International Property - Global Branded Residences
As branded residences proliferate, from the Caribbean to China, a growing number of developers, hotel groups and investors are looking to capitalise on this opportunity. But just what are branded residences, what underpins their appeal, and what is driving the rapid expansion and diversification of this sector?
The evolution of branded residences
The first true branded residence, the Sherry-Netherland hotel in Manhattan, opened its doors in 1927. More than 90 years on, the sector has grown enormously and is now to be found in over 60 countries across the globe.
Our research shows that there are now over 400 branded residences across the globe, the majority of which are hotel branded. Growth in the sector shows little sign of abating: “Marriott alone has more than 60 branded residential projects in the pipeline,” says Daniel von Barloewen, Regional Senior Director for Mixed-Use development for Europe at Marriott International. In 2018 and 2019 alone, Marriott plans to open 19 branded residential projects in nine countries.
The birth of the branded concept can be traced back to the prolonged economic boom of the 1920’s in America. Indeed, across the years, there is a direct correlation between wealth creation and demand for branded residences.
Much of the sector’s expansion has occurred in more recent decades. “The market did not really take-off until the mid-1980s when Four Seasons opened condos next to their hotel in Boston. That really demonstrated the success of the model,” says Chris Graham, an expert on the sector. The Aman hotel group launched the concept in a resort setting in 1988, with Amanpuri in Phuket, Thailand.
It is no coincidence that we are seeing such a renewed interest in the branded concept given the rapid growth in global wealth witnessed since 2000. Knight Frank’s Wealth Report highlights that the global ultra-wealthy population ($50m+ in net assets), grew by 18% in the five years up to 2017 and is forecast to increase a further 40% over the next five.
With the branded concept well established by hotel operators, the number and types of operators entering the space is now expanding and diversifying. Brands such as Versace, Armani and Porsche have all lent their names to developments in recent years. In this report, we look at the different types of branded residence, the rationale behind the concept, global exemplars and future trends.
What defines a branded residence?
The traditional branded concept is a hotelled development with integrated or linked residences. They naturally benefit from the hotel brand (quality), management (smooth running) and services (luxury). In essence, this gives the owner the comfort and permanence of a home but with the full benefits and luxury of a five-star hotel.
This concept has diversified so that it can be offered more flexibly across varying markets and locations and now manifests itself in many ways globally, which fall into five broad categories, as demonstrated below.
While every scheme is different, one could argue that the impact of the branded concept is diluted the more it moves away from the original hotel-driven traditional model.
Timeline of the branded residence
1927 Sherry-Netherland hotel opens in New York marking the birth of the concept
1985 Four Seasons opens its first branded private residences in Boston
1988 Aman launches the first resort branded residence with Amanpuri in Phuket, Thailand
2011 The Residences at Mandarin Oriental, London were completed setting a new world benchmark for luxury branded residences
2000-2018 Rapid expansion to over 400 projects by 2018
The wide and expanding reach of the branded residence concept, mapped.
To build a global picture of branded residences we have looked at some of the industry’s biggest hotel operators including Marriott, Four Seasons, Accor Hotels and many more. Together Marriott, Four Seasons and Accor Hotels represent over half of all hotel branded residences, with Marriot alone accounting for three-quarters of these. The map demonstrates the geographical expanse of the concept with hotel branded residences present in over 180 locations across 64 countries globally.
As the concept originated in North America, it is no surprise that this market is the most developed and has the largest presence, accounting for a third of all schemes. However, the Asian market for hotel branded residences has seen strong growth, particularly in Thailand and Indonesia, with Asia now accounting for an estimated 30% of schemes. This trend is set to continue, “Asia is the continent of opportunity: there’s a growing market and rapid urbanisation,” says Muriel Muirden, executive vice president at the architectural firm WATG.
At a more localised level, as a single city, Dubai is where there is the highest concentration of branded residences. Withoperators such as Kerzner International, The Address, The W, Jumeirah and Bvlgari entering the branded residence marketplace, from resort living on the Palm Jumeriah to urban concepts close to Downtown Dubai and the Financial Centre (DIFC). According to Piers Schmidt, a luxury brand consultant and commentator at The Luxury Consultancy, “the explosion of development in Dubai is down to the fact that developers and promoters have a need to differentiate: you can build it taller, make it revolve and shimmer, but when you get inside an apartment, having a brand gives an advantage.”
