The phenomenal global growth of branded residences has captured the attention of real estate investors worldwide, drawn by its unique financial metrics, cyclical resilience and upbeat outlook.
Savills research suggests that branded residential has achieved a global growth of 180 per cent in the last ten years alone, with the sector attaining rapid success in new regions including Africa and Asia. Meanwhile, more mature hotspots in North America and the Middle East, such as Miami and Dubai, continue to impress with outsize demand for new concepts.
Chiefly backed by the global expansion of ultra-high-net-worth individuals (UHNWI) and the world’s increasingly aspirational middle classes, branded residential offers the cachet and reassurance of a famous name, paired with an amenity-rich lifestyle.
“Global wealth has exploded by $6.5 trillion in the last decade; the richest 1 percent hold 45 percent of global wealth,” says Louis Keighley, head of Savills global residential development consultancy. “For individuals buying five or six homes around the world, one of the key attractions of branded residential is the turnkey solution it represents.”
Investor appeal
On top of the sector’s rapid expansion and healthy demand dynamics, its profit margins are a key part of its investment appeal. Savills data shows that the average brand premium achieved by branded residential versus non-branded residences of a similar quality is currently 33 percent.
From a development perspective, the ability to sell-off the residential units adjacent to a luxury hotel scheme has also become a crucial financing model for the hospitality industry.
“Investing in branded residential alongside a hotel allows for pre-sales, which provide valuable upfront cash flow, and can open the door to more attractive financing options,” says Brian Betel, head of direct assets at ActivumSG. “The profit generated from the residential component can support the development of the hotel and ultimately reduce its cost basis.”
European hotspots
ActivumSG recently acquired the Spanish resort Fairmont La Hacienda, a new development on the Costa del Sol featuring 213 rooms and villas, with the deal also including 42 for-sale branded residences. Notes Betel: “For La Hacienda we believe we will be able to sell the branded residences at prices that will help to de-lever the investment and substantially enhance the return profile of the overall asset.”
Spanish property developer, Kronos Real Estate Group, has already achieved success with branded residences in areas like the Algarve, where US buyers make up a third of its clients, attracted both by copious amenities and the option to re-lease the units when vacant. Current projects in southern Portugal include the Marriott Residences Algarve Salgados and The Residences at The Westin Salgados Beach Resort. The CEO of Kronos Homes, Rui Meneses Ferreira, says that the “excellent reception” of branded residences in Portugal is inspiring the firm to expand across Spain as well.
Another player in the Iberian real estate sector is Stone Capital, a Lisbon-headquartered investor-developer that specialises in the sympathetic refurbishments of the city’s heritage buildings. Stone Capital is the co-developer of the Standard Lisbon, an ambitious project transforming a neoclassical naval hospital into a 172-room hotel with 32 adjacent branded residences. Both are being flagged by Hyatt’s growing lifestyle brand, The Standard, which is “synonymous with character, irreverence, and a strong connection to its surroundings,” according to Felicity Black-Roberts, SVP development EAME, Hyatt.
Financial benefits
According to Arthur Moreno, co-founder of Stone Capital, the combination of residences and hospitality is a tantalising prospect, both culturally and financially.
“Developing residences alongside a hotel creates significant financial and strategic benefits,” he notes. “From a residential perspective, the association with a respected hospitality brand such as The Standard Hotels, and the access to curated amenities and services typically command a premium, driving higher sales values, stronger demand, and sustained long-term asset appreciation.”
He adds: “We believe that the combination of branded residences and hotel operations provides diversified revenue streams – balancing upfront sales or lease value with recurring cash flow from hospitality.”
Moreno notes that this “dual-market approach” not only “enhances overall returns but also broadens market reach and mitigates risk by appealing to distinct yet complementary customer segments”.
US domination
The branded residential concept started out in the US in the last century, driving the emergence of power brands in the sector, such as Four Seasons, Ritz Carlton, Hilton and Fairmont. Despite new development rates in US cities now lagging demand hotspots such as Dubai, it remains a key playing field for expert investor-developers.
One such investor is Cain, which is currently developing One Beverly Hills in Los Angeles. The sizeable project will feature two Aman-branded residential towers with fewer than 200 units, a luxury Aman hotel with 78 all-suite rooms and an Aman Club. It will also integrate the existing Beverly Hilton and Waldorf Astoria Beverly Hills into a large landscaped site augmented by 200,000 square feet of luxury retail and food and beverage.
The branded residential towers will be the tallest in Beverly Hills and offer residences ranging between 2,000 and 16,000 square feet, with some featuring private pools and direct elevator access.
Jacob Sigel, senior managing director, global head of private equity at Cain International, says that the project is all about “community, centred around the gardens”. He adds: “We like to equate this with people buying in Hyde Park in London or Central Park in New York; it’s overlooking the botanical gardens, Los Angeles Country Club, the Hollywood Hills, downtown and the Pacific Ocean. It provides the connectivity within that community.”
Cain International is no stranger to developing branded residential real estate, having achieved notable successes in the field in the US and Europe. “From an investor standpoint, branded residences achieve a price premium, even over luxury non-branded product. The brand drives trust, identity and a lifestyle promise that a buyer takes comfort in.”
Further expansion is now on the card with present and new partners. “We are actively looking at branded residences across Europe,” he says. “There is huge untapped opportunity, and as Aman and other brands we’ve partnered with are looking to grow their branded residential and managed estates, they are also looking at the opportunities that we are getting into.”