The rising number of HNWIs is fuelling demand for globally recognised branded residences with all its accompanying prestige and bespoke services.
There are now 2,000 billionaires in the world, growing at 13% per annum, according to Forbes. Many of them have homes all over the world and typically stay in different countries in a year. Their choice of homes – global branded residences. This is why the number of such residences has increased tenfold over the past decade.
These are homes in prime locations that offer bespoke luxury services and prestige associated with an established brand. Branded residences started about 100 years ago in New York but only became a trend in the mid-1980s beginning with Four Seasons followed by Ritz-Carlton.
When it became a success, other hotel brands came in such as Starwood, Fairmont, Kempinski, Aman, St. Regis, Hyatt Regency, Six Senses, Banyan Tree, W Hotels, Viceroy and Mandarin Oriental.
However, it is in Southeast Asia and the Far East that resort branded residences have reached a matured phase and become the ultimate in luxurious accommodation.
In Southeast Asia, Thailand leads the way with Amanpuri Phuket in 1988 followed by The Four Seasons Chiang Mai in 1995. Thailand still leads today with the biggest number of such residences in the entire SEA region.
According to Bill Barnett, Managing Director at C9 Hotelworks, large luxury hotel brands like Ritz-Carlton and Four Seasons are seeing a high proportion of their hotel pipeline being generated in mixed use or project with branded residences; they tend to favour gateway cities and key well-known leisure destinations with strong airlift.
“Japan has been active in top end projects like the Four Seasons Kyoto or Park Hyatt Hanazono near Niseko.
Overall, the urban push is strong, interestingly two key Asian resort brands, Aman and Six Senses, have city branded residences coming up in New York City.”
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Branded residences tick all the right boxes – for the buyers, there is assurance of quality in construction, design and service; secure environment, bragging rights, “Lock up and leave” capability and the potential for investment returns from a rental pool (notably in a resort context).
Says Joanne Kua, CEO of KSK Group Berhad and Managing Director of KSK Land Sdn Bhd: “Ultimately, when people buy a branded residence, they are looking at buying more than
just a property, they want unique experiences that are often anchored on four key attributes –
Opulent design by a renowned designer
Luxury services and facilities offered by a 5-star hotel brand
Unique architecture by a celebrated architect
Brands associated with a level of quality and trust these brands can deliver”
“Expatriates or HNWIs prefer branded residences, particularly famous international brands because these brands inspire confidence and provide the kind of bespoke services that they are used to. The brand carries the guarantee of quality and services as well as safety and security,” affirms Dato’ Sri Gavin Tee, President of Swhengtee Group.
Adds Wright of SB Architects: “Usually the access to ownership comes at a higher cost, but the return is a deep emotional connection to the brand philosophy, culture and often the related hotel amenities.”
Other reasons include hassle-free ownership, owner benefits, e.g. residents’ discount card, access to the operator’s properties in other locations and like-minded neighbours. Indeed, some leading designers such as Luciano Mazza at HKS and John Hitchcox at YOO are talking about creating “modern day communities” of like-minded people – a sort of exclusive residents club.
From the standpoint of the developer, having a brand associated with its property enhances sales by as much as 30%. The resale value is higher or maintained while at the same time, it can fetch higher rentals.
Furthermore, these residences yield a typical premium of between 20% – 40% with some fetching as much as 50% – 100% more, for example, the branded residences at The Ritz-Carlton Dorado Beach in Puerto Rico sold at up to 250% above the average per sq foot price of non-branded units in the same development. The Armani Penthouses in Dubai were selling at more than 50% higher than when they were launched five years previously, according to a report by Chris Graham, Founder and MD of Graham Associates.
Interestingly, it is not just hotel brands which are the players, luxury brands from the fashion and jewellery industry such as Bulgari, Versace, Moschino and Armani and those from the automotive sector such as Porsche and Mercedes Benz have also licensed their names to developers. Royalty fees typically range between 3-5%, according to HVS and Savills.
According to data from Savills, 65% of branded residences around the world are located in urban locations and 35% are in beach/resort locations. Many experts believe that this urban-dominant trend will continue. “Prime urban branded developments have greater appeal because they are perceived as less risky,” observes an insider.
However, Wright from SB Architects believes that despite the urban-centric focus, there is a growing number of thriving ultra-luxury branded resort real estate in destinations like the Maldives, Caribbean or Turks & Caicos.
THE DESIGN FACTOR
Apart from location which is the most important factor for branded residences, architects and interior designers are also a critical part of the mix. “Branded residences need to have a high-degree of personalization and the accent is on interiors that tag the buyer’s lifestyle and wrap around emotion and feelings. We seamlessly merge architecture, interior design, and lifestyle in a way that speaks to the aspirations of the buyer, explains Arianna Leopard, Director of SB Architects.
Wright concurs: “Consumers are more design conscious than ever before; they want to work in creative spaces and holiday in unique hotels. They want that bespoke design aesthetic to continue through their personal lives into their homes.”
Yoo’s founder John Hitchcox says: “This can really be attributed to the growth of the design savvy consumer, the ever increasing importance of brand trust in our society and ultimately, developers recognising the importance of the home as a high involvement purchase.”
Yoo is a leading designer in this sector with a portfolio of over 80 projects around the world and a stable of top designers including Philippe Starck, Jade Jagger and Kelly Hoppen.
The ultimate design differentiation is of course to engage “starchitects” for example WATG’s St. Regis Hotel & Residences in Singapore and the residences by Norman Foster and Frank Gehry at Battersea Power Station in London.
Clearly, the quest to differentiate is a constant race to imbue the residences with the best and most unique qualities this has shifted to more experiential lifestyle.
Says Graham: “Whilst buyers’ priorities remain consistent in terms of location, design and access to world-class amenities, very much in line with trends in the hospitality sector, it is increasingly more about the intangible ‘added value’ lifestyle benefits associated with a brand. Increasingly, the shift is towards creating an emotional connection with residents through experiences.”
An example is a residence with access to a private marina a few steps away. Pan Pacific Serviced Suites Puteri Harbour together with Puteri Cove Residences and Quayside, are the only luxury waterfront project with both private-marina (300 berths) and sea views in Iskandar. Developed by Pearl Discovery, a joint venture by Singapore-based real estate developers Pacific Star and DB2, the 205-suite Pan Pacific Serviced Suites Puteri Harbour is scheduled to open in the third quarter of 2018. The marina facility will be managed by Singapore’s award-winning Marina and Lifestyle operator, One 15 Marina.
In fact, says Glen Chan, President and CEO of Pacific Star Development: “The private marina in Iskandar will be modelled after the one in Sentosa Cove which is also managed by One 15 Marina.” WHAT’S NEXT?
The supply of branded residences is currently limited around the world. However, given that more and more of such residences are being built, it runs the risk of oversupply. That has already happened in Thailand and Vietnam, where branded residences are now becoming so engrained and numerous in the market that they risk being the norm rather than the exception, cautions Graham. Barnett agrees saying that there will be more and greater diversity in real estate grade from luxury to entry level. “Even budget chain YOTEL is talking branded residences.”
This then is the challenge for the branded residences segment today to push that differentiation factor even further as competition begins to heat up.