One region in which the branded concept is still quite small is Europe, accounting for only 7% of branded residences. In Europe there is “less demand for branded things, period,” according to Schmidt. “Developers are less prone to license a brand to move their real estate [in Europe] because they know their asset has appeal,” he adds. However as residential markets become more competitive Europe may be another area of growth.
The branded concept is a predominantly urban concept, with 62% of hotel branded residences in cities as opposed to beach/resort locations. However, this does vary by region. In North America, two-thirds of schemes are in cities, whereas in Asia it is much more balanced, with almost half being in resort locations.
As the market continues to expand it is expected that developments are likely to concentrate in urban areas. Across the global economy there is a huge shift towards major urban hubs, for example Aman, the first resort brand, is now moving towards the urban space. This is driven by the less seasonally affected demand in urban centres.
LOCATIONS IN FOCUS
We spoke to four leaders in Knight Frank’s global network on their marketplace for branded residences.
Hotel branded residences have been a key segment of New York City’s luxury market since the original hotel serviced residential apartments at The Sherry- Netherland and The Carlyle.
The early 2000’s saw a resurgence of large-scale hotel-branded condominiums, notably the opening of The Residences at Mandarin Oriental New York in 2003 as part of the mixed-use Time Warner Center development perched on the prime southwest corner of Manhattan’s Central Park. This revival reflected the rapid expansion of global wealth and the focus of New York as a key global city for high net worth individuals.
In the 15 years since, a number of hotel branded condominium developments have created a popular niche in the prime and super prime development market. While previously clustered in historically prime neighbourhoods on the Upper East Side and Midtown, new hotel branded developments have now extended into the prime Downtown market. Midtown’s Baccarat Hotel and Residences, which sold out in 2017, boasts the world’s first Baccarat Hotel and views of Central Park. With the crowning duplex penthouse selling for more than $42 million in 2016, condominium residents here have access to five-star hotel services and amenities.”
In a city renowned for its plethora of 5-star hotels, the emergence of branded residences in Dubai has become increasingly common.
In recent years Dubai has transitioned from a holiday destination, to a city in which to invest in a more permanent home. The global citizen is looking for a more sophisticated offering in Dubai that will elevate their living experience to incorporate not only great design and architecture but also the benefits of resort living private beaches, spa facilities, concierge and Michelin-starred restaurants.
The branded residence offering in Dubai has raised the bar even further, with its first super-prime development. Located on the Palm Jumeirah, directly adjacent to the iconic Atlantis The Palm resort, The Royal Atlantis Resort and Residences provide a selection of 2, 3 and 4 bedroom apartments, penthouses and garden suites. Not only does the development benefit from all the world-class amenities and experiences that one would expect from a best-in-class hotel, it also occupies one of the world’s most prime locations in global real estate terms and is set to become the new icon of Dubai.”
Maria Morris, Knight Frank
Since a global residential benchmark was set at One Hyde Park, the first European residences at the Mandarin Oriental, the London market has seen an increase in branded residences at the top end of the market.
While many prime residential developments actually offer the service level and amenity akin to hotels, both hotel and residential developers have identified London as the global city of desire for ultra high net worth individuals and are looking to take advantage of this focus.”
Alexander Lewis, Knight Frank
One Barangaroo, Crown Residences marks the introduction of hotel branded residences in Australia. The arrival of branded residences at this time into Sydney is no coincidence.
Sydney continues to attract high net worth individuals (HNWIs) by taking up a significant proportion of the 10,000 HNWIs net inflow into Australia each year, the highest of any country, for three years running as reported by New World Wealth. This demonstrates Sydney as a rapidly advancing global city. Since the global financial crisis in 2008 Sydney has seen strong growth in prime property prices. The lack of exceptional stock has plagued the top end of the market, lifting prices as demand continues to increase.
One Barangaroo, Crown Residences, as the country’s first fully integrated, six-star hotel branded residences, has received a very warm welcome from both Australian and offshore purchasers alike since sales commenced. The driving force behind the on-going interest is a combination of the lifestyle offering as well as the design and location.
