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These are wobbly times for property markets around the world. But not, it would appear for the branded residences sector. According to a recent report by the real estate company Knight Frank, the sector is expected to grow by 55 per cent between now and 2026.
Branded property is a partnership between a brand and a developer that results in residences that are sold to buyers. Typical examples include schemes by hotel groups such as The Four Seasons, the Aman and the Ritz-Carlton.
They are often in desirable locations and adjacent to the brand’s hotels, with linked servicing. They may be designed by star architects and are aimed at wealthy individuals. By far the biggest market is the US, although Mexico, the UAE, Thailand, the UK and China are also significant.
For buyers, there are a number of attractions, says Liam Bailey, global head of research at Knight Frank: “If you’re making an international purchase, it comes with a degree of risk, and uncertainty.” Buying from a trusted brand, he says, allays these fears.
Renting branded properties out can be easier too as prospective tenants trust the brand. It’s in effect a turnkey second home which is designed and furnished to the sort of standard and look you’d expect from a hospitality brand.
All good practical stuff. But in some ways, what is more interesting are the less tangible, more instinctive and emotional attractions of the brand. Henry Pryor, a property expert, says that branded residences represent a different way of looking at real estate.
One of the first examples of branded properties in the UK was One Hyde Park, which was launched in 2011 and has access to Mandarin Oriental hotel services — its penthouse sold pre-launch for £140mn, in 2010.
“The Candy brothers [the developers of One Hyde Park] wanted to make boring old property part of the luxury goods market,” Pryor explains. This worked even better than they could have hoped. “It turned out that people actually wanted the brand as much, if not more, than they wanted the property. It’s a bit like owning a Rolex or putting an Aston Martin key ring on the table when you sit down for lunch. These things are very important to some people.”
Izzy Pugh, a partner at the marketing consultancy G=mc2, says that branded residences are now a part of the well established luxury lifestyle economy. “Consumers seek brands that can offer them an effortlessly curated lifestyle and a big part of what drives this is ‘aesthetic value’.
“A branded residence is the ultimate aesthetically curated experience. You can step directly into a world which has been hermetically sealed into an aesthetic bubble.”
She adds that the brand values guarantee you a level of quality and style within the home and exclusivity outside. “It’s pretty much guaranteed that if you are buying a Ritz-Carlton branded residence you are going to have a fair bit in common with your neighbours. This is useful if you are new to a city or buying a second (or even ninth or tenth) home. For wealthy people this is a convenient way to make the right choice because someone else has done all the hard work for you.”
All this is good news for the developers and the brands. “People will pay a premium for this sort of designer label,” says Pryor.
Mass-market brands also see opportunities in projects that tie-in their name with property developments. Ikea and Skanska have a joint-venture called BoKlok, which has built about 14,000 homes in Sweden, Finland, Norway and the UK. John Lewis has plans to build and rent 10,000 homes in London and Tesco also has plans for a set of tower blocks in areas such as Woolwich. This may stretch the idea of branded residences — but it’s true that where luxury leads, the mass-affluent and mass markets follow.
Bailey notes that one concern about branded residences may be the lifespan of the brand agreement. “You may have bought a 99 year lease but the developer might have done a deal with a brand where it’s a 20 year contract.” Thus you may find your residence rebranded at some point. This could be to a more aspirational brand — or one that is no longer a fit for you.
There are a number of locations to watch when it comes to branded residences. Europe has considerable potential and is quite a way behind both Asia and the US. Vietnam is growing fast. But, says, Bailey, “When I asked the [major players] which market excited them the most in terms of future expansion, all of them said, unprompted, Saudi Arabia.” It’s likely too that other players will enter the market: Soho House is a name that is mentioned frequently.
Of course, there is the question of taste. If you want a beautifully restored 17th-century farmhouse in the French countryside, the Bulgari Residences at Jumeirah Bay Island in Dubai would probably not appeal. But there are plenty of people who do like them. As Pryor says, “Whether you think it’s shallow or not, the attraction of luxury lifestyle brands is a hugely important part of the world we live in.”
Rhymer is reading . . .
Pop 1280 by Jim Thompson. Published in 1964, this is a hard-boiled Western, which follows a small-town sheriff who, beneath his slow-witted, affable exterior is a manipulative sociopath. Thompson’s ability to fuse noir, satire and literature were only acclaimed after his death.
Follow Rhymer on Twitter @rhymerrigby
This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment
