New research report on Branded Residences from Savills World Research
Branded residences can offer a solution to residents in emerging markets with immature residential property sectors. Savills World Research has identified ‘emerged’ and ‘emerging’ countries with the best domestic growth prospects over the next decade. The UAE, a safe haven in the Middle East, ranks first and already has the largest pipeline of branded projects outside the US. Pioneering developers and operators may consider emerging eastern European markets such as Latvia and Slovenia, all currently unserved with no projects in the pipeline.
The amount of existing supply and projects currently under construction suggests a broader geographic spread than ever before. Over a quarter of projects are in Asia Pacific (27%), closely followed by the Middle East and North Africa with 23%.
Smaller premiums are achieved in more mature luxury markets where prime stock is of a high quality and location is a greater determinant of value. Analysis of recent sales prices in New York suggests that, in some cases, there is a branded discount of 15% as there are some exceptional non-branded buildings in the market.
Savills analysis shows an average price premium for branded residences over non-branded schemes of 31%, but this varies significantly by location. The largest premiums are usually achieved in emerging markets where the luxury brand adds an appeal to the newly wealthy. Owning a branded property is seen as both status affirming and a safer investment choice. Premiums are also higher in these markets because the standard is usually much higher than existing non-branded stock.
Paul Tostevin, associate director, Savills World Research, said, “New brands will give hoteliers a run for their money. Tech companies, already disrupting the car industry, may be a natural fit. Luxury food and drink brands may be another contender.”
Savills World Research estimates that there are now more than 400 branded residential schemes globally, with a combined stock of approximately 55,000 residential units. Hotel brands are the dominant force and account for some 85% of schemes. Marriot International is the largest single player with a market share of 31% among hoteliers by number of schemes. But the largest individual brand by number of schemes is not a hotelier, but Yoo, a brand built on design credentials. It has more than 50 branded schemes in operation.
Riyan Itani, head of international development consultancy, Savills, said, “Cash-rich, time-poor, brand-conscious individuals are attracted by the quality of design, security and high levels of service that branded residences offer. Hoteliers are actively diversifying into residential whilst developers are now recognising the value-add of a brand in an increasingly competitive marketplace.”
Branded residences have been around for the last century, but it is in the last two decades that the sector has really taken off, says international real estate adviser Savills in its Spotlight on Branded Residences launched today.