The Branded Residences: Crisis-Resistant New Real Estate

Author: Miguel Espada, Serial Entrepreneur, Owner and President of the Propriétés & Co group and Slowlifecapital Family Office, Alumni of ESCP Europe and Harvard Business School.

There’s a current real estate trend that all property experts are discussing: the desire of High Net Worth Individuals (HNWI) to access a new level of luxury in their daily lives - to bring a turnkey, five-star experience to their homes. Enter Branded Residences - homes built under the auspices of a luxury name, often a hotel.

The global economy is going through a period of stress and uncertainty. This has led to a noticeable slowdown in residential real estate markets at large. Branded Residences, as a sector, have continued to grow strongly in the face of the new housing crisis, especially in Europe and in France.

The concept of Branded Residences has been around since the 1920s, but it wasn't until the 1980s that the sector truly emerged as a significant subset of the residential market. Initially focused on North America, residential programs in partnership with hotel brands are now present in nearly all global markets, with exceptional new real estate projects in Europe such as Mandarin Oriental Residences in Barcelone, Amanzoe villas in Greece, Port Marseillan Residences in the South of France, Pine Cliff residences in Algarve - Portugal, or OWO Residences by Raffles in London.

Worldwide, there are 690 completed projects as of mid-2023, with over 600 projects in the pipeline expected to be delivered by 2030. This future growth aligns with historical trends - over the last decade, Branded Residences projects have increased by over 160%.

Global sales of luxury properties are experiencing significant growth. Key markets such as the United States, Mexico, the United Kingdom, Australia, Saudi Arabia, Dubai, Spain, Portugal, Greece, and France are preferred destinations for purchasing secondary residences. Here’s an analysis of the current and future Branded Residences market…

The evaluation of the branded luxury residences market covers 324 projects comprising over 26,000 residential units in 52 countries. Among the surveyed projects, 186 are operational, and 138 are under development. Our assessment of projects with known opening dates indicates that the sector will experience an average growth of 12% per year until 2026. Saudi Arabia and Vietnam are the markets experiencing the fastest growth in terms of project numbers, while the United Arab Emirates, Mexico, and the United Kingdom have significant projects in progress. Florida leads in the growth of the American market. Brands like Aman and Six Senses are experiencing strong growth, while The Ritz-Carlton (Groupe Marriott) and Four Seasons lead in terms of project numbers.

Knight Frank is indeed a renowned real estate firm, offering a wide range of services and having a global presence. Founded in the United Kingdom in 1896 and establishing its office in Paris in 1972, it has expanded to become a worldwide network with over 207 branches in 43 countries. With a team of over 6,000 experienced professionals, Knight Frank annually handles real estate worth a total value of £18.3 billion (approximately €22.9 billion) across commercial, agricultural, and residential sectors. Their services cater to a diverse clientele, ranging from individuals to major real estate developers, investors, and businesses, providing them with advice and expertise in various areas of real estate.

The evolving patterns of use continue to shape the preferences of buyers of secondary residences. With the current shift towards flexible and hybrid work, Branded Residences buyers are using their properties for longer periods. This evolution prompts changes in the supply of amenities and services globally, with brands adapting to meet evolving customer preferences.

Amidst this evolution, competition for destinations, developments, and buyers remains intense. Success in this continually growing global sector depends on a deep understanding of local markets, buyer trends, and the merging of brand identity with each unique location - factors that continue to propel projects and brands forward.

North America, once representing the entirety of existing programs, now accounts for a little over a third of the total supply. Over the last 30 years, the sector has expanded across all regions; the Asia-Pacific and the Middle East are hotspots, hosting an additional 40% of the total supply. The most significant growth during the covered period has been in the Middle East (+120%) and Central and Latin America (+89%). All regions of the world are projected to exhibit high growth levels by 2030.

