The experts were the protagonists of webinar «Branded Residences» promoted this Tuesday by APR (Portuguese Resort Association), which gathered more than 300 online participants. The «Branded Residences» segment shows an enormous potential to be developed and make their mark in Portugal. The understanding of the international markets where this type of real estate product is already implemented is essential to understand the market fundamentals, crucial for the success of this new concept in Portugal, which promises to attract internationally renowned operators and brands. 2020 was a year of adaptations and the «Branded Residences» segment proved itself resilient despite increased competition», explained Pedro Fontainhas, APR’s CEO.
The branded residences segment grew three digits throughout the last decade and is now going through a period of clear expansion across the globe in terms of number of projects and by welcoming a new range of rising geographies and operators. These were some of the conclusions to be drawn from international study Branded Residences, compiled by Savills and presented by Riyan Itani, Head of International Development at the British consultant.
«The segment appeared in America and in 2015 it already concentrated 50% of all offer. But that has changed and in 2020 the US represented only 40% of the global market due to the enormous expansion taking place in other parts of the world, especially in the Asia-Pacific region, which already concentrates 25% of all the offer on the pipeline, followed by the Middle East with 20% of all new projects under development and Europe with 17% of all new offer on stock; whereas America only represented 16% of this pipeline».
For now, Spain and the United Kingdom are the main European destinations for this type of projects, but our country is under the segment’s brands and investors’ radars as well. «Portugal has a great opportunity with this branded residences market, not only because of the strong fundamentals it shows and all the characteristics that make it one of the best European tourist destinations, but also because the few projects planned for the country are still on the planning or development stages», observed Paula Sequeira, Consultancy Director at Savills Portugal.
The advantages of associating a brand to the housing component of a resort are effective and extend to all stakeholders, guaranteed the experts. The required brand notoriety and quality criteria and a professional management assured by a renowned international chain are the main arguments which seem to convince buyers, explained Riyan. For developers, the premium price is, perhaps, one of the greatest attractions, guaranteeing on average a 31% increase in terms of selling prices when compared to the local offer. For brands, increased revenues guaranteed by management fees are one of the main advantages.
Market will continue to skyrocket
Throughout the last decade, the branded residences segment grew 170% globally, with Savills reporting a 590 project stock with 76.000 units in 2020. «Last year it reached another record, with more than 100 new projects launched and our expectation is that this market will continue growing rapidly in terms of geography as well. In the same way, the number of brands present is also skyrocketing, having gone from 60 operators in 2010 to 130 in 2020, and we forecast 160 to 175 individual brands operating on the market in 2025».
The diversification of operators entering the branded residences market is one of the great trends observed. «At the beginning this was a market dominated almost exclusively by luxury hotel chains, but this scenario is changing», highlighted Riyan Itani. «There is a growing number of new brands entering the market», and if on the one hand «amongst hotels the expansion of the non-luxury segment, which already represented 31% of the pipeline (vs 23% on the stock currently in operation), is clear», on the other hand we also see «an increasingly bigger bet from brands not at all related to hotels, but to experiences and lifestyle», added Riyan. Well-known names such as Bugatti, Ferrari, Roberto Cavalli, NOBU or Pharrell Williams are only a few of those who are riding this wave.
This is good news for the segment, guaranteed this expert, remarking that «the entry of new operators and this diversification is also allowing to significantly open the target-market, that is, making branded-residences become an attractive product for an increasingly larger number of people, besides the ultra-rich».
This is why Ryan Itani has no doubts «the market will continue growing exponentially in the years to come, since it is far from reaching its maximum potential» on practically all destinations.