Branded residences have grown in popularity amongst property investors in recent years. However, can we expect them to be the next big investment trend? Many property investors are now looking to this sector with questions around the possible benefits this type of investment strategy can bring.
A branded residence is a residential property affiliated with a brand, for example, a hotelier or otherwise, available on the open market. Besides affiliation, the residence typically benefits from higher-quality facilities and services, which are usually provided by a hotel (included as part of the ownership package).
When the owner is not living there themselves, these residences can be rented out to create an extra income. A separate management company manages these rentals on the owner’s behalf. Due to the residences’ branded nature, they often include higher-quality facilities such as gardens, pools, and landscaping, helping the brand maintain its image.
Many investment experts recognise the benefits of these investment opportunities, acknowledging the net yield/return at the end of the year for owners.
There are three types of branded residence:
- Co-located properties – the branded residences are on the same site but not joined directly to the hotel.
- Condo-hotels – the residences and hotels are one entity.
- Standalone residences run by non-hotelier brands – such as fashion, tech and interior design brands.
The branded residential sector originally began in the 1980s in New York and grew at a modest rate until the 2000s. But, there has been much more extensive growth in the past ten years, with the sector expanding by 180%. This trend is expected to continue on its upwards trajectory and thus presents itself as a fantastic opportunity for property investors and developers.
This upward trend is because of the model’s sound economics and the benefits it brings for property investors and develops. The affiliation with a brand enables them to make their product/property stand out from the crowd. Each brand engages with its customers in a unique way; they can reach new markets and locations that property investors would have been unable to do alone.
These types of homes appeal to second-home or even third and fourth-home buyers who want a stress-free purchase. The owners have the reassurance that the property is being cared for when they are not there on top of them having an expected level of quality which provides them with an appealing potential to rent them for additional income.
This property sector is steadily expanding in Europe, with 70 current schemes and 69 in the pipeline. More brands are entering the market, too. In 2010, 60 brands were operating in the sector, but by 2020 this has risen to 130 brands. 160 to 175 brands are expected to operate in this market by 2025. This presents an excellent opportunity for property investors looking to invest at home in the UK or internationally in Europe, Asia and North America. And with a wide range of homebuyers seeking this hassle-free hotel-like service and home, property investors can be assured that their properties will find owners.