Branded residences - or residential properties for sale that are affiliated with a well-known brand and offer exceptional amenities - have found renewed popularity since mid-2020 as the Covid-19 pandemic boosted demand for second homes with increased privacy and safety, extra space for remote work and impeccable services at the doorstep.
Recent trends in the US - the largest market of branded residences globally - indicate that this market could remain strong going forward. High-net-worth buyers poured over $40 billion into luxury residential properties in 2021, up by 138% from 2020, while demand for second homes rose by 87% from pre-Covid levels in January 2022, the highest level in a year.
The shift to hybrid work models is fuelling more people to invest in real estate and seek larger homes for remote work while remaining within commuting distance, Sotheby's International Realty said. It said domestic buyers dominated some key luxury markets around the world in much of 2020-21, but international buyers are now expected to return in bigger numbers.
That is good news, as branded residence buyers normally tend to be international. It is also encouraging that 39% of prime international buyers are willing to pay a premium for a branded residence compared to a non-branded product, with this average higher at 45% and 43% in Australasia and Asia, respectively, Knight Frank found in a 2021 survey.
Developers may see healthy price premiums for successful branded residences, especially in less mature markets where such properties are difficult to find. Emerging cities achieve a 44% premium in average, well above the 29% global average, Savills said in its latest report. Resorts and global cities offer lower premiums, at about 25% and 18%.
Supply is forecast to climb
Seeing a continued growth potential in the sector, property developers are expected to increasingly expand into branded residence projects. The total number of branded residence schemes globally is estimated to nearly double to over 900 by 2026 from 580 open schemes with about 100,000 units combined in 2021, Savills said.
Among licensing partners, hotel groups will likely remain the most important drivers of growth in the coming years. Marriott - the current market leader with nearly 190 projects open or in development globally across 14 of its brands - is expecting to debut 14 residences in 2022 after its residential business saw robust growth in 2021.
The top two individual brands - The Ritz-Carlton and Four Seasons - aim to boost the number of their projects to around 70 each by 2026 from over 40 in 2021, according to Savills. It said the fastest-growing brands until 2026 may include Six Senses and Mandarin Oriental with a pipeline growth of 233% and 214%, respectively.
Branded residential is still dominated by hotels, but new entrants from outside the hospitality sector may progressively chip away at their market share. Competition may get fiercer with dozens of non-hotel brands - from the fashion, automotive or even the food industries - foreseen to enter this sector by 2025, Sotheby's International Realty said.
Location hotspots to watch
Location undoubtedly remains a main factor to consider for future projects as developers are exploring emerging markets that can offer above-average premiums. Growth is forecast for all regions, including the current top three markets of the US, Thailand and the UAE, but there are some new hotspots set to emerge in the mid-term, according to Savills.
In the next five years, Costa Rica, the Cayman Islands, Nigeria and Egypt are foreseen to more than double their current supply, Savills said. In an example of new projects, Egyptian-Saudi real estate developer Edge Holding has teamed up with Accor to build Sofitel Cairo New Capital Hotel & Residences with 200 rooms and 280 residences by 2026.
New projects in mature markets may try to differentiate themselves by offering units in unique properties. Investors Hinduja Group and Onex Holding partnered with Accor to open the 85-unit The OWO Residences by Raffles and a hotel in 2023 in London's Old War Office building - Winston Churchill’s WWII headquarters and a shooting location for James Bond movies.
New types of residences
Developers and their brand partners continue diversifying not only in terms of location, but also in terms of product types. More and more standalone residences - those without an adjoining hotel - are brought to market, and residential units developed as part of mixed-use commercial or office projects are also gaining ground.
In recent examples, Thai developer Raimon Land teamed up with Rosewood Hotels & Resorts to open Rosewood Residences Kamala on Phuket from 2024, while real estate firm Masterise Homes will build a dual-branded residential and officetel facility with a whopping 4,200 units in Ho Chi Minh City by 2024 with units from JW Marriott and Marriott Hotels.
Fast-expanding segments also include lifestyle branded residences, which differentiate themselves from classic luxury brands by focusing on energetic design and unique experiences. Also gaining popularity are eco-friendly complexes that prioritize sustainability and work to implement strong environmental, social and governance (ESG) practices.
Non-luxury brands rising
Diversification is also expected to intensify regarding the level of offering by chain scale. The branded residential sector has been traditionally dominated by luxury brands, but the project pipeline of players in the non-luxury segments now accounts for 31% of the total market, compared to 23% of such schemes operating today, Graham Associates reported.
In an example of premium segment projects, Central and Latin American real estate company ECI Development and Marriott broke ground on a 202-key oceanfront resort in Belize in January 2022. Scheduled to open in December 2023, the Marriott Residences Ambergris Caye Resort will include a hotel and 70 residences for sale.
Non-luxury brands offer an attractive opportunity in emerging markets, as they have lower entry costs and less risk than luxury brands, allowing residences to reach new customer groups, Savills said. It added that the fastest-growing chain scale by pipeline is upper-upscale, with 82 schemes under development until 2026.
In summary, many uncertainties still remain regarding the effects of the Covid-19 pandemic on the real estate and hospitality sectors, but the branded residence market seems set to keep its appeal to developers and hotel brands in the future and continue its growth in a post-pandemic business environment.