Over the next few weeks, we’ll be exploring the exciting topic of branded residences, delving into consumer demand, the performance of the segment, supply/pipeline, and investment/debt/pricing. First in the series, this week we’ll be exploring emerging consumer preferences and how branded residences are evolving/should evolve to satisfy the end user.
In recent years, branded residences have seen significant evolution, and is set to enjoy enormous growth as consumer demand continues to swell. Supporting the expansion of the segment is the continued growth of high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs), key drivers of the branded residence market.
The buyers
In 2022, The Knight Frank Global Branded Residences Report 2023 predicted a 28.5 per cent rise in the growth of UHNWIs between 2022 and 2027, and a 57 per cent growth in HNWIs in the same period of time. This growing affluence is expected to fuel demand for second homes, including branded residences. And despite higher interest rates, there remains healthy underlying demand, with 15 per cent of UHNWIs considering a purchase in 2023.
Alexandra Yao, global head of branded residences at IHG Hotels & Resorts notes there was a big surge in demand for branded residences during and post-Covid because high net worth individuals realised they wanted to have vacation homes but still have it be looked after when they weren’t physically present, also highlighting growing demand and activity in Southeast Asia in addition to the already burgeoning global demand.
“Covid was a game changer because working from home become popular and those that typically bought at the ultra-luxe level wanted to rotate around a portfolio of homes around the world and be able to work from them,” she says.
The flexibility of spaces is also increasingly important, Yao says, adding that the ability to have spaces which can flex as home offices is key as more and more people are working remotely.
What they want
But which types of branded residences are seeing the most demand from this group and how can the sector ensure any development is something that not only appeals to buyers but also effectively targets and captures this burgeoning demand?
Yao says that while previous generations of branded residences were more of a condo hotel structure where people were essentially buying a hotel room which wasn’t properly set up to be lived in full-time due to an absence of necessary facilities, now consumers want a proper residential structure with full kitchens, separate living & dining area, washer dryers etc.
She adds: “We’re seeing a trend towards bigger spaces. Previously, you could get away with something smaller but now space is luxury, especially coming out of Covid where everyone was confined.”
Lee Lin, regional director, Asia Pacific at Nobu Hospitality says there’s also an increased demand for branded residential concierge services.
“Those with the means to buy branded residences are looking for a concierge to take care of many things. And so I think well trained concierge for these branded residences is important because it's all about service.”
Yao agrees, noting that it goes further than a standard concierge and veers more towards a personal assistant type of service.
“In addition to general services like room service, a trend we’re seeing is that at that level, they love the pre-arrival services that we offer which ensures the residences are prepared and made welcoming for their arrival. This could include things like turning the heating on before they arrive, stocking fridges, watering plants.”
Integration with hotel services is another key need, both Lin and Yao note. Buyers of branded residences expect access to amenities such as gyms, spas, and fine dining options, blurring the line between home and hotel.
“Branded residences absolutely need to be integrated top to bottom in terms of services, in terms of management. It needs to stay on brand at least, in terms of quality of service and making people feel at home and welcome. It’s definitely about more integration, not just physically but a lot more in the service side,” Lin says.
He notes this integration is key as one goal is to ensure that not only do people become branded residential customers because of familiarity wth the Nobu brand, there’s a cycle where they become more loyal customers of Nobu and bring their social circles around the experiences Nobu has to offer.
Yao adds that consumers want branded residences that are integrated with hotel services but also want privacy, noting that branded residences have to strike a fine balance between integration with hotel services while ensuring privacy, security and independence.
She says one way to achieve this is through separate entrances and structuring the residences in a way that hotel services can be discreetly delivered to the branded residential owners. #
“We always think about ways to integrate and to bring services for them while recognising that privacy and security is key. For example, we have two separate profiles of users and separate entrances allows someone coming back home to not have to experience a busy hotel lobby where people are trying to check in. The arrival experience is extremely different for the two profiles of users. And if it's a big project, we also require separate gyms, separate pools, separate amenities to further split that different profile of users and to ensure privacy and security as well.”
Another prominent trend is a focus on fitness, wellness, sustainability and technology, with Lin noting that full-blown wellness programs are very attractive points for buyers.
Yao goes further to highlight a trend towards melding wellness and technology such as having circadian rhythm lighting that changes as evening approaches, installing infrared panels into the home spas or extended bathrooms and thinking about different types of airflow. This convergence of wellness, sustainability and technology is becoming a major expectation for buyers, particularly as consumers become more health-conscious.
“In addition to the actual unites they have in their residences, every resident has full access to the hotel menus such as the wellness and spa programs,” she adds.
Growing buyer pool
But the buyer market for branded residences is becoming increasingly diverse and as the sector evolves, branded residences are accommodating a wider range of consumers, transitioning from being niche luxury offerings to more widely accessible products catering to a diverse demographic.
Lin notes: “In terms of buyer profiles, you’re going to get a lot more diversified profile from all source markets, different segments and even different incomes. There are so many different business models and products out there. The consumer profile has completely changed - before, it was only really for the elite and the wealthy but now a very wide range of products will create huge demand from all sorts of people.”
Yao agrees. “I think consumer demand will continue to evolve. In addition to where it started at the ultra-luxe brand, we're starting to see our premium brands start to have demand for branded residences. So it's really getting a little bit more mass market.
Everyone is getting more interested and so I think that branded residences demand will continue to grow globally. I also think we're going to see buyers who because they liked their first purchase, keep buying in different locations around the world. It's going to be a big business both for IHG and for others getting into the space.”
Buyers are also seeking flexibility in ownership models, Yao says.
“Generally, in urban areas, buyers often seek owner-occupied residences solely for their own use. They don't want strangers in their place - it's for them to use. They want a community and they want it to be secure. In resort destinations, they tend to want more flexibility to either keep it to use themselves or have the option to give it back to hotel inventory for part of the year, allowing them to make some income.”
Demand for branded residences may also be aided by a continued growth in wealth individuals. At the end of 2023 there were 4.2 per cent more UHNWIs than a year earlier, with growth led by North America - up 7.2 per cent - and the Middle East, up 6.2 per cent. According to Knight Frank’s 2023 Wealth Report, more than a fifth of global UHNWIs planned a residential purchase in 2024.
Additionally, investment by foreign buyers in branded residences may also be down to the allure of golden visas, with golden visa programmes continuing to attract foreign buyers seeking residency or citizenship across the world in exchange for substantial investments in real estate. US, Singapore and the UAE all utilise golden visa programs, all countries that sit top of the list in terms of sales of $10m+ according to Knight Frank’s figures.
Looking forward, Yao says standalone branded residences will be a big trend due to growing demand and the need to be flexible to cater to different needs of different buyers.
However, Lin warns that residences that don’t have much more to offer than a brand slapped on a building will be a lot less competitive as travellers have become more exacting.
“It’s going to be a lot more competitive now because virtually all the brands can do branded residences. And so it’s going to be tougher for those that don’t have anything unique to offer,” he says.