Unpacking the allure of Dubai’s branded residences

Armani Hotels

It has been almost a century since the Sherry-Netherland hotel opened on Manhattan’s Upper East Side.

The world’s first-ever branded homes ushered in a new type of investment, tying together the idea of home ownership with the promise and opulence of one of New York’s most luxurious hotels.  

The sector has certainly come a long way since 1927, and there are global hotspots in the US, Europe and Asia.

More recently, Dubai has been playing an outsize role in the market for branded residences. The city’s first ever scheme of this type, Armani Residences in the Burj Khalifa, launched in 2010 to great fanfare, and featured apartments designed by Giorgio Armani himself.

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Since then, the sector has grown significantly, and there are now about 40 completed branded residences, amounting to about 12,000 units, in the city. 

Impressive as that growth has been, it’s nothing to what’s coming. Our estimate is that there are another 35 to 40 projects in the pipeline, which will add another 14,000 units to the market. 

These are sizeable numbers, making Dubai by far the most active market in the world when it comes to this particular segment, overcoming more established locations such as Miami or New York. 

A sign of the times

Of course, part of the interest in Dubai’s branded living projects is being driven by the overall resurgence in the city’s property market more generally.

For a wide number of reasons – including geopolitics, improved social regulations and residency permits that are easy to obtain – the UAE has secured an enviable position as a country that’s open to all. 

As it happens, a healthy percentage of those choosing to move to Dubai are wealthy and thus more likely to invest in the luxury end of the market.

More high-net-worth individuals are expected to migrate to the UAE than any other country barring Australia during the course of this year.  

To find out how and why investors have fallen in love with Dubai’s branded residences, it makes sense to take a deeper look to see exactly what is on offer, where and what the attraction of this market is.  

Our own research tells us that the top four locations for this market in terms of supply within Dubai are Business Bay, Downtown Dubai, Dubai Marina and the Palm Jumeirah.

These four areas all enjoy centrality, connectivity and accessibility, are well established and benefit from proximity to key demand drivers such as malls, lifestyle developments, waterfronts, public transport, dining and entertainment options.

Moving beyond location to consider the types of associated brand, by far the most common are hospitality-branded residences. They account for almost 60 per cent distribution by number of units.

Around the world, branded homes typically command a price premium of 30 per cent, which varies depending on location and partner, according to recent research conducted by Savills. 

In Dubai, however, premiums for branded residences can be considerably higher. In Business Bay, for example, buyers can expect to pay 60 per cent more for branded homes compared with others in the same area.

That is despite the fact that competition in the branded space in that area is relatively high, congestion is an issue and there are no nearby beaches. 

Why do buyers pay such significant premiums? Simply put – you’re not just buying an apartment, you’re buying into the promise of the brand. Generally speaking, the more highly regarded the brand, the higher the premium. 

You know that you are going to receive a guarantee of the level of quality associated with the brand, and this is across a number of areas, not just design.

It extends to furnishings, fittings, services and facilities, all of which must be delivered to the same exceptional standard.

In addition, for those looking for solid return on investment, the brand association and visibility usually result in higher rents, as well as the ability to let the home more rapidly. 

It’s a potent combination and one that is proving extremely successful. 

Rosa Piro is senior business development director at property company Arada