Branded Residential Review - Introduction

Over the past decade “branded residences” have become important components of many leading residential real estate markets, often establishing new benchmarks in terms of achieved pricing, quality and service. The branded residential model typically combines a decidedly upscale residential product with a suite of luxury hotel services that many affluent consumers now demand as integral components of their residential experience. Rather than developing independent market positioning, developers using this model license an international luxury brand to differentiate their residential project.

Given the importance of the service component, luxury hospitality brands have been uniquely positioned to deliver a turnkey branded residence solution – licensing their brands to third party developers who build to a defined brand spec, and then serve as residence manager and service provider post-construction. Shangri-La, Four Seasons, Fairmont, Raffles, Jumeirah, Ritz Carlton, Rosewood and Starwood’s W and St Regis brands have all been leveraged to create residential business lines. Commercial terms typically include a variable brand-licensing fee calculated as a percentage of sales revenue and a technical services fee. Services are funded through maintenance fees and in some instances, a resort or hotel access fee. 

In addition to an enticing mix of services and luxurious amenities, consumer confidence is bolstered by the knowledge the product has been built and will be managed to demanding international brand standards. This confidence is reinforced by the typically long-term nature of associated management agreements. While the branded residential model is most commonly applied to whole ownership developments, Four Seasons, Fairmont and Ritz Carlton have also extend their brands to luxury private residence club developments.

The branded residential business is at a crossroads in today’s economy. After a decade of robust growth and the entrance of several new players including luxury fashion brands like Armani, Bulgari and Versace, the global downtown dramatically slowed the pipelines of participating brands and their development partners. With growth in luxury segments clearly returning, it is an opportune time to take stock of efforts to date and to consider criteria for success going forward. A study released by Bain & Company last month forecasts an 8% increase in the size of the global luxury goods market in 2011. This latest forecast follows a 10% (YOY) rebound in 2010 to 172 Billion Euros. Our timely and in-depth review of the branded residential segment will be conducted over a series of posts beginning with today’s introduction. Please also return in the coming days for:


Part 1 - The Developer Perspective
Part 2 - The Brand Owner Perspective
Part 3 - Future Branded Residence Opportunities