Branded residences gaining popularity

(File pix) The Royal Atlantis Resort and Residences in Dubai. Theroyalatlantisresidences.com Photo

 

Published in NST Property, November 1, 2018

THE first branded residence―The Sherry-Netherland Hotel ― opened its doors in Manhattan, New York, in 1927. More than 90 years on, the segment has expanded enormously to over 60 countries across the globe, including Malaysia.

Branded properties in Malaysia include The Residences@The St. Regis Kuala Lumpur, Banyan Tree Signatures Pavilion, Four Seasons Private Residences and The Ritz-Carlton Residences.

Knight Frank Malaysia head of residential sales and leasing and project marketing, Kelvin Yip, said branded residences are becoming popular as trophy assets that offer a high level of service,

facilities and quality.

This type of properties continues to attract affluent end-users and investors.

“More branded residences are scheduled for completion by 2021 and collectively they are expected to contribute more than 2,000 units to the existing stock,” he said.

Notable upcoming schemes include The RuMa Hotel & Residences, YOO8 serviced by Kempinski at 8 Conlay and SO Sofitel Kuala Lumpur Residences by the Accor Hotels Group.

According to Knight Frank’s Branded Residences Report: 2019, branded residences in Kuala Lumpur recorded a premium of 69 per cent against non-branded luxury residences last year.

This was the second-highest price premium seen among Asian cities.

The highest premium seen last year was in Bangkok, at 132 per cent above non-branded luxury residences, followed by Kuala Lumpur at 69 per cent, Manila at 36 per cent and Phuket at eight per cent.

The Knight Frank report states that branded residences are attracting significant premiums in Asian cities, with price differentials varying by up to 132 per cent compared to generic luxury developments.

Price premiums are driven primarily by location and can vary within the same city, it noted. For suppliers of branded residences, motivators include market differentiation, brand enhancement and year-round income, while for buyers, they include service, amenities, security and investment yield potential.

POSITIVE OUTLOOK

Knight Frank said growth in the branded residences sector will not be without potential pitfalls.

“There is a danger that in democratising the concept of branded residences, developers also risk devaluing it. The concept has always been aspirational. Now hotel companies are offering brands at a four-star level too.

“That risk may be unlikely to stall developers, however, with industry commentators saying that it is unlikely that we are going to move to a world where suddenly buyers are no longer concerned with the offerings of branded residences,” the firm said.

Knight Frank believes that the market will undoubtedly get more competitive, and there will be a few developers and brands squeezed out as a result.

“But that is unlikely to stop them from trying to capitalise on a market which still offers substantial benefits,” it said.

Knight Frank global head of research Liam Bailey said: “The global branded residences sector is growing exponentially. Until the 1980s, branded residences were a scarce commodity. They can now be found in almost every major city and holiday destination.

“Since a global residential benchmark was set at One Hyde Park, the London market has seen an increase in branded

residences at the top end of the market. In Dubai, the emergence of branded residences like The Royal Atlantis Resort and Residences mirrors the city’s transition from a holiday destination to one in which to invest in a more permanent home.

“The Asian market for hotel branded residences has seen strong growth, particularly in Thailand and Indonesia, with Asia now accounting for an estimated 30 per cent of 400 developments globally. This trend is set to continue.”

Knight Frank Asia Pacific head of residential, Victoria Garret, said Asia’s fast-growing, ultra-wealthy population is fueling demand for branded residences.

She said these buyers favour branded residences as they offer the convenience of high-quality services, delivered by a trusted brand and with the potential for capital appreciation.

“One example of this is One Barangaroo, Crown Residences in Sydney. As Australia’s first fully integrated, six-star hotel branded residences, the project has received a very warm welcome from both domestic and offshore purchasers since sales commenced. Like The Royal Atlantis, ongoing interest is driven by a combination of its lifestyle offering, design and location,” she Garret.

OVER 400 BRANDED RESIDENCES WORLDWIDE

Research by Knight Frank shows that there are more than 400 branded residences across the globe, the majority of which are hotel-branded.

The number and types of operators entering the space is now expanding and diversifying. Brands such as Versace, Armani and Porsche have all lent their names to developments in recent years.

Marriott International has, for example, Bvlgari-branded residences variation on price differentials between different global locations and different locations within cities.

Knight Frank said it is seeing renewedinterest in the branded concept given the rapid growth in global wealth witnessed since 2000.

Its Wealth Report highlights that the global ultra-wealthy population (owning US$50 milllion plus in net assets), grew 18 per cent in the five years up to 2017 and is forecast to increase a further 40 per cent over the next five.

“The market did not really take off until mid 1980s when Four Seasons opened condos next to their hotel in Boston. That really demonstrated the success of the model,” says Chris Graham, an expert on the sector.

The Aman hotel group launched the concept in a resort setting in 1988, with Amanpuri in Phuket, Thailand.

“Marriott alone has more than 60 branded residential projects in the pipeline,” said Daniel von Barloewen, regional senior director for mixed-use development for Europe at Marriott International.

This year and 2019 alone, Marriott plans to open 19 branded residential projects in nine countries.