I can say one word—Hilton—and immediately you think of two things: either you think of Paris Hilton or you think of Hilton Hotels. And the only reason Paris Hilton comes to mind is because of the hotel’s brand. The feeling that the name evokes is high-end, luxurious and classy. Every big name hotel has tried to create a similar brand, one that is part name recognition and part association with quality.
When you consider how much value hotels create with compelling brands, it’s not surprising that developers are keen to employ similar marketing and branding strategy to commercial buildings. If done right, branded properties can turn their goodwill into real life profit. According to the numbers, a residence that is branded as a premium property can bring in a 30% higher asking price than a non-branded building.
It should be noted that this is still a minuscule niche in the property ecosystem. According to the Savallis report cited above, there are only around 400 global branded residences, nearly a third of which are in the U.S. Plus, of these properties 85% are hotels.
But this trend is likely to rise. With the increasing desire for authenticity and brand connection of today’s consumer the value of a properties brand might become more and more lucrative. Today branding efforts are being used to sell and lease multi-use complexes, office spaces, apartment buildings, and new business districts and the impacts could change the way the real estate industry thinks about how they position and market properties forever.
Co-Working and Co-Living Lead the Way
One of the big reasons that property companies are looking at creating brands is due to the success of co-working and co-living companies. These types of spaces flip the paradigm for renters, buyers, and workers by offering shared spaces that provide flexibility. But maybe more importantly they create a connection with the user.
On the residential side co-living has also been making some big strides. The Medici Group recently received over a billion dollars to expand their co-living brand. In these arrangements every occupant has their own room and personal space, but the kitchen, bathrooms, and living rooms are shared. This helps make living in a branded building more affordable and also builds a sense of community. The economics work out well. Tenants pay less per “unit” (read: bedroom) and property firms are able to increase the density (read: profitability) of their properties.
A Brand for Every Consumer
The real value of a brand, according to Adam Chaloeicheep, partner at the branding consultancy Executive Agency far outweighs the costs, “Think about the pricing later–focus on the value and purpose of the brand first.”
He stressed that the brand needs to be tailored to each use case, “The branding process varies based on client goals. Our branding strategy depends on the sector: student housing, mixed-use, condos, co-living etc. It’s important in real estate development because people want to be a part of a community or a lifestyle.” Obviously we all want different communities and lifestyles so not every property brand will appeal to us no matter how well the branding strategy is executed.
Starcity is a great example of culture, branding, and storytelling done right. They are a co-living startup designing housing and a community for the backbone economy: teachers, firefighters, etc. Branding a co-living space starts from the moment architects begin thinking about the purpose and meaning of the space. Tenants who are opting to share living spaces with strangers, you need to prioritize making the space fun and comfortable. Only after that do design and visual elements come into play. It’s the emotional connection to the building, and what that type of space can add to your life.”
Partnerships Make Co-Working Spaces Brands Stronger
Brands don’t have to go it alone. There are many ways to co-opt other brands’ connection with the consumer with creative partnerships.
Take for instance the new 620,000 square foot development in the heart of New York City called The Wheeler. This is more than a co-working space; they call it a “creative office hub.” Of its ten stories, the iconic Macy’s store will continue to occupy the first four floors while the remaining six will be used for innovative office spaces like co-working.
When it comes to real estate, nothing exists in a vacuum. Any decision that is made to any property directly affects the surrounding real estate. The real estate market is very location sensitive so any local changes to supply and demand sends ripples through the neighborhood. If a property sells for an “above market” price the market adjusts accordingly. If a tenant changes from an auto shop to a bookshop it changes the character of the block.
This building is garnering all kinds of attention, not just because the space will be a part of the historic Macy’s brand, but also because it is being marketed in partnership with top named designers and developers with a partnership between the famous Shimoda Design Group and well-known developer Tishman Speyer. All parties involved, including Macy’s, understand that creating a well designed integration between the retail and office elements of the building will strengthen the property’s brand.
In downtown Brooklyn, a 36 story office tower is going up which partners designers from FXCollaborative and building developer JEMB Realty. FXCollaborative will occupy three floors of the building as part of the deal. This interesting arrangement means that the designers will not only be creating the look and feel of the building but will be a permanent part of the culture as well.
One of the companies that has pursued the partnership strategy is flex-space provider Convene. They create a revenue sharing agreement with property firms and often cobrand their space with the ownership. Convene’s co-founder and CEO Ryan Simonetti said, “There is always a conversation about whether a property should be co-branded because that is in the best interest of the asset or depending on the deal structure is it something that should be branded solely as Convene. It is about finding how we can be the most accretive to the asset strategy. Building owners that are looking to sell a property see value very differently than those who want to own a property for the next thirty years.”
It isn’t just partners in the property industry that are important. Convene has recently penned partnerships with a high-tech convenience store brand and an artisanal coffee roaster. Finding companies outside of the normal spectrum of real estate can help deliver value to a building’s residents and help partners get in touch with a “built in” audience.
On-Demand Lifestyles Help Properties Increase their “Touch”
The property industry, just like just about every industry right now, is dealing with the effect of Millenials. They are becoming one of the biggest demographics for the real estate market and are increasingly choosing to live in city centers, close to where they play.
