Branded residences have been gaining momentum in Thailand for the past few years, originally in resort destinations but now increasingly in Bangkok as well. Simply put, a branded residence involves combining a luxury residential development with a lifestyle element to deliver a product with superior design and specifications and value-added services, all combined to offer an enhanced lifestyle and quality of living.
To achieve these goals, branded residences are managed by well known hotel operators and most of them are developed within a hotel compound, enabling the resident owners to benefit from the use of the facility's amenities and services. Some branded residences also offer rental management by the brand, providing a turnkey investment opportunity.
The key features of branded residences include a prime location, whether in the heart of the city or prime coastal resort locations. The brand association also influences other aspects of the properties such as iconic design concepts and distinctive interior decorations, sometimes with the involvement of well known celebrity architects, a high standard of furnishing and equipment, and premium specifications. The wide range of value-added facilities and services can also include round the clock concierge services unmatched by conventional luxury residential developments. With this complete package, branded residences tend to command a price premium of at least 15-20% compared to conventional luxury residential developments in a similar location.
So how did the concept of the branded residence begin? The business model that underpins the concept is simple _ build a high-quality residential project in a prime location, then integrate a branded hotel operator via a management agreement and add a hotel component to the development. These brands range from top-end international names such as Ritz Carlton, Four Seasons and St Regis to local hospitality brands that are growing internationally, such as Amari, Centara and Dusit.
Providing the developers are able to pre-sell off-plan residential units at a price premium, the branded residence is a very viable financial model. Developers will be able to generate capital inflows which help to partially fund the construction of the residences and the hotel.
The concept seems to be a win-win situation for the developers receiving greater capital inflows and purchasers get top quality hotel services in a well managed residence with long-term capital appreciation.
In Thailand, the concept first began with the launch of Amanpuri Phuket in 1988. Together with the hotel component, a limited number of private residences were launched at Amanpuri, which was then just an emerging hotel brand. The private residential villas were originally launched below US$1 million (28.8 million baht). Today, latest figures indicate they are valued in excess of $10 million with successful launches of subsequent phases that quickly sold out. The Aman brand itself has also expanded internationally, with 25 properties worldwide today, making Amanpuri a true branded residence.
Another pioneering branded residence in Thailand is The Residences at Four Seasons Chiang Mai. This was Thailand's first branded residence to be associated with an established international hotel chain and was launched in 1995. Following the sales success of the condominiums priced at 75 million baht each in the first phase, the second phase of five luxury villas priced at 150 million baht was later launched in 2011.
In today's market, there are two key types of branded residence _ a private residence for one's own use and a branded investment product with a rental programme. Examples of private residences that have been completed today are The Residences at The St Regis Bangkok and The Sukhothai Residences. The same model will be used by The Ritz-Carlton Residences, Bangkok at MahaNakorn when it opens next year.
The concept of a branded private residence appeals to the top-end market and high-net-worth individuals who seek superior quality, design and services that are not available in other luxury developments. They have bought into the lifestyle element of branded properties, the ownership benefits of an enhanced lifestyle, ease of property management and capital appreciation potential.
The second type of branded residence is one that has been designed as a pure investment product such as the Amari Residences Phuket and Banyan Tree Residences in Bangkok and Phuket.
This type of product offers a combination of a turnkey investment as well as part-time usage of the property. The units are typically part of a compulsory leaseback programme which operates on a rental-pool basis, whereby the revenue from all units are pooled together and divided proportionately among individual owners.
In such case, owners' usage of the unit will be restricted in order to maximise the yield. This type of branded residences appeals to lifestyle investors who seek a long-term property investment with rental yields and capital appreciation, as well as the added benefit of owning a secondary home for part-time use.
Both types of branded residence exist in the Thai property market today. Over the years, the market has evolved to offer more choices for buyers in terms of branding and location. Bangkok and key resort markets including Phuket, Pattaya, Hua Hin and Samui all offer investors the choice of owning a branded residence.
Branded residences traditionally have been a niche product appealing exclusively to the top-end market. This market alone is limited both in terms of demand and supply. With changing lifestyles and a shortage of quality property management, I believe the concept of branded residence will continue to be popular but will vary based on target group of buyers and location.
For example, to serve investment purposes, many developers are riding this trend to launch branded residential developments that are more investment focused, with the ability to generate ongoing income through a managed rental scheme.
Another example, a branded residence associated with a high-profile hospital, could work well for existing and future demand from an affluent elderly group of people.
I expect to see continued growth both on the demand and supply side for branded residences in Bangkok and key resort locations which will be more sophisticated in concept and offer a well-balanced combination of benefits for the buyer.
Aliwassa Pathanadabutr is the managing director of CBRE Thailand. She can be reached at bangkok@cbre.co.th; Twitter: @CBREThailand; Facebook: www.facebook.com/CBRE.Thailand.