Standalone developments are on track to become the dominant model of branded residences worldwide, a structural shift Global Branded Residences founder and director Riyan Itani says is driven by simple building math.
Standalone projects, those built without any operating hotel component, currently account for 33 percent of the market. The pipeline pushes that to 40 percent.
“The number of hotels in the world is limited compared to the number of residential buildings,” Itani said during the State of the Industry presentation at the Brand x Residential event in New York City earlier this month.
This constraint will force developers to consider more decoupling of branded residential product from a finite hotel-key supply. That also means the opportunity for more competition from unlikely players. Among non-hotel parent companies, Italian design house Pininfarina has climbed nearly to the top on a pipeline weighted toward the Americas and Latin America. The Trump Organization — which operates hotels, but Itani’s presentation designated as a non-hotel parent company — is in third place and remains the top non-hotel brand in the U.S., but Itani flagged its pipeline as “almost non-existent.” Yoo Residences is the top non-hotel parent company in branded residences.
Among individual hotel brands, Ritz-Carlton and Four Seasons continue what he called a “little alternating dance every year” for the top spot, with Ritz-Carlton currently ahead and other Marriott brands filling much of the field alongside brands like Rosewood, Mandarin Oriental, and Shangri-La.
For investors, the premium data is the core asset. GBR, which Itani said runs 20 to 40 brand premium studies a year for major market players, reports a 44 percent adjusted global premium on branded residential projects (after researchers removed outliers above 200 percent and below negative 25 percent premiums). The figure is highly setting-dependent: 32 percent premiums are typical in urban areas, whereas 54 percent is the norm in urban-resort, and 57 percent premiums are usually found in resort markets.
The urban premium runs lower for a simple reason, Itani explained: The competition is already good. In a market like New York, the non-branded building next door likely offers its own concierge, valet, gym, and bar — so the branded project has less room to command a premium over it.
The more important signal for underwriting is that the global average has climbed from 25 percent since Itani began tracking it and not because the value proposition changed.
“We are seeing more resort developments, we're seeing more urban resort developments, and that's where you gain the biggest premiums,” he said.
In North America, Itani counted 268 completed projects and another 174 in the pipeline, with the U.S. accounting for the bulk of both. The region also runs more upscale than the world at large: roughly 75 percent of its projects fall in the luxury tier, versus about 68 percent globally. That gap shows up as a thinner middle, with fewer projects in the upscale, upper-midscale, and midscale segments than the global mix.
He also projected a leveling of the global field: North America's share of the worldwide market falls from 32 percent today to 23 percent in the near future, even as the region retains a diversity of settings (strong urban cores, urban-resort markets like Miami, and resort product from beach to ski) that few other geographies can match.
The clearest forward indicator came in the standalone pipeline. In North America, 30 percent of completed projects are standalone against 45 percent of the pipeline. More telling for site selection, Itani said, is location: Those standalones are increasingly landing in resort and suburban markets rather than dense urban cores.
“That's a really interesting sub sector of the market that we should be looking at again as the sector evolves,” he said.