217 ‘W’ branded residences will be available in Manchester from 2027. For sale through Savills. Photo: Savills ·Savills
Branded residences, in their modern capacity, have been around since The Four Seasons Boston opened in 1985. They are defined as high-end developments, associated in some way with a luxury brand that provides additional levels of service and management. The brand is usually a hotel, but car, fashion and other luxury goods labels are increasingly entering the market.
Residences are purchased rather than rented, but owners then make use of the development’s on-demand services, including restaurants, room service, spa facilities and golf courses, for an additional fee. They can also use the housekeeping and concierge services, so everything is ready and runs smoothly while they are staying at their residence.
“Branded residences provide the opportunity to access high-quality services, amenities and design credentials typically associated with luxury brands,” says Charles Leigh, sales director of The Whiteley. “The association with a reputable name provides buyers with assurance in their investment.”
Brands that have entered this space include The Four Seasons, Six Senses, Rosewood and Ritz-Carlton hotel groups; Ferrari (RACE) and Bentley in the luxury car industry and fashion labels Fendi, Armani and Bulgari.
“There are more than 220 brands active to varying degrees within the sector,” says Rico Picenoni, Savills head of global residential development consultancy. “The brands are predominantly hospitality brands, but also include automotive, food and beverage, design, fashion and other industries.
“Brands possess an emotional appeal to purchasers who trust and confide in the brands, which in many cases have been operating luxury hotels for decades.”
Branded residences are popping up all over the globe, but the US is still a hotspot.
“North America, the birthplace of the sector, was the single, most active region until 2015, when its contribution to the global landscape dropped below 50% for the first time,” says Picenoni.
“The Middle East and Africa are expected to see the strongest growth at 270% over the next seven years, while Asia Pacific is also on an impressive growth trajectory.”
At a local level, there are two areas in particular that have seen significant expansion. “There are hotel brands everywhere, but non-hotel brands are focussed on Miami and Dubai,” says Liam Bailey, head of global research at Knight Frank.
New York and London are also seeing increasing numbers of branded developments.
There’s expected to be a 100% increase in branded residences over the next seven years and, over the next five, Savills forecasts that 60 new brands will enter the space, and the industry will reach five new geographies, including in countries such as Romania and Tanzania.
Owners can make use of the development’s on-demand services, including restaurants, room service, spa facilities and golf courses. The OWO Residences by Raffles, London, for sale through Savills. Photo: Savills ·Savills
As well as the initial purchase price, buyers of branded residences have to pay an annual service charge and then additional fees for extra amenities.
“Typically, residence owners enjoy essential services that are covered in their service charge, including the management fees that are payable to the brand. In addition to this, they enjoy access to á-la-carte services that are payable on consumption and may include private chefs, housekeeping, private transportation, and much, much more,” says Picenoni.
As the on-going costs can be relatively high, potential buyers need to consider how long they will spend at the branded residence and which services they will make use of.
Most branded residences are bought by ultra-high-net-worth individuals (UHNWIs) or high-net-worth individuals (HNWIs) due to their high cost.
“These are affluent individuals buying them as second homes,” says Bailey. “I’m making an informed guess, but I’d say people in their 40s, 50s, 60s… Some of the big hotel brands have numerous owners who become collectors and have them as part of an investment portfolio.”
Many purchasers, especially those buying in areas that aren’t familiar to them, are attracted to a branded residence because they trust the brand and this gives them extra confidence in the development.
“There’s a degree of value placed on the brand,” says Bailey. “If you’re buying outside your country, it’s confirming that it’s a sensible thing to do; it also makes sense as it’s an easier purchase process.”
The flip side of this is that you are paying a premium over non-branded residences that might have a similar offering or be better value.
‘Non-hotel brands are focused on Miami and Dubai,’ according to Liam Bailey, head of global research at Knight Frank. Mr C Residences Downtown Dubai (Cipriani) for sale through Savills. Photo: Savills ·Savills
There are several watchouts that those purchasing branded residences need to be aware of.
The first is the relationship between the brand and the developer. “The developer owns the building, not the brand, and there is a licensing agreement in place,” says Bailey. “Ultimately what you are buying is a residential property with a brand attached… In rare occasions, the brands might change. You need to look at the developer and the brand; is there a track record in the market for a long-term agreement?”
It’s also important to understand that branded residences vary across different regions so, even if you’re buying with the same brand, the offering, fees and rules might be different. In particular, this may relate to whether you can rent the property out when you aren’t using it.
“In certain locations, brands don’t allow you to rent out, you can only occupy,” says Bailey. “Others have rental programmes and take a percentage of the rental income to pay for managing the costs.”
You also need to consider the brand itself and the services it’s offering, especially if it’s not known for being in the hospitality sector. “The value of a branded residence isn’t solely determined by its relation to a prestigious brand, so buyers should be wary of non-hospitality brands putting their stamp on residential schemes — it is about more than just adding a logo!” flags Leigh.
As well as the initial purchase price, buyers of branded residences have to pay an annual service charge and then additional fees for extra amenities. Mr C Residences Downtown Dubai (Cipriani) for sale through Savills. Photo: Savills ·Savills
With the supply and spread of branded residences expanding so significantly, it’s worth considering their potential for investment.
“[Dubai and Miami branded residence markets] have boomed in the last five years but how successful they will be in the long term has not been tested yet,” says Bailey.
Dubai’s property market has doubled in value in the last two years so it’s difficult to work out how much of this increase is down to growth in the region as a whole.
Picenoni agrees: “Branded residences were borne out of the luxury hospitality industry and are first and foremost a lifestyle purchase, as opposed to an investment.”
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