Understanding Why Branded Residences are Expensive
Branded residences are more expensive than traditional real estate due to a number of reasons; brand prestige, luxury amenities, prime locations, high-end design, superior materials and enhanced service standards. These properties have higher development costs for the real estate developer, which results in branded residences having to be more expensive than traditional real estate
As elite luxury real estate developments, branded residences are seen as the best of the best, but that does come with a price.
This article highlights the various reasons for the premium pricing, which we hope offers insight into both a buyer’s perspective and the challenges also that a developer faces in bring these residential masterpieces to life.
Paying for The Brand Premium
Prestige and Reputation
The association with a prestigious brand, from luxury hospitality such as Four Seasons, Aman, Ritz Carlton, JW Marriott to the fashion and luxury industry such as Armani, Fendi, Aston Martin, adds significant credibility and perceived value to these developments.
This brand affiliation is one reason why branded residences are expensive, branded residential projects normally command prices on average 20-30% higher than non-branded luxury residences, and in some regions that figure is even higher.
Branded residences are essentially marketed as a lifestyle and status symbol, and not just a home.
Quality Assurance
This in our opinion one of the most important benefits of branded residences. These top names have spent many years fine tuning their brand standards and protecting and growing their brand reputation.
These brands do not allow their “brand” to be used lightly, and they will insist that the property developer follows these standards.
From the very outset the brand is involved in the design and road map for the project, dedicated staff are normally assigned to the project, specific designers and architects are normally recommended to ensure that those involved have a strong understanding of the brand, and that the building and homes reflect the brand ethos. Regular inspections and brand-mandated upgrades are extremely common.
Elevated Amenities and Service Standards
World Class Personalised Ownership Benefits
Branded Real Estate typically offers access to world-class amenities that are normally found in premium 5 star hotels and in many cases surpasses that of a traditional hotel. Developers normally have to follow a minimum standard expected from the brand, but with the extreme competitiveness of luxury real estate, developers have had to become creative.
We are seeing branded residence projects offer, not only the expected state of the art fitness centres, spas, swimming pools, 24/7 concierge and restaurants but also private chefs, cinemas, body guards, chauffeurs, dog walking services, personal shoppers, private elevators, in room car parking spaces with private elevators, resident lounges, the list goes on.
These facilities and services significantly enhance the living experience for homeowners, while also increasing development and maintenance costs for a property developer.
Traditional Real Estate
In general, traditional real estate projects do not come close to offering anywhere near the levels of services and amenities compared to their branded counterparts.
Yes there are some excellent projects being developed that are not branded, that do offer a superb range of ownership benefits, services and onsite facilities, but when you look at these projects in detail the pricing point is not a lot different.
Prime Locations
Strategic Positioning
Whilst we are seeing branded residences being developed across the globe, in pretty much every country, what you can normally expect is for the projects to be in the best locations. Whether in the heart of major cities or prime beachfront areas, the land cost of these locations is normally exceptionally high, and thus can directly impact property prices.
Design and Construction
Branded Residences offer The Best Design, High-End Materials and Finishes
Luxury branded residences have to feature the highest quality materials and standards in their construction and finishing normally mandated by the brand. From rare marbles and exotic woods to custom-made fixtures and top-of-the-line appliances, and in many projects, the rooms are expertly designed and come fully furnished to give property purchasers that turn key experience.
Many branded residences are designed by world-famous architects and interior designers especially if they are standalone non hospitality offerings, adding yet another layer of exclusivity for property purchasers but also a higher cost to the real estate developer.
Investment Potential
Resale Value
Whilst branded residences are a more expensive initial investment, data has shown that they do hold their value much better than a non branded property, resales commonly enjoy a capital appreciation of up to 35% in some markets, and rental returns are around 1-3% higher also. This is very location, room type and project specific and cannot be guaranteed.
The reasons behind this are mainly down to brand value, but also because the properties are maintained and managed to very high standards. As one would expect from a hotel, that normally every 5-7 years is completely upgraded, branded residence projects are also maintained in this way, which should ensure that the capital valuation of the home and development remains high
Rental Income Opportunities
Most purchasers of a luxury branded residence are buying because it is a residential offering, however there are still opportunities for a rental income with many projects, should an owner desire. Some developers offer rental guarantees, other schemes allow the homeowner to leaseback the room to the hotel company who will add it to their room pool and share the income of that room.
Branded Villas in luxury beachfront locations are a good example of this, whereby the owner spends 3 months a year in their home, and for the remainder of the time, the hotel operator includes it in their inventory.
Developer Costs and Expenses
A branded residence that is associated with an elite hospitality or luxury brand could be up to 20-30% more expensive to develop than a non branded development.
From this article you can clearly see property developers face far higher costs with branded residence developments compared to a non branded project.
These costs include substantial brand partnership fees, sales royalties, enhanced construction standards to meet brand standards, far greater amenities and services provided, expanded design teams, increased marketing expenditure, operational setup costs, and a higher risk premium due to the complex nature of these projects.
All of the above, has to result in a higher price premium that a purchaser will pay for a luxury branded residence
Summary
In conclusion, the premium pricing of branded residences reflect a combination of word class luxury, features, amenities and service standards, intangible brand value, and the substantial costs involved in developing these exclusive real estate properties.
While the price point may be higher than a traditional real estate investment, the luxury personalised living experience, construction quality, service offering, prestige and potential investment benefits make branded residences a great option in the luxury real estate market, and in many ways the extra costs are justified.
“You only get what you pay for” as they say!!
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BRESI is the world’s first platform dedicated to the selling and marketing of branded residences. BRESI is an exclusive platform for owners, developers, and hotel groups to promote luxury branded residences
Our goal is to highlight the best branded real estate for sale around the globe, and to provide insight and news from the sector
DISCLAIMER: All information in this article is for information purposes only. For more detailed information please visit the links cited in the article. BRESI claims no copyright to any of the images
- Insight: Why branded residences are expensive
- Staff Writer
- Images:
- Cover Image Baccarat Residences Miami
- Main Images The Ritz-Carlton Residences Pompano Beach
- Bathroom Image Four Seasons Private Residences Fort Lauderdale
- Aston Martin Residences Miami
