Market Insights
THE PROPERTY DEVELOPMENT REVIEW
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15 MINUTES
CHRIS ORR
With Ted Lloyd
DIRECTOR OF RESIDENTIAL: SAVILLS AUSTRALIA
Branded residences, as a property sector, is a relatively new one in the Australian market, but in more mature markets like the US and UK, it’s booming – at saturation point, in fact – and that’s set to be good news for developers here in Australia.
identifying the hotspots of High Net Worth Individual (HNWI) growth globally. Data from Savills Global Research show high net worth households in Australia are predicted to increase by a third over the next five years, sending it to fifth place globally on the list of countries with underlying demand to support a sector like Branded Residences. And given other markets have, or are reaching saturation point, global brands are now looking to markets like Australia for expansion opportunities. But as Chris Orr, Director, Residential at Savills Australia, explains, Branded Residences are more than just adding a luxury brand to a development build. “Branded projects are about differentiation and the appeal of partnering with brands consumers have an association with, that they instantly recognise as being a ‘premium’ product. ‘The strength of a brand, aside from creating consumer trust and confidence, also offers developers clear product differentiation in the market along with a specific value proposition that is essentially pre-sold to consumers as a brand they already know, love and in many cases, part of their current environment. “While factoring in Gross Realisation achieved elsewhere, emerging markets are seeing over 50% premiums, while the global average currently sits around 30%. “Getting the distribution partnership right across marketing and brand association can elevate the built form, introducing a project to a whole new audience that a developer may otherwise have difficulty attracting.”
Historically, Branded Residences made its first foray in the late 1920s, as one of New York’s Super Prime locations became the setting for the first known offering. However, it wasn’t until the 1980’s when a major hotel operator led the global trend of associating their brand and luxury hotel facility with adjoining apartments that the term came to be, what we know today, as Branded Residences. Fast forward to current supply and while hotel brands still command an 88% market share of global pipeline, the offerings have evolved from purely hotel associated properties to deliver fashion, auto, lifestyle & even sport curated experiences with brands such as Versace, Armani, Porsche and Bentley already established in the space globally. Today there are over 640 schemes operating globally that total close to 100,000 units across every continent of which only 54.2% of completed stock is considered ‘Luxury’ by comparison. A projected 1,100 schemes are expected to be in operation by 2027 with key regional growth dominated by EMEA, followed by considerable increases in demand from USA & South East Asia. With the sector ever expanding, Savills has worked on over 250 projects across 43 countries and believe there is significant existing opportunity for local residential developers in the Branded Residence market. Understanding that affluent, globally-mobile individuals will be the highest demand drivers for Branded Residences, developers and brands are turning their attention to
April / May 2023 – 11
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