If you do a quick Google search on “serviced residences,” you are likely to find thousands of results. This is due to a sudden boom of these properties in the region. Several years ago, the Malaysian real estate market also experienced a huge growth of serviced apartments.
Many of these projects were billed as “all-