Branded residential real estate has grown exponentially in recent years. Especially with luxury real estate brands. Beginning with the opening of The Sherry-Netherland apartment hotel on Manhattan’s Upper East Side during the 1920s, the concept and execution of branded residences has expanded globally, especially throughout the Americas in both urban and resort towns. Today, there are more than a hundred branded residential schemes in the market with many more in the pipeline. South Florida, New York, and Los Angeles are the branded residence leaders in the U.S. market.
A branded residence is a residential property designed and developed between a real estate developer and an existing hospitality (or other) brand, whereas the brand affiliation is the result of a design, operational, and/or service management partnership. These hospitality and lifestyle brands (such as Equinox Hotel and Residences) extend a licensing agreement to the developer to design, market, and sell/rent the residences under their flag, and in many cases, manage operations when open and occupied.
The architecture and interior design of the residences are built in line with the brand’s design ethos and standards. A residential property associated with a globally recognized brand name carries a premium value leveraging the flag’s brand equity and lifestyle accompaniments: the epitome of luxury real estate.
There are three common types of branded residences:
- Mixed-use condo-hotel: the hotel-branded residences are situated within a hotel property, whether attached or detached; these residences either function as a traditional home, or implement owner’s use and occupancy restrictions with a mandated rental pool;
- Standalone condo-hotel: the hotel-branded residences are located separate and independent from a hotel site but still provide hotel-like services and accompaniments in alignment with the brand’s values;
- Non-hotelier: the branded residences are associated with a non-hotel brand, but instead a lifestyle brand (such as Armani Residences and Equinox Hotel and Residences)
Historically, brand affiliation was in partnership with luxury hotels; however, the last decade birthed a new era of non-hospitality brands in the residential space. The proliferation of branded schemes today include fashion houses, car manufacturers, and restaurant groups that cater to a variety of lifestyle preferences and luxury experiences targeting a discerning group of consumers.
For any buyer, branded residences offer a significant value-add, including:
- Brand prestige and recognition
- Design, amenity, and service quality assurance
- Fully-furnished and fully-serviced accommodations
- Professional and experienced management
- Potential rental premiums and investment opportunities
Today, typical price premiums for urban located branded residences range anywhere from 20-30% above the underlying market, while resort residential property can garner value premiums north of 100% against similar properties in its local proximity.
While hotel brands have a long-established record in property markets, non-hotel branded newcomers are also making successful debuts. Despite a lack of experience in the real estate sector can prove a challenge, triumphant plays of non-hospitality branded real estate can be seen across South Florida. Currently an epicenter for such crossovers between luxury consumer brands and heavy hitting real estate players, notable examples include the Porsche Design Tower, Aston Martin Residences, Bentley Residences, Residences by Armani Casa, Fendi Chateau, and Missoni Baia.
In Los Angeles, there is strong competition between luxury hotel brands at the top of the market. Buyers seeking a home or pied-à-terre in the city can choose among a flurry of hotel branded residences including the Pendry, Fairmont, Edition, Mandarin Oriental, Four Seasons, The Ritz-Carlton, W, and most recently, Rosewood. While some of these residences include a hotel on property, others are standalone residences offering the exclusive services of its brand.
Like all real estate investments, despite the strong value proposition of branded real estate, there are some risks. One of the most significant risks includes the long-term commitment and term of the brand’s license, nothing is guaranteed forever. For example, in 2020, the exclusive 20-unit Montage Hotel and Residences in the globally sought-after location of the Beverly Hills triangle changed its flag to The Maybourne. While some may consider the change a like-for-like brand swap, others may find caution in this scenario if their take on value was tied to a specific brand.
Looking ahead, branded residences will continue to expand globally as more prominent non-hotelier brands enter the arena. While anticipated brand premiums continue to increase and garner pricing power in the market, maturity of these properties will require a redefined value proposition to substantiate its price premiums beyond its name equity.
For more intelligent data on residential developments around the world, find your missing piece to luxury real estate by connecting with The Kennelly Group.
