Branded Residences: The New Luxury Good and New Asset Class

The demand is for buildings that come with not just high-quality design, but also a service level that supports all the needs of life, along with services such as effective business space, access to exclusive social environments and even on-site health care.
March 11, 2022

If the brand of your car, watch, silk tie or handbag stands for something, then why shouldn’t your apartment building? We are all familiar with the world’s most luxurious brands: names such as Gucci, Cartier, Hermes, Porsche, Prada, Ritz, St Regis, Aston Martin. These organizations stand for trust, due to their consistent quality, luxury, prestige, service and style. Nowadays, market trends show that the high-net-worth segment is seeking these same qualities in their apartment buildings.
The demand is for buildings that come with not just high-quality design, but also a service level that supports all the needs of life, along with services such as effective business space, access to exclusive social environments and even on-site health care.
Such requirements arise from the new way of living, particularly as the events of recent years have shifted the center of the day to the home and not the office. It is a massive new trend that is creating beautiful new buildings and a new asset class with a new opportunity for wealth management.

A new growth sector

This new demand has created one of the hottest sectors in real estate today – as noted by Riyan Itani, head of global residential development at Savills[1]who said "2021 has seen the continued expansion of the branded residences sector globally, moving the 10-year growth rate from 170% last year to 230% this year”. There are now over 400 branded residences spread across the most exciting cities in the world, totaling some 55,000 separate luxury dwellings. The spread is truly global with a third of the buildings in the US, a third in Pacific Asia and a third in Europe and the Middle East.
The branded residence idea was born in New York in 1927. It was the height of the roaring ‘20s and high-end branded hotels began to provide the luxury living demanded because of the booming economy. 95 years later and this branded sector is booming again, in cities such as Dubai, Singapore, Los Angeles, and Miami. Of these Miami is perhaps the hottest market – as well as hotel brands such as Ritz-Carlton and St Regis the city has more than 16 non-hotel branded residence schemes.[2]

Familiar names and new players

Most of these buildings (80%) are run and branded by luxury hoteliers as fulfilling this demand is an obvious extension of their service. The Ritz-Carlton Residences development in Miami is a shining example of this. In this building, everything you could possibly want is available with a simple intercom call, all as you look out over Sunny Isle Beach and the Atlantic Ocean.
However, they are not the only players in this sector. Ultra-luxury brands such as Armani, Bentley, Fendi, Aston Martin, along with others have moved into this [3]. These brands add prestige and endorse the quality, style and exclusivity of living in such buildings. Many have gone further and added their own mark, offering special edition interiors and even exclusive cars for the buyers of the most high-end units. There are now examples in NYC, Dubai, Berlin, Madrid and Hong Kong and with many more planned.
This is not a passing fad; this is a long-term phenomenon, as these long-standing brands are not merely lending their name for the short term. These buildings are part of the master brand and must live up to the brand’s commitment to quality, in both fabric and service, for the long term. As such it proves a long-term guarantee of value of these buildings to any buyer, tenant or investor.

Access to a new asset class

Branded Buildings present an outstanding investment opportunity. Firstly, the shift to luxury living means that there is a ready demand to rent. Secondly, the financial markets have made a flight to quality; and money is looking for a home in tangible assets that can provide a hedge against inflation and uncertain times.
That said, historically most investors have been excluded from this opportunity, as they would have been required to invest in acquiring a whole unit, at a very high capital cost along with a high cost of transaction. However, alongside these developments in real estate, there have been developments in the prop-fin-tech market. Companies such as Miami-based Estating are opening the door to this new asset class and democratizing access to it.
Estating is a global investment platform allowing qualified investors and their financial advisors to property pick and to build a property portfolio from inside their current brokerage account. These luxury properties are securitized in Luxembourg, sit inside the banking system and are protected by regulations. The purchase process is as simple as buying stocks and bonds. And the long-term maintenance of the property value and the annual yield from tenants is all managed by Estating, removing the hassle normally associated with investing in property.
It is a simple way for smart investors to join in what is a long-term shift in the way people want to live and the chance to own a piece of a global brand.

[1] Mansion Global: ‘The Number of Branded Residential Developments Is Set to Double in Next Five Years’, published November 2021 by Liz Lucking

[2] Savills- Spotlight: Branded Residences, 02 November – 2021

[3]  Elite Traveler's "What are Branded Residences?" by Emma Al-Mousawi, April 2021