Among the future wealth creation hubs, 10 countries hold the best prospects for anticipated growth in UHNWI population from 2022 to 2027. France is among the Top 5 countries with the strongest global demand for luxury residences in 2023. Asia is the most active market in terms of volume according to experts. The Branded Residence concept is well-established in this region, with room for further growth. According to these same experts, certain European cities will also benefit from the Branded Residences phenomenon. London and Barcelona will lead, but Europe's growth will focus on beach resorts and leisure destinations in Portugal, Turkey, France, and potentially Italy and Greece. The Middle East is, of course, very important, with Dubai in the United Arab Emirates, but Saudi Arabia is thriving in the Branded Residences market. The Americas also experience healthy growth, with demands for urban and leisure locations for branded residential projects in the United States, the Caribbean, and Mexico.

The past year has been marked by global economic uncertainty, resulting in a general slowdown in residential real estate markets. However, high-end residential properties have maintained their strength despite these challenging economic conditions. Concurrently, luxury residences are expanding globally, with brands exploring new territories to expand their footprint. This expansion is particularly evident in emerging markets, where these brands leverage their reputation in rapidly growing economic regions accumulating wealth.

The landscape of luxury residences is transforming with the entry of new players, including brands not traditionally part of the hotel sector. While luxury hotel brands remain predominant, other segments are emerging, promoting diversification to cater to diverse buyer needs in various geographical areas.

Shifts in usage patterns are also influencing buyer preferences. With the rise of flexible and hybrid work, luxury residence buyers invest in homes they occupy for extended periods. This trend leads to adaptations in offerings in terms of amenities and services on a global scale, with brands adjusting to meet these shifts in customer preferences. In this evolving context, competition for developments and buyers remains intense. Success in this continually growing sector depends on a nuanced understanding of local markets, subtle buyer trends, and the integration of brand identity with each location, elements that continue to drive projects and brands forward.

"On a global scale, the luxury residence landscape has expanded," according to Rico Picenoni, Head of Savills Global Residential Development Consultancy. It no longer confines itself solely to luxury hotels but begins to offer products at all levels within hotel chains.

Founded in the UK in 1855, Savills is one of the world's leading real estate agencies. For over 160 years, they have offered exceptional properties, specialized services, and expert advice to their clients, helping them make decisions and achieve their real estate ambitions.

Let's revisit some advantages of Branded Residences for hotel groups:

• Instantaneous customer relations
• Additional revenue streams from management fees and licenses
• Numerous advantages for buyers
• Hassle-free property management
• Quality of life with superior services and amenities
• Professional house management
• Guaranteed rental income potential
• Loyalty programs offering discounted stays across the hotel network
• Benefits for developers
• Buyer trust through brand association
• Premium prices for developers
• Enhanced project visibility
• Consistency at all levels
• Access to hotel clientele

What are the profiles of Branded Residences buyers?
Regular buyers of luxury residences are High Net Worth Individuals (HNWI), wealthy individuals whose net worth generally reaches around $1 million. They are drawn to the concept of these brands because, while easily affluent, they often lack time. Thus, the benefits of delegating home management and enjoying luxury experiences and services offered by the brand make it an attractive and wise investment.

What is the model of Branded Residences?
The majority of branded residences operate on a model where owners must acquire a set of standard accessories and furniture to integrate their home into the rental program. Additionally, the hotel services offered provide an instantly luxurious lifestyle, while extras like housekeeping or a private chef can be purchased additionally.

Like any residential property within a resort, owners pay an annual fee for the maintenance of common areas and facilities. However, this type of residence is often perceived as a symbol of success and a trophy by many buyers in this segment.

Typical services and amenities offered by hotel groups:

• 24-hour security
• Valet services
• Concierge, reception, housekeeping
• On-site dining
• Entertainment, travel, and golf reservations
• Personal sports coach
• On-site spa and wellness
• Childcare and pet services
• Indoor and outdoor pools

This type of real estate investment shows no signs of slowing down and could even gain more popularity due to significant geographical expansion. Currently under construction in the Middle East, Latin America, Europe, Asia, and Africa, these residences promise additional growth in regions like the United Arab Emirates, China, Israel, and Qatar.

Other brands, whether in travel, automotive, gastronomy, or fashion, are also exploring this luxury residence concept to gain buyer confidence in the real estate sector. Some experts even believe that as buyers seek more personalized services, brands will turn to even more unique residences rather than ready-made models.