The full suite of hotel-style concierge services, in-room dining, priority booking at the restaurants within the building and the private residents’ pool deck, means that the Crown Residences have set the benchmark high for Australia and will compete on a global level to both investors and residents alike.
The Wilkinson Eyre designed building will be globally recognisable and with floor to ceiling windows throughout, will offer iconic views over Sydney Harbour Bridge and the Opera House.”
Erin van Tuil, Knight Frank
THE FUTURE OUTLOOK
As branded residences multiply globally, how and where is the sector expected to grow and diversify? What are the potential risks and rewards for developers, brands and buyers as it does so? And in an age of high customer expectation and the on-demand economy, how will branded residences meaningfully differentiate themselves from the competition?
Branded residences, until the 1980’s a scarce commodity but can now be found in almost every major city and major holiday destination. Having extended its reach, the sector is growing exponentially. The major hotel brands dominate and expand. However, smaller hotel groups are entering the market and, recently, luxury brands outside hospitality have lent their names to new developments. This adds a new dimension to the concept, one with an emphasis on pure association rather than a proven service record.
The sector’s growth has been such that, in some areas, the development type has almost become ubiquitous. They were once “the exception rather than the rule,” says Chris Graham, an expert on branded residences, “but look at Thailand today, where almost 40% of all new developments are now branded.” “Marriott International sees demand for colocated residential product in the luxury and uppermost tiers gaining traction,” says Daniel von Barloewen of Marriott International. “The company expects to expand its branded residential portfolio by more than 70% in the next four years.”
“From a consumer perspective, the power of brand identification is only growing,” says James Snelgar, head of business development at YOO. “The world is becoming increasingly design conscious and brand aware. We talk about appealing to ‘a tribe’ of like-minded people, people who want to live and socialise with other people with whom they share things in common,” he says.
As well as reaching into new territories, hotel developers are attempting to expand their customer base. “We are seeing an increasing demand now for a more affordable offer catering for the millennials,” says Snelgar. Resort developers in particular, says Muirden, “are looking at the behaviour of millennial parents and what they want: they really want a good, well rounded experience for their kids.”
Increasingly, operators are looking at experiences, rather than just services or facilities, as a way to tempt buyers. “The hospitality industry has gone very much from the tangible to the emotional. It used to be “we can offer more: bigger pool, bigger gym etc. Those features have pretty much become a given. There are only so many gold taps and marble you can put into a residence,” says Graham. Now, “it’s about creating memories and an emotional link: bringing in a celebrity chef or cocktail maker, arranging a cycle tour,” he adds. “The focus,” echoes Snelgar, “is now becoming more experience orientated: for example cooking, climbing or diving.”
“As well as diversifying the activities they offer, resorts will need to differentiate themselves: they’ll need to be more eco-focused in design and operation. Branded residences will have to be far more holistic, with beautiful gardens and a wellness focus, as well as being more multi-generational,” says Muriel Muirden of WATG.
With a crowded market providing the impetus to differentiate, developers are also aligning with renowned brands for more and more aspects of any residential project. The model originated with hotels lending their name to developments. The next stage saw the arrival of designers –
such as Philippe Starck, who co-founded YOO. “Following the designers have been the ‘starchitects’: Daniel Libeskind, Frank Gehry, Norman Foster and César Pelli among them. In some cases, as developers strive to raise the bar, you can now end up with two or three brands on a single development. The Armani residences in Miami has Giorgio Armani doing the interiors and Pelli doing the exterior,” says Graham. These brands are being pushed forward as part of a scheme’s identity, rather than just a component part of the physical product.
The growth of the sector will not be without potential pitfalls. There is a danger that in democratising the concept of branded residences, developers also risk devaluing it. The concept has always been aspirational. Now hotel companies are offering brands at a 4-star level also.
That risk may be unlikely to stall developers, however, with industry commentators saying that it is unlikely that we are going to move to a world where suddenly buyers are no longer concerned with the offerings of branded residences.
The market will undoubtedly get more competitive, and there will be a few developers and brands squeezed out as a result, but that is unlikely to stop them trying to capitalise on a market which still offers substantial benefits. The crucial question, as Graham puts it, is this: “the bar gets raised every year – more facilities, more experience, more tech: if everyone’s doing that, how are you going to to offer something different?”
