Branded residences in Dubai ‘set to double over the next five years’

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 report.

Dubai, the commercial and financial centre of the Middle East, has emerged as the magnet for global investors seeking branded residences.

The emirate currently has 51 branded residential projects, from well-known hotel brands to new entrants into the 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’s report said.

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 the popularity of Dubai’s branded residences, Riyan Itani, founder and director of GBR, said.

Dubai is a relatively new market, which means that newbuild development can be done at a scale, he added.

In Dubai, “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 comprises two main categories: investment and lifestyle. While the developments are mainly geared towards affluent clients seeking luxury properties, some of the hotel brands offer an opportunity for mid-level investors as well.

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 increase by between 25 and 35 per cent, on average globally, which leads to a higher profit for developers.

“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.

Dubai’s property market is on the sharpest trajectory of growth ever, on the back of strong investor demand as favourable economic conditions and policies continue to encourage long-term residency.

Property consultancy Knight Frank said last week that prices of prime residential properties in Dubai rose by more than 16 per cent last year, the second-fastest pace globally.

Several high-profile branded residences projects were launched in Dubai in recent months, including the Armani Beach Residences at Palm Jumeirah, the Franck Muller Aeternitas tower in Dubai Marina and Mercedes-Benz Places in Downtown Dubai.

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.

The safety and security of delivery

Compared to cities such as London, Paris, Madrid, or New York, the level of constraint on land in Dubai is much less

RIYAN ITANI

Founder and director of GBR

and the fact that most branded residence buyers do not need debt to buy these properties bodes well for such projects. “Branded residences during the pandemic in particular proved to be an incredibly resilient product for the market globally,” Mr Itani said.

Meanwhile, Sharjah property developer Arada, which launched the Armani Beach Residences in January, is confident about the future of branded residences.

“We’re bullish on the outlook for the branded residences market in both Dubai and Sharjah,” 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. I am expecting more first-time fashion and other segmented branded products to choose Dubai to make their debut in the branded residences space,” he said.