The surge in branded residences shows no signs of slowing down, with new projects emerging across the globe, almost on a weekly basis.
Branded residences are a superb opportunity for real estate developers if planned and executed correctly. Developing a project associated with an international hotel chain or a high end luxury retail brand, has many benefits.
Branded Residences if “Done Right” Key Markers.
In this article we will highlight the more commonly known benefits if a developer does its “right” and also the less talked about problems, if its done “wrong”
Brand for an Edge
Branded residences offer developers a competitive edge in the real estate market. The association with a prestigious brand enhances the property’s reputation. Such associations are recognised with quality, luxury, and service. Developers can leverage the brands reputation with their own, which can be extremely powerful when competing against a non branded offering.
Brand for Exposure.
Buyers are attracted to projects due the the prestige associated with elite brands.
International knowledge of brands can attract increased interest from global buyers. In general there is market wide interest in branded residences, and therefore this should drive more exposure.
Brand for Quicker Sales
Speed of sales is principal factor that developers must consider when initiating projects.
A carefully structured launch of a branded residence normally creates more interest from property purchasers. We have seen projects sell out on either on launch or within a matter of a week or so,
Market wide data, shows that branded residences sell quicker than non branded options.
Brand for a Higher Premium
Branded residential projects can command average premiums of 25-50% compared to non-branded offering. In some markets that premium is even higher. We have seen first hand ourselves a premium of as much as 200% for one project that we worked on.
Rental returns and capital appreciation for homeowners are also normally higher with a branded residence.
Branded Residences if “Done Wrong”
Recently we were approached by a developer to assist them with branding, sales structure and marketing.
The project was at stage that we would not normally get involved.
Nevertheless, initial impressions seemed positive. A well recognised brand on board, the hotel was operational and residences completed, apart from some small internal fit out.
However during our market study and due diligence it was apparent that the developer had missed all the opportunity markers.
First, our research showed that there were already at least 11 properties in the area, under the same operator. These were a mixture of standalone hotels, residences, condos and even a timeshare, of various star ratings.
Therefore the first marker to be missed was Brand for an Edge
We also found reviews for the developers property, for other projects mistaken for our potential clients. Complete confusion.
Therefore Brand For Exposure was not only missed but potentially damaging the project.
These factors then in our opinion had the final impact on Brand for Quicker Sales and Brand for Higher Premium
There were other projects being sold off plan, and due to the competition between developers using the same brand there was somewhat of a pricing war.
Speed of sales was also going to be very difficult. By our calculations there were almost 2300 unsold units available between all of the projects.
Final Summary
Branded Residences are an ever growing addition to the real estate market. They can reap great rewards for all parties, if planned and executed by the developer and brand, with great thought and care.
In this example the only parties benefiting were possibly, the brand and the hotel guests.
The selection of a branded partner, is vitally important and in many ways is a 4 way relationship. Developer, brand, property purchaser, and hotel guest.
The developer must understand that this is a long term relationship that should benefit all parties, the decision of whom to appoint and work with, should not be taken lightly.
And Final a Warning
Developers under no circumstances should launch a project “unbranded” and then re-launch as “branded” because sales have not been as expected.
Yes we have seen this happen.
Any brand that agrees to work with you in this situation, in our opinion is simply branding for their benefit and not the developer.
BR Asia is a bespoke independent branded residences consultancy specialising in brand licensing and strategy for branded residential development.
For more information http://www.brandedresidencesasia.com