This creates opportunities for properties to become more than just a place to stay. According to Alain Kapatashungu, Founder and CEO of real estate sales software Frontdoor, “Developers and property owners are smartening up their buildings to attract millennial buyers and are coming up with new ideas in terms of modern design breakthroughs to make life easier. Some have launched apps that help residents to make club bookings, order food from nearby restaurants and connect with local businesses.”
Part of creating a successful brand is having positive touch points. Products that we seldom think about, say once a year when a lease term ends, usually struggle to create a strong connection. By becoming a conduit for other aspects of residents’ lives buildings will have a lot more opportunity to build their reputation (downside: this means a lot more opportunities to lose it as well).
Technology’s Big Effect on Building Branding and Design
When commercial real estate first started adopting technology, effect were mostly seen on the analytics level. It took years before the sector got on board with more user facing innovations. This seems to be changing. Over half of real estate professionals surveyed by Deloitte for their 2019 Commercial Real Estate Industry Outlook report believe that advances in technology are going to have the biggest impact on branded buildings with a long history over the next few years.
Interestingly 80% prioritize business intelligence and analytics over all other advances in technology for the real estate industry over the next two years. Being able to understand users is key to creating a brand. It also makes a building a lot more attractive for investment. Deloitte reports that more than 60% of investors surveyed said that they are basing their investment decisions on data aggregated through the IoT (remember: perception is reality).
Smart technology is becoming less of a perk and more of a necessity. Especially when it comes to branding spaces that attracts millennials, technology has to be the top amenity. According to one report, more than 85% of millennial aged adults will pay more to rent a smart apartment or home.
Not all tech is the same, however. What buyers want are tech amenities that make their living space more convenient and easy to manage. Many renters today won’t even fill out an application for an apartment that doesn’t have a website or that has a website that is not interactive.
From first contact, new buyers and renters are looking at the property for its tech efficiencies including online rent payments, immediate application submission or review, text alerts, move-in technology, and automated maintenance. Building maintenance and management should all be able to be utilized by phone or online without any human-to-human interaction if necessary.
Above that, renters and buyers are looking for technology that can help make their daily lives easier. That could mean something as simple as being able to monitor package deliveries by phone or good access to wi-fi throughout the building. It could also mean including smart home gadgets like smart locks or thermostats. As the penetration of smart speakers keeps up its startling pace look for this tech too also become a part of the property purchasing decision.
There are downsides of all of this innovation. Much of the focus of branded spaces has targeted the luxury price point.
Some Really Cool Newly Branded Buildings
Brooklyn is a prime example of how the very culture of some of New York’s most famous neighborhoods has been completely changed by designer buildings. Here are just a few examples of buildings that are focusing on brand:
Famous architect David Adjaye designed a 66 story building (image above) to be finished next year that will be located in Manhattan and contain nearly 250 units with some affordable studios starting as low as $650,000: 130 William St
Winner of the Pulitzer Prize for design, Tadao Anto will add a new condo building to the NYC skyline (152 Elizabeth St) where the branding is in the design—a huge green wall made up of ivy. The cheapest units will cost over five and a half million dollars and there are only seven of those available, increasing the appeal for designer buyers.
A collaboration between the Rockwell Group, DS+R, and Shed will add nearly 400 new units (The Shed) with a quarter being “affordable” units starting at $2 million. One of the numerous incredible amenities is a 75 foot swimming pool.
For less than a million dollars, there are units going up in high-end branded buildings that go as low as $350,000. Places like Bushwick, Rockaway, Murray Hill, and Sheepshead Bay are attracting buyers at all income levels to these new developments:
You get a “virtual” doorman and ten foot ceilings for just over half a million dollars for a studio apartment that is more than 700 square feet in Bushwick.
In Rockaway you can live on the beach with a short subway commute to Manhattan for only $350,000 for a one bedroom, one bath apartment spanning just over 700 square feet with rooftop deck and on-site fitness center and lounge areas.
At The Lindley, you can find a studio in Murray Hill for just under $1 million that includes a spa tub, a rooftop deck with views of the Empire State building and convenient access to the subway.
Branded Buildings’ Effect on Culture and Pricing in New York
New York is a bit of testing ground for the property industry. Many of the big property firms call the city home and its cosmopolitan and wealthy population are usually early adopters of new innovations. It is on the forefront of the branded property revolution and what is happening in New York could prove to be a foreshadowing to what will happen in other major cities.
There are downsides of all of this innovation. Much of the focus of branded spaces has targeted the luxury price point. This has driven up prices in almost every burrough and is often followed by a troubling change in the culture of an area. Local shops become chains, creatives take flight and community often suffers.
But this doesn’t have to be the case. Branded spaces are equally as important for every property type, not just the top end of the market. Plus, the things that most help a properties brand, creating a community and connecting residents to their neighborhoods, are exactly what most “gentrified” areas need.
Some of the newly branded buildings we’ve discussed have shown that there is room to accommodate those needing more affordable options while also pursuing a vision of high-end branding. With community buy-in, those efforts are made much easier and in fact can help push marketing efforts with a partnership with the community.
Since humans started gathering in cities the property industry has played a role in creating the physical structures that we live in and around. Now that brands are becoming seen as an important part of the industry and technology is giving a lot of new ways for buildings to service their clients and communities we might see real estate play a similar role in creating the cultural structure of our cities as well.