There are wide ranging factors that determine the value placed on hotel branded residences and these factors must be considered at all stages of planning and development. Understanding what drives decisions is key to optimising profit. This is an area of focus for Knight Frank’s consultants across the globe.
Before any residence is brought to the market there are years of work; from concept planning through to detailed design. Maria Morris states that the consultancy services provided by Knight Frank throughout the process “optimise the residential offering by aligning every aspect of the residence with what the buyer is looking for.”
Wealthy individuals buy hotel branded residences as a lifestyle option but also with an eye on capital appreciation. Carolyn Sebba comments that high-end hotel brands represent “prestige, an extraordinary level of services, aspirational lifestyle and convenience.” In addition, Morris notes that is also important to ensure that the brand is right. “It is simple for a developer to enter in to a license agreement with any operator, but for the branded residences to be exceptional, it has to be the right operator that aligns with the level of service that buyers expect.”
The lifestyle component of hotel branded residences is key to buyers’ decisions. Erin van Tuil remarks that hotel branded residences offer “ease of living through having all of the facilities on your doorstep,” van Tuil continues that “a hotel concierge offers a different service than what you can find in serviced apartments. For example if you want to organise a sommelier or private chef they can do that for you - a normal concierge wouldn’t.” Sebba adds that the list of services available are endless and hard to replicate outside this space, “for example, amenities include having a butler service, a seamstress, translation services, personal shopping, flower delivery, catering, childcare, and all of these are on call.”
However, the added facilities alone are not enough to create a best in-class residence. All aspects relating to the residence must be considered carefully and each stage in the development process interrogated as to what is going to add the most value to the buyer. “Having the right architecture, right location, superior interior designers, and extras, such as landscape gardening, marry together as real value drivers,” notes van Tuil. “In my view, it has to have a combination of great design and tremendous architecture, top class interiors, plus the right amenities and experiences. Luxury is expected from our clients; the most important element is how to raise the bar across every aspect of the overall offering,” adds Morris.
“There are some more practical elements that need to be analysed in the concept phases as well,” highlights Alexander Lewis. “In the first instance, you have to remember that you are still designing a residential scheme. Space and function will always outsell frills. Scheme concept and space planning, from building form to detailed layouts, must be perfect. Branded residences can also throw up problems such as onerous service charges and security issues. Cost control and specification analysis is also critical in an inflationary environment.”
“Designers can get carried away with all the niceties and latest gadgets,” adds van Tuil. “Focus must be on what the buyer places value on, not just expensive gimics.”
Morris remarks that our work can “ensure every project is designed with the end user in mind, which is crucial in an increasingly competitive global marketplace.” She continues saying that “we offer consultancy services from conception through to completion. Our goal is to add value to the entire development chain, from spatial planning and mix analysis, through to advising on the amenities required in each building.” Sebba adds that “with access to an immense network, including high and ultra high net worth clients, we can provide in-depth market research, intelligence from the brokerage community, knowledge of the market and buyer preferences, all valuable input to create the perfect design, amenity and service offering.”
“Good hotel design and good residential design do not always go hand in hand though, as they are both specialised markets that until recently have remained separate, and sometimes follow opposing principles. Design grids, service runs, basement requirements and external light treatment may all conflict and a key part of our job is working with different design disciplines to ensure the value of both hotel and residential are optimised,” adds Lewis.
“Most importantly,” van Tuil concludes, “we work as a global team. Branded residences cannot be designed in isolation without considering global exemplars. Not only the residences, but the hotel brands that lie behind them. The reality is that our clients, whether they are buying in Dubai or Sydney, will have likely experienced the very best across continents. They will be comparing a scheme offered in London to one offered in New York. Our greatest strength as a firm is working together to ensure our clients schemes are globally competitive.”
* Knight Frank’s residential alliance partner in the United States
Courtesy: Knight Frank
Contacts – Research
Liam Bailey - Global Head of Research
Flora Harley - Senior Research Analyst
Contacts – Residential Sales
Erin van Tuil - Partner, One Barangaroo, Crown Residences
Maria Morris - Partner, Head of MENA Residential
Alexander Lewis - Partner, Residential Development – Consultancy
Stacey Watson - Partner, International Residential
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