The booming branded residential market in the U.S. is undergoing a transformation, fueled by shifting consumer behaviors, evolving economic conditions and population migration. According to a 2023 report by Savills, the global branded residential sector has seen a remarkable increase of over 160 per cent in the past decade, with North America accounting for just over one-third of the total supply.
Cities on the Rise
Once concentrated in a few high-profile urban hubs, demand is now spreading into emerging secondary and tertiary markets, with markets such as Charlotte, Charleston and Atlanta standing out as attractive investment opportunities
“There is some attractiveness in terms of having new branded residences in markets like Charlotte and Charleston as more people and businesses move from north to south. We’re seeing pieces of development in Austin and while that has slowed down a little, there’s still opportunity for more branded residences,” said Barry Landsberg, principal at Landsberg Residential Consulting.
This is even as even as established markets like Miami continue to lead the charge as prime locations for branded residences.
This is evident in the surge of branded residence development across Miami, particularly in the Brickell neighborhood and up the coast of Florida. Amongst those are the Waldorf Astoria Residences Miami set to complete in 2027, The Residences at Mandarin Oriental and The Ritz-Carlton Residences Palm Beach Gardens.
Atlanta also presents promising prospects, with neighborhoods across the state such as Buckhead witnessing a rebirth of the opportunity for branded residential projects.
Regional slowdowns and solutions
But while markets like Florida are thriving, other regions are experiencing contrasting trends. “California - for example in L.A. and San Francisco - has slowed due to the economics of it and the challenges related to getting development done,” Landsberg observed also noting a slowing in places like New York and Chicago due to the movement of people to southern cities such as Nashville, a market which has seen significant branded residential growth over the past few years.
Positively though, Landsberg sees opportunity in Seattle and Denver. He adds: “We’re also seeing a shift where there’s the multi-family opportunity because of housing needs as people move to work in those communities.
However, the challenge of branded residential development in markets like LA and San Francisco could be surmounted by taking advantage of partnership opportunities such as seen on the other side of the pond where keys are split between hotel rooms and branded residential.
“There are cases where keys of hotel assets are being handed back due to financial challenges being faced by the hotel owner. But there are deals done where a partner has proposed converting the top floors of the building into residential and leaving the rest as hotel rooms as a solution to keeping the hotel,” Landsberg added.
And as some urban markets reach a saturation in hotel accommodation, there will be a shift towards more standalone branded residences.
“I believe there’s a point where the demand for hotel keys especially in the luxury or lifestyle space may be met and residential opportunities will be a bit more attractive,” Landsberg said.
This upcoming shift is starting to be evident in the occurrence of projects such as the 391-unit Aston Martin Residences in Miami. And while luxury consumer branded residences such as Aston Martin, Missoni, Fendi and Porsche prove very popular with consumers due to the draw of those brands, experts predict an evolution which will see these consumer brands linking up with hospitality brands or other third-party operators in order to improve the service offering.
“Consumer brands in the space will be pushed to improve what service looks like and the quality of service within those buildings because apart from their affinity with these brands, consumers will want to make sure that the service level equates top what they bought into. Branded residences 2.0 will be around elevating and providing that quality of service,” Landsberg said.
Midscale Opportunity
And while luxury brands dominate the US branded residence scene, there's a growing recognition of the potential in mid-tier offerings.
On the other side of the pond, the growth of branded residences in the last ten years has seen an expansion into the mid-scale premium space as evidenced by the likes of Accor’s Novotel Residences. Jeff Tisdall, chief business officer at Accor One Living, noted that from being largely a “classic luxury play," he believes that the sector has deepened and matured
While Landsberg noted that mid-tier branded residences haven't really taken hold in the U.S. yet compared to those in the luxury space, he notes huge opportunity in where those premium upscale brands may fit into the residential space.
“Consumer understanding of the product and what it is has shifted and the next level is them understanding that they can have some of what the guy with the Four Seasons has with a more affordable price tag,” he explained.
Navigating Challenges
But despite all the opportunity that abounds and the optimism, the branded residential market faces challenges, particularly concerning financing and development logistics.
“The availability of financing has slowed overall development in some markets,” Landsberg noted. And part of the solution is collaborating with experienced developers familiar with local markets in order to mitigate risks and ensure project success. Additionally, understanding and navigating local regulations as well as aligning with brands that resonate with target audiences, are crucial components of a successful strategy.
“You take on a lot of risk when you have a developer who doesn’t necessarily have experience in that market and may not have experience in terms of doing a luxury or lifestyle product offering. From a developer perspective, it's really about finding the brands that are going to work with you and work within the market.”
Looking deeper at locations in order to find attractive submarkets are also crucial, with Landsberg highlighting Miami’s Coconut Grove as a submarket in this regard.
He advised further. “Do your research and engage the right partners. Ensure you’re bringing on the right partners, developers and brand that align with your vision along with the right amenities and facilities for the consumer.”