Although the branded residential sector is still relatively small, it is a growing market. It is seeing exponential growth in the Asia-Pacific as the growing economy is supporting the sector’s expansion. While luxury offerings have previously dominated supply, non-luxury schemes now account for 42% of the future supply and dominate in emerging markets like Viet Nam, Thailand, and Mexico. With a growing market, it is important to understand what some of the differentiating factors of branded real estate are.
According to Savills World Research, the number of branded residence schemes globally has increased by 230% in the past decade. In the context of this expanding market, one must ask, what is the difference between branded real estate and traditional serviced properties? Our research shows that brand affiliation, premium services, and the amenities on offer set these properties apart.
As the name suggests, brand affiliation is a key factor in distinguishing branded real estate from traditional serviced properties. Brand association can boost the reputation, credibility, and prices, of branded schemes. Brand awareness is also linked to the perceived design, service, and quality levels of the product, and because of this, buyers are prepared to pay more for this type of property.
On an unweighted basis, branded residences can achieve a 29% premium over comparable non-branded products. Emerging markets have the highest brand premiums with an average of 44% above non-branded stock, and emerging markets with few branded properties can see prices that are double non-branded stock. This is as luxury brands are seen as ‘trophy’ assets to (newly) wealthy buyers. Branded properties in global cities with well-establish luxury markets have smaller premiums of about 18%.
Mr Matthew Powell, Director of Savills Hanoi said: “Branded residential apartments are a secure and lucrative investment, and they differ from the condotels and other serviced properties we have seen in the past. These properties are more tradeable, predictable, and reliable compared to other products thanks to the existing brand awareness. Foreign buyers in Viet Nam like this market as they are usually familiar with the brands and have a higher degree of confidence in the product.”
Although traditional serviced properties have services, the type and extent offered in branded properties are generally superior. The services are often bespoke, and the quality reflects the brand itself. As luxury brands like Marriot, IHG, and Four Seasons lead the market, buyers expect luxurious, efficient, high-quality services. Branded properties make everyday life easy for residents with ‘base services’ such as concierge and valet parking, or ‘on-demand’ services like personal shopping or in-home spa treatments.
According to Mr Powell: “Branded residences are associated with high-quality services and professional property management services, which buyers and residents expect in these properties. Of course, customers have their own set of expectations, and consider services like valet parking, concierge services, and 24/7 security essential when buying branded properties.”
Amenities create a point of difference for branded properties and are as influential as the brand or location of the property. Buyers should be aware that the amenities can differ quite dramatically between brands (hoteliers versus non-hoteliers) and where the brand positions itself on the chain scale. For example, some upper-midscale properties offer just 60% of the amenities that luxury properties provide. Most properties provide standard amenities like fitness centres, spas, concierge and security services, and pools, while between 25% and 50% of properties offer amenities like golf, libraries, and beauty salons.
As the pandemic has changed how we live and work, the demands for amenities in branded properties have changed. Because working from home is a trend that will outlast the pandemic, customers now want larger properties, private outdoor spaces, and high-speed broadband to facilitate their new lifestyles. These lifestyle changes also mean increased demands for wellness amenities, and while this is already quite a robust offering (accounting for 21% of the amenities), demands are growing. Recognising the increasing demands for wellness amenities, developers are implementing more extensive wellness provisions such as spas, steam rooms, and treatment rooms.
Commenting on the potential of the branded residential market in Viet Nam, Mr Powell said: “There is good potential for this type of product in Viet Nam. Buyers looking for branded property want high-quality management, luxurious facilities, and a unique lifestyle. This means they are more likely to buy a branded apartment in downtown, compared to landed property in a suburban area.”