The rise of branded luxury homes

In recent years an increasing number of “Branded” real estate projects have been tendered in iconic cities around the world as demand for high standards of design, services and brand recognition increases among the rich in both established and emerging markets.

According to a Knight Frank’s research, which took into account branded and non-branded property developments in 17 global cities, branded developments outperform non-branded developments, sometimes by a considerable margin. The report found, for instance, that branded property had an average 34 percent value above their non-branded counterparts, although the amount of increase depends significantly on the width and depth of the tie-up and the value of the associated product as well as on the specific location, ranging from 5.7 percent in Jakarta to as high as 120 percent in Dubai.

Considering the success of many branded projects, luxury property experts predict this will be an increasing trend. We have tried to understand the reasons of this success and which buyers and locations are most receptive to these homes.

Deeper Brand Experience

People purchasing these premium properties walk into the buying experience with the same expectations they would have walking into a designer shop in High Street Kensington or Avenue Montaigne. They require a high service level, a very distinct style and user experience. This influences the way they shop for these branded residences.

Obviously the overall quality of the development is critical as well as how its designers have successfully integrated the brand’s products throughout the property thereby reinforcing the brand dynamic.

Exclusive Membership

Consumers are buying into an international community with other like minded contemporaries who share a similar lifestyle. There is a sense of prestige, security and trust that is particularly appealing to those HNWIs who are more aspirational and like to display what they have achieved; they view their standard of living as a measure of success and tend to see these branded luxury properties as their valuable trophies. This is why new riches from emerging markets like Russia, Brazil or the Middle East generally are very strong buyers.

Market Dynamic

When markets overheat having something extra to differentiate oneself from competitors becomes more important at any price point.

Often developers with properties in A+ locations, with outstanding views or nearby amenities do not need to pursue licensing agreements with luxury brands. Yet, properties in slightly less central locations are apparently able to achieve similar success and price points when the property is associated with a respected luxury retail brand especially when these new developments become the centre of new upscale neighbourhoods.

A price to pay

While the quality of the details and the brand experience are often impeccable, the main downside of these developments is typically given by the higher cost of the property; smart buyers realise that part of the ticket price on that residence is the cost of international marketing and may prefer to work with the best local architects and designers to get the best value at the best price. However it can be argued that the premium positioning of branded projects with unique amenities can be leveraged during resale. It all boils down to how well the project has been executed and how it keeps its edge over time.

The evolution

Originally, branded residences were simply residential developments often linked to an adjacent hotel. Now, wealthy consumers are often demanding designer developments with restaurants, bars and leisure facilities on site on top of a well known, brand name associated with their property. These additional amenities are especially in demand in emerging markets such as Russia, the Middle East and South America where new projects tend to be of larger size.

Recent projects

High profile examples of branded developments include the Baccarat Residences in Shanghai and New York, the Bulgari Residences in London-Knightsbridge and Bali (both are adjacent to luxury hotels constructed by the jewellery brand) Versace’s projects in Dubai and Lebanon and Fendi’s penthouses in both Los Angeles (in collaboration with the Ritz-Carlton) and New York.

In 2004, Italian designer Giorgio Armani and Dubai’s Emaar signed a partnership deal to develop a string of Armani-branded hotels around the world including Milan,Paris, New York, London, Hong Kong, Los Angeles, Tokyo, Shanghai, Seoul and Dubai. In many of these locations there is a plan to sell also luxury apartments and penthouses.

Even Virgin, the British multinational owned by tycoon Richard Branson has recently commercialized the first custom-designed luxury residences in Moscow in collaboration with Kelly Hoppen, a leading designer at Yoo which is an international luxury property developer that has branded and designed more than 10,000 homes, hotels and commercial projects in 37 cities, working with high-profile designers such as Marcel Wanders, Jade Jagger and Anouska Hempel.

In conclusion we believe that branded luxury projects can become an increasing profitable trend and add value also for sophisticated property buyers provided that designers have a long term vision about the overall property, the quality of the development is up to the highest standards and the pricing is reasonable.