JLL Asia Pacific’s head of advisory & asset management, Xander Nijnens, shares how consumer-branded residential projects are gaining popularity, among other trends in today’s luxury living sector
When it comes to luxury living, branded residences take this experience to the next level. Sometimes known as a “hotel and home-in-one”, these are essentially apartment projects associated with well-known brands and are typically targeted at high-net-worth individuals (HNWIs).
Such a concept is believed to have originated in the US in the 1920s, with the branded residence environment historically being dominated by luxury hotel brands from the likes of Marriott International, Four Seasons and Accor. In Asia, the first branded residence project dates back to 1988 with the development of Amanpuri in Phuket, an iconic resort in South-east Asia.
However, the branded residences environment is changing – not only is the Asia-Pacific market for such concepts growing, but we are also seeing more luxury consumer brands jumping on the bandwagon.
A bigger slice of the residential pie for luxury consumer brands
Between 2013 and 2019, the global population of HNWIs increased at a compound annual growth rate (CAGR) of 6.1 per cent, while the period between 2019 and 2021 witnessed a 7.1 per cent increase across regions. As the number and wealth of HNWIs continue to increase, consumer brands are also looking to capitalise on this growing market worldwide.
For luxury consumer brands, expanding into the residential market is a natural path for a brand to expand and diversify its income stream. Today, luxury branded apartments are no longer just about their location or design – it is the services they offer within these exclusive developments that can make all the difference. Naturally, this offers luxury consumer brands the perfect opportunity to attach an experience to their products and differentiate their design and service experiences from other hospitality brands.
Fashion brands such as Giorgio Armani and Karl Lagerfeld, as well as car manufacturers Porsche Design and Aston Martin, have already joined the mix. While such consumer branded residences have yet to debut in Asia-Pacific, they’ve since popped up in places like Dubai with the Armani Hotels & Residences and Miami’s Porsche Design Tower.
As more luxury consumer brands join hotel brands in entering the branded residences space, we are also seeing a growing trend towards standalone branded residences – in other words, residences without a hotel located within the same building or nearby. The benefit of this is that brands can collaborate with new partners and real estate developers or investors beyond those within the hospitality sector, allowing for greater product differentiation.
The opportunities for investors and developers
Even in the face of Covid-19, the branded residences sector has remained resilient, especially as the population of HNWIs continues to grow despite the pandemic. In Asia-Pacific alone, the number of HNWIs increased 4.2 per cent from 2020 to 2021, while wealth in the region grew by 5.4 per cent. This suggests strong purchasing power and potential demand for such residential concepts in Asia-Pacific.
The benefits are clear – with branded residences offering association with high profile hotels or luxury consumer brands, as well as enhanced premium services, it allows investors and developers to benefit from solid price premiums compared to unbranded, high-quality residential projects.
Additionally, residential developers and investors can also look for a brand association to further differentiate their product from the competition and increase sales velocity in markets where the supply of quality condominiums can be considered saturated. While residential developers are feeling the pressure of higher interest rates on buyers, many branded residential buyers are cash rich and are less impacted by fluctuation in rates.
Recent activity suggests that the branded residence story in Asia will continue to gain momentum as demand swells. In 2022, the Banyan Tree Grand Residences Phuket came onto the market. This year, the depth of the sector will be bolstered by the opening of Aman Niseko in Japan and in the Vietnam, the Intercontinental Residences Halong Bay and the Ritz-Carlton Residences Hanoi at The Grand.
The shift towards more flexible working arrangements post-lockdown has further supported the proliferation of branded residences in leisure-focused markets – a trend that we expect will continue long after the pandemic ends.
As interest rates and construction costs continue to rise significantly due to global economic uncertainty caused by the pandemic and geo-political tensions, branded residences have driven attractive returns for developers’ and investors’ mixed-use developments due to the premium and upfront sales proceeds from branded residential units.
Looking ahead, we expect branded residences to become an increasingly integral business model globally – especially as more consumer brands come on board and developers and investors lean towards standalone developments due to the financial benefits for all relevant stakeholders.