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How brand loyalty can add value to residential assets

4 MIN READJanuary 20, 2020
In today’s world, brand loyalty drives sales for the world's most successful retailers. In an attempt to capitalise on this market mentality, real estate brands are beginning to put more emphasis on their brand in their assets, such as branded residences or branded coworking. This has been historically true for office operators, as the larger operators have been successfully following in WeWorks footsteps by making their brand more memorable, associating itself with amenities and service, and reliable enough to garner recurring tenants. For coworking especially, as the sector has grown by over 200% in the last five years, branding is needed as a way to stand out. 

This trend is beginning to find its way in the residential market. As coliving demand rises across Europe, real estate as a service is beginning to find a gap in the market with renters looking for a better user experience. Many operators present at GRI Residential Europe 2019, one of Europe’s leading gathering for senior real estate leaders, spoke about how branding was especially important for tenant retention. If you can build a rapport with tenants and have a variety of products, you can potentially provide housing to people for their entire lifetimes - for example, providing student accommodation to affordable living to BTR with a good brand might mean you could keep a tenant from when they are 18-30. At the moment, this is done by associating your brand with security and sociability.  

Now we’re seeing branded residences. When people think about luxury apartments, we think about location, size, and decor. But for international buyers and investors however, they’re looking for a brand they can trust as they know the kind of service guaranteed. Much like people stay loyal to Burberry for formal wear or Aston Martin for cars, high-end hospitality brands such as Marriott, Hilton and Mandarin have a strong enough image to completely disrupt the luxury living market. In fact, these three names take up over 80% of the branded residence market. 

Branded residences are already quite established in the US and Asia, but now Europe is beginning to see the value in the sector. In fact, London just became home to the first Four Seasons Branded Residence project in Europe. There’s now a growing realisation that investors stand to benefit from adding branded assets to their portfolio - as a big name can help raise their profile among their target audience. For developers, there’s also the price premium; branded residences in a prime location in central Berlin could sell for 20 percent more than their unbranded equivalents.

For private investors, according to JLL, it’s a rare product that investing in would carry guaranteed kudos for those successful in securing a deal. It’s explained in one report that the greatest potential lies in the combination of higher sale premiums and the ability to generate additional income and thereby achieve a higher total return on investment. 

At the same time, there are also risks with this specific asset. The quality of the brand can be a decisive factor in value, and while this is a key strength when you have a big name with a great marketing strategy, it leaves itself open to scandal and diminished perceptions.

Some of the biggest operators and real estate brands across Europe will gather at the GRI Club’s upcoming events for behind closed door discussion and high level networking. Among the GRI Club events taking place in Q1 and Q2 include France GRI (22 - 23 April), Deutsche GRI (12 - 13 May, 2020) and Italia GRI (13-14 May). 

Article by Matt Harris
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