In the fashion industry, consider Karl Lagerfeld.
The couture house, based in Amsterdam and Paris, inaugurated its first luxury residences in Marbella, Spain, in 2021 and recently announced branded residence projects within The Sail hotel tower in Melaka, Malaysia. Lagerfeld, who passed away in 2019 after an exceptional career as a designer, was involved in numerous interior and hotel projects throughout his life. The interior design sector has become a lucrative field for luxury brands in recent years. However, houses such as Fendi, Karl Lagerfeld, Elie Saab, and Dolce & Gabbana are now considering investing in real estate. In Marbella, a luxury resort in Spain, these brands now offer "Branded Residences" to millionaires.

In the automotive and fashion sectors: Porsche Penthouses and Armani Apartments
Branded residences in the Americas are expected to double by 2030: real estate developers are eager to partner with luxury brands to offer luxury residences at affordable prices. The amenities at Armani Casa à Sunny Isles Beach, Florida, are continuously improving. Led by the renowned Giorgio Armani himself, the interiors offer exceptional design accompanied by a collection of high-end artworks. Add to that a private restaurant, gym, spa, cinema, lounge, as well as a cigar and wine cellar.

For Daniel Tzinker, a real estate broker at The Agency, who acquired a property in this building near Miami, it's not just these extraordinary amenities that caught his attention. It's the brand!". This name has significantly boosted the value of the building," emphasized Mr. Tzinker. "Will people be more intrigued by a building bearing a brand than an anonymous building? It's a very clever idea." While residences offering 5-star restaurants and hotel-quality amenities are not new, their locations were once known only to affluent buyers. Now, ultra-luxury brands like Fendi and Nobu are entering the market by developing branded residences. In Florida, there are 40 similar projects to Armani, a rapidly expanding market for branded residences, with 20 others in progress. According to Savills, the first 15 sites of this kind in America are expected to double by 2030.

Real estate developers know that these high-end properties are expensive and attract a specific group of buyers eager to associate with a brand. Thus, competition intensifies in this sector, with new amenities and brands. "Developers are looking to generate additional income, regardless of the quality of already high-end constructions," explains Peter Bazeli, director at Weitzman, a major branded residence consultant in the United States. "They want to create value based on exclusivity. This is where a brand can play a crucial role for developers."

And again in the automotive sector, this time: Mercedes-Benz in Dubai
The Mercedes-Benz Places project, planned in the heart of Dubai, was recently announced. Both companies highlighted that this collaboration arose from a shared passion for iconic design and innovation. This partnership aims to push the boundaries in design and luxury residences, merging the worlds of real estate and automotive excellence. Binghatti Properties unveiled the architectural plans for this exclusive residence, which will rise 341 meters high and span 65 floors. Muhammad BinGhatti, PDG de Binghatti, expressed his enthusiasm: "We are very excited to collaborate with Mercedes-Benz, an iconic name, to create the first luxury residence bearing the Mercedes-Benz brand globally. Mercedes-Benz Places in Dubai is not limited to being a mere real estate project; it will also focus on community and mobility, thus setting new standards for smart lifestyle."

In the south of France, the seaside resort project Port-Marseillan stands as a pioneer in the luxurious segment of Branded Residences in France. It's no coincidence that this unique destination and exceptional site were chosen by one of the biggest names in the hotel industry.

This project was initiated by Miguel Espada, President of the Propriétés & Co group, and will not only include luxury apartments and villas but also a 5-star hotel, bearing the stamp of a luxury brand from the leading international hotel group, which will soon be unveiled.

The global distribution of Branded Residences, such as Port-Marseillan, also continues to expand, with brands seeking new unique locations to develop their portfolios. This expansion extends particularly to emerging markets, where brands capitalize on their reputation in regions experiencing rapid economic growth and wealth accumulation. Thus, the Propriétés & Co group believes strongly in the development of Branded Residences in Africa and has indeed started investing in several African countries.

In France, agencies like Keller Williams, Sotheby’s Realty, Beaux villages immobilier or Remax Belgium, trust Propriétés & Co Development team & Port-Marseillan Branded Residences project, a fine example they aim to support by offering it to their wealthy and international clientele. These international agencies are well aware that the growing interest in Branded Residences will become an essential new real estate product in the years to come.