The demand for branded residences – from investors, developers, and owners – is growing in several new European markets in addition to the UAE.
There is new interest in standalone branded residences (i.e. accommodation units not attached to a hotel) from families and younger buyers.
Marriott International - with 135 branded residences already in operation around the world – has a pipeline of another 121, forty of which are in EMEA.
Dana Jacobsohn, chief development officer, Marriott International, said: “A lot are, of course, in the UAE but we’re also seeing growth in Spain, Portugal, Italy, Baku, Azerbaijan; Limassol, Cyprus; and Bodrum, Turkey; so many great new markets.”
Much of this growth is concentrated in Dubai, with a raft of standalone branded residences under development, including the 104-unit W Residences on the Palm; plus, brands like Bentley, Bugatti, Aston Martin, Cavalli, Karl Lagerfeld, and Mercedes-Benz putting their names onto developments.
“It’s like the new South Florida. Every branded residential product, every luxury car company, every jeweller, every fashion designer is already in South Florida, and it feels like they are all moving to Dubai now,” commented Jacobsohn.
Young individuals and families are new demographics for branded residence ownership, she said. “One example would be the W Manchester project in the UK. It's all about lifestyle, it's all about being part of the community, the rooftop bar, the DJ, the F&B scene. And that's not what you would have expected ten years ago for a branded residential project. So that project became 80% under contract very quickly.”
At a Ritz Carlton residential project, the sales and marketing team expected buyers to be predominantly empty nesters, but found that families were moving in, meaning playgrounds needed to be added to the facilities.
It is the stakeholders’ responsibility to make crystal clear the exact nature of the product they are selling, said Alda Filipe, real estate director, Kronos Homes.
“Brands play a very important role because if I'm selling an Edition, for example, it’s very different from selling a W. I had a client who once told me: ‘I bought in the W and it’s a bit noisy.’ And I said: ‘Well that’s the DNA of the brand: DJs at sunset.’ We have to be very clear and explain what they are buying into.”
Standalone branded residences are a relatively new phenomenon, particularly those carrying non-hospitality names.
Traditionally, branded residences are attached to a hotel so residents can enjoy the hotel’s amenities and services. The Corinthia London, for example, has 12 apartments directly connected to the hotel via an elevator.
Guido Fredrich, chief development officer, Corinthia Hotels UK, said: “We’re definitely seeing a growing interest in branded residences.” With eight confirmed hotels in the pipeline, four will include branded residences.
Many owners use their residence for a portion of the year (e.g., two months) and participate in a rental programme for the remainder of the time.
This dual usage of the accommodation is not without its complexities. Nicholas Mellis, vice president, acquisitions, Highgate Hotels, said: “It's complicated, but if you're able to get it right with a rental programme that works with pricing, with a product that works, there is the opportunity to create a significant premium and you can create a fee stream which is relatively stable. And you're able to get cashflow upfront in the way of individual sales depending on how fast the sales team can move the product.”
Filipe added: “The brand helps you with a faster rhythm of sales versus non-branded because the sales, marketing and distribution machine is there. So that really helps from an investment point of view. Maybe you start a project, and you already have 30-40 per cent sold. If you’re IRR driven, getting those cashflows upfront makes a ton of difference.”
Hospitality companies are different from luxury, fashion and automotive brands when it comes to creating successful branded residences, said Heidi Schmidtke, head of operator selection EMEA, JLL.
Firstly, they have decades experience of delivering in-person hospitality, secondly, they often have vast accommodation-specific distribution networks. For example, 90% of Marriott branded resident owners are members of its Bonvoy loyalty programme.
Most buyers want to see historical performance data, said Filipe: “Most of my clients are not buying as their permanent home. They want to enjoy the property for a few weeks, and they want to see some yield. They’re buying as a long-term investment. Show me the numbers. What happened last year? What are your projections?”
Nicholas Mellis, vice president, acquisitions, Highgate Hotels, said: “For us, the way we think about investments is there needs to be some hospitality component and we typically look to manage that ourselves. The reason at the core of why we go to a brand is distribution. And for us, we don't look at any kind of standalone residential. There's always a hotel component. Regarding some of these other guys that are getting into hospitality, there's no distribution. That's the real difference maker.”