The number of branded residences in Dubai is set to double over the next five years, as robust economic momentum continues to drive demand for big-ticket ultra luxury properties in the emirate, according to a new report.
Dubai, the commercial, financial and aviation centre of the Middle East, has emerged as the magnet for global capital looking to invest in branded residences.
There are 51 branded residences projects in the emirate, ranging from well-known hotel brands to new entrants into the bustling market from the automotive, fashion and design industries, according to property consultancy Global Branded Residences.
Branded residences refer to property development carrying the stamp of iconic brands from fashion to lifestyle and automotive sectors.
A further 70 are planned to be launched by 2028, more than three quarters of which will be non-hotel related, GBR said in its Future of Branded Residences, report.
Areas such as Downtown Dubai, Business Bay, Dubai Marina and JBR will be home to the majority of projects in the coming years, it added
The availability of land and relative freedom when it comes to design and build are reasons for Dubai's branded residences popularity, Riyan Itani, founder and director of GBR, said.
Dubai is a relatively new market, which means that new-build development can be done at a scale, he added.
“Developers are able to build exactly what they want, almost where they want, and at the scale they want, which means that compared to, for example, historic European cities like London or Paris or Madrid, or indeed New York, the level of constraint on land is much less.”
The branded residences sector is divided primarily into two main categories: investment and lifestyle. While these developments predominantly are geared towards affluent clients seeking luxury properties, some of the hotel brands offer an opportunity for mid-level investors as well.
'Win, win, win'
Developers also favour branded residences as, despite having to pay a premium to bring the bands onboard, they can charge higher prices to buyers. Residence buyers are happy to pay the extra amount because of the brand and the services and amenities that come with such properties.
“When you look at construction costs, professional fees and soft costs, the [aggregate jump] is somewhere, globally speaking, between 7 and 15 per cent. So, you're adding [that much] on to your costs,” said Mr Itani.
Sale values increases by between 25 and 35 per cent, on average globally, which leads to a higher profit for developers.
“The effect is a significant multiplier. The net profit margin is approximately 40 per cent, if you look at global figures, which is why developers realise that they don't need to put in anywhere near as much cost as they get out in value,” he said.
“There's a good phrase in our industry by a chap called Chris Graham, who's a commentator on the sector, that it's a win, win, win model, meaning that the developers win, the brands love it and the end users are really looking for that type of product, whether it's for investment or for lifestyle.”
Dubai's property market is on the sharpest trajectory of growth ever, on the back of strong investor demand amid favourable economic conditions and policies that encourage long-term residency.
Property consultancy Knight Frank said in a report last week that prices of prime residential properties in Dubai rose by more than 16 per cent last year, the second-fastest pace globally.
Despite the record sales of luxury homes last year, Dubai is still ranked towards the bottom end of the most expensive prime markets globally, the report said.
With $1 million securing 979 square feet in any of the emirate’s three prime residential districts, the city was ranked 13th on the list of the world's top 15 prime residential markets.
In recent months, developers have taken advantage of the booming market and successfully launched several high-profile branded residences projects, including the Armani Beach Residences at Palm Jumeirah, the Franck Muller Aeternitas tower in Dubai Marina and Mercedes-Benz Places in Downtown Dubai, which sold half of its properties a day after its launch.
Branded residences, however, are not necessarily dependent on market trends and do need to be launched in buoyant market cycles to be successful, Mr Itani said.
“Anecdotally speaking, branded residences perform much better compared to non-branded residences in poor market conditions, because of a mix of things,” he said.
The safety and security of delivery and the fact that most branded residence buyers do not need debt to buy these properties bodes well for such projects.
“When you have poor interest rates, the type of buyer that buys a branded residence isn't affected by those same kinds of pressures as me and you and a public Joe ,” he said.
“Branded residences during the pandemic in particular proved to be an incredibly resilient product for the market globally.”
Bullish outlook
Sharjah property developer Arada, which launched the Armani Beach Residences in January, is confident about the future of branded residences in both Dubai and Sharjah and expects to see new brands coming to the UAE in the coming years.
“We're bullish on the outlook for the branded residences market in both Dubai, which is already well-established in this segment, and Sharjah, where we’ve led the market by working with Vida and Rove to launch the first branded homes in the emirate,” Rosa Piro, senior business development director at Arada, told The National.
“Given the breadth of investor interest in Dubai, we can see that even niche branded products have witnessed a favourable reception here, and the city has also become a playground for first-time brands.
“As a result, I am expecting more first-time fashion and other segmented branded products to choose Dubai to make their debut in the branded residences space.
“The reception we’ve received for our branded residences launches in both Dubai and Sharjah has convinced us to invest further in this space; we’re looking to launch at least two more branded projects over the course of this year in our existing markets.”
