Branding of real estate developments has long been used to add prestige and enhance value in Dubai
Developers partner with globally recognised brands to use their name and service standards. In this setup, the developer benefits from a stronger standing in the marketplace, while the third-party brand enjoys widened name awareness and direct revenue streams.
Branded real estate is mostly seen in the hospitality sector, apartment developments and master-planned villa communities.
Examples of branded real estate in Dubai include Armani Residences at Burj Khalifa, The Address Residences, Trump Estates, Palazzo Versace, Kempinski, Paramount, Nikki Beach Residences, Ritz Carlton, Fairmont Residences The Palm, Rixos, Anantara and Bvlgari Residences in Jumeirah Bay.
Research by ValuStrat reveals that branded real estate enjoys both higher capital values and improved recurring income from leasing and room rates. In a region often obsessed with brands, from coffee to cars, real estate is no different. Consumers pay more for property that has the cache of a premium name. Property buyers spend more at initial purchase, and tenants pay more to stay.
Our analysis shows that in Downtown Dubai branded serviced apartments at The Address Boulevard currently sell for approximately Dh3,000 per square foot, compared with Dh2,100 for a non-branded Emaar offering at 29 Burj Boulevard — displaying a 43 per cent premium for the branded offering. The same is true for Palm Jumeirah, where real estate at Kempinski Residences and Fairmont commands prices in the region of Dh1,500– Dh1,700 per square foot, which is on average 33 per cent more than the nearby Golden Mile and Shoreline complexes. Meanwhile, the high-end Versace Palazzo in Culture Village achieves sales rates approximately 57 per cent more than the adjacent D1 residential tower.
Furthermore, branded property concepts in the rental market also have leverage over their non-branded counterparts. For example, a two-bedroom flat at Ritz Carlton Residence in Dubai International Financial Centre (DIFC) has an annual asking rent that is at least 13 per cent higher than a similar unit located in neighbouring Sky Gardens. In Jumeirah Lakes Towers, a one-bedroom dwelling in the Bonington Tower is currently listed at an average annual asking rent crossing Dh100,000, which is about 35 per cent more than the asking rent per year on a similar unit in Goldcrest Executive tower.
However, it is a two-way street: consumers expect more from a branded real estate, from experience upon initial arrival at the property, to the full-service offering and quality of furnishings and fittings. For luxury brand names, nothing but the very best is expected from patrons who anticipate standards in keeping with the very best of global trends.
This all comes at a significant cost to the property developer. Decisions need to be made at the earliest design stage and consideration made of the advantages and disadvantages of collaborating with a brand. Association with a third-party premium brand will likely bring a myriad of ongoing obligations for the property.
Other considerations to be made include the intricacies of having to deal with a third party — both at the initial concept period and through to the ongoing management of the asset. Also, what is the downside reputational risk to the asset if the brand name was to fall out of favour with consumers, or a license agreement with the brand owner did not get renewed upon expiry?
In a Dubai context it is interesting how Emaar has leveraged both its own local name and in-house hospitality brand The Address in the serviced apartment sector. Individual units can be bought in the open market and enjoy an investment return via the property’s rental pool. Both capital values and rental returns are seen to be enhanced by the brand association.
Premium branding is an extra that Dubai buyers and tenants are clearly willing to pay more for. Investment returns can be improved and the long-term prospects for the property enhanced. Going forward, it’s important that third-party brand names are carefully selected and that the quality of the real estate offering is tightly controlled during the entire lifespan of the asset. If managed well, brand association in real estate can help launch a development, add pedigree and drive both capital values and revenue streams.
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