Developers with branded developments see an uplift of around a third, research shows
Branded developments are leading the way in terms of price growth in the prime global residential market, according to new a research report.
Developers can increase profits by around a third by building ‘branded homes’, says the Branded Developments report from Knight Frank that looks at what makes a branded residence, assesses recent market performance and examines why these properties have been attracting a price premium.
The increase in the number of wealthy people and the growth in the value of their assets has coincided with a shift in their investment requirements, the report explains. Following several years of chaotic financial markets many High Net Worth Individuals believe they ought to invest a greater share of their wealth portfolio in tangible assets, including residential property.
But while the main prime city markets around the world saw prices rise by an average of 15.5% in the three years to June 2012, outperforming more mainstream markets, t6hey have in turn been outperformed by branded residences.
Yoo, a luxury property developer cited in the report has branded and designed more than 10,000 homes, hotels and commercial projects in 37 cities and chairman John Hitchcox believes that a name and its associations with style appeals to consumers.
‘People identify themselves with the project, the community they’re about to move into and the location to an extent. They are buying into a lifestyle that will enable them to meet likeminded people. These developments are like new villages in a sense,’ Hitchcox explained.
The report researched 26 branded and 79 comparable non-branded property developments in 17 global cities and found that developments linked to well known designers or labels were around a third more valuable that similar plots nearby.
Branded property had an average 34% uplift in value above non-branded counterparts, the report calculates. The amount of increase ranged from 5.7% in Jakarta, to 45% in Puerto Rico and over 50% in several locations.
‘I think we’re still in the very early stages of branding in the residential sector. Coupled with the fact that the proportion of the world’s population living in cities continues to grow, I think we’ll see an expansion of the branded sector in various ways,’ Hitchcox concluded.
Some of the best evidence of the impact of branding on values has been in Dubai. Armani branded apartments in the Burj Khalifa tower are priced around AED5,000 per square foot. Ordinary unfinished apartments sell at between AED3,000 and 3,500 per square foot, an uplift of roughly 50%.
Comparing Palazzo Versace and D1, adjacent to each other on the Dubai Creek, gives an extreme example of the impact of branding. Apartments at Palazzo Versace achieve an uplift of 120% against the unfinished D1 apartments.
London is also a hub for branded developments. Examples include One Hyde Park (Mandarin Oriental), The Shard (Shangri-La), and The Knightsbridge (Bulgari). The uplift in London equates to around 11% on average for these schemes. There are several high profile hotel branded schemes in the pipeline in London’s prime and super prime residential market.
In Puerto Rico the average uplift for branded residences is around 45%. The Ritz Carlton Dorado Beach, a branded luxury beach resort, has an average asking price of around £777 per square foot. The average price of the non-branded parts of the development is £218 per square foot, which represents a 250% uplift. In other nonbranded developments the average price of comparable schemes ranges from £258 per square foot at Azure Beach to £504 per square foot at Aqcuamarina.
