Group moves into sixth, having only entered the sector at scale five years ago. It has an extensive pipeline in the UAE and wider Middle East, under its Address and Vida brands. Parent company Marriott International dominates the market in terms of number of schemes and unit numbers. However, in terms of individual brands, YOO is the largest single player in the market by both number of schemes and units, followed by Four Seasons. Ritz-Carlton, a Marriott International brand, is set to overtake the latter in the coming years based on reported pipeline.

Regions on the rise

The birthplace of branded residences, North America is home to 39% of all schemes, but as the sector has matured other regions are growing more rapidly.

Asia Pacific, led by Thailand and Vietnam, currently has the most schemes in planning and under construction (23% of pipeline), followed by MENA (21% of pipeline), where the UAE and Egypt account for most of the forthcoming supply.

Latin America is a major growth market. The number of schemes in Mexico is set to more than double in the coming years as Marriott International, Accor and Hyatt (among others) open new projects in both resort and city locations.

All change in the city league

New York is set to be toppled by Dubai as the global branded residence capital by the end of 2019, thanks to a pipeline equal to its current supply (see map, overleaf ). This surge in supply coincides with the city’s hosting of Expo 2020. Miami, gateway city to the US and major resort destination, has the third largest number of branded schemes, and will retain its position. Phuket is forecast to overtake Bangkok, clinching fourth position, where a large number of smaller resort schemes are in the pipeline.

Beyond Luxury

As the sector matures, the range of brands is diversifying. There are almost 80 individual brands in the sector today, and a further 30 brands will be entering the market for the first time in the coming years.

Luxury hotel brands dominate, but the share of ‘Upper Upscale’ brands is set to grow, accounting for 22% of the pipeline by number of schemes (see chart below), and 26% of the pipeline by number of units.

Other aspirational brands are operational too, ranging from luxury cars, such as Porsche, Aston Martin, and Mercedes, to fashion houses, including Missoni, Armani, Versace, and Bulgari. Most recently, US media company Condé Nast has announced its intentions to enter the sector (see Brand profiles).

Price premiums

Savills analysis shows that the average premium for branded residences, over an equivalent non-branded product in the near vicinity, stands at 35%.

This varies significantly by location, brand and operator. In emerging global cities such as Kuala Lumpur, the premium exceeds 70%. In mature markets, where location is a much greater determinant of value, premiums are less. In New York, for example, where some exceptional non-branded product has come to market, a branded discount has been recorded.

Price premiums are only one advantage of branded residences. Greater project visibility, design and marketing expertise and access to the brand’s customer base are a few of the benefits for developers. Owners, meanwhile, benefit from owning a stake in a reputable brand, have access to superior services and amenities, and in some instances access to a hotel’s rental programme. And while owners pay a premium for purchase, analysis suggests this premium carries to resales too.

These benefits should be considered and balanced against the costs of brand association, including royalty fees, design fees, commitment fees, service charges, construction costs, FF&E costs and reserve.

*Figures have been updated to exclude fractional ownership projects

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