Branded residential real estate has grown exponentially in recent years. 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 across America and the world 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 lead the US market for branded residences.
A branded residence is a residential property that is affiliated with a well-known brand via a partnership between the brand and a property developer. The company licenses out their brand to the developer to market and sell residences under their flag and in many cases (particularly with hospitality brands) manages the property when open. The architecture and interior design of the residences are built in line with the brand’s design ethos and standards.
There are four types of branded residences:
- Standalone: hotel-branded residences located separate from a hotel site
- Condo-hotel: hotel-branded residences situated within a hotel, often with a use restriction and mandated rental pool
- Co-located: hotel-branded residences located on the same property, or immediately adjacent to a hotel
- Non-hotelier: residences associated with a non-hotel brand
Historically, brand affiliation was with a hotel; however, over the last decade there has been a proliferation of non-hospitality brands in the residential space. Today, branded schemes include fashion houses, car manufactures, and restaurant groups that cater to a variety of lifestyle preferences and demographics.
For a buyer, branded residences offer a significant value-add, including:
- Prestige associated with a brand
- Design, amenity, and service quality assurance
- Professional and experienced management (“lock and leave”)
- Rental potential
Typical premiums for urban branded residences range from 20 to 30%, while branded resort properties can earn premiums of up to 100% above otherwise similar homes. While hotel brands have a long-established record in property markets, non-hotel brands have also made successful plays, though their lack of experience in real estate can prove a challenge. Some successful examples of non-hospitality branded real estate can be seen across South Florida, which is the current epicenter for the crossover of luxury consumer brands and real estate. Some notable examples are: 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 in the city can choose among a flurry of hotel brands including the Pendry, Fairmont, Edition, Mandarin Oriental, Four Seasons, Ritz-Carlton, W, and most recently, Rosewood. While some of the residences are part of an on-site hotel, others are standalone residences.
Despite the strong value proposition of branded real estate, particularly those associated with a luxury hotel offer, there are some risks. One of the most significant is the long-term commitment of brands to a particular scheme. For example, in 2020, the exclusive 20-unit Montage Residences in Beverly Hills changed flags to The Maybourne along with the on-site hotel. While one can consider the change a like-for-like brand swap, others may find caution in this tale if their take on the value-add was tied to a specific brand.
Looking ahead, branded residences are expected to continue to grow and evolve as more non-hotelier brands enter the arena. We expect them to continue to garner a strong premium in the market; however, as markets mature a challenge will be the need to define and substantiate the value proposition built into price premiums.
All information is from sources deemed reliable but no guarantee is made as to its accuracy. All material presented herein is intended for informational purposes only and is subject to human errors, omissions, changes or withdrawals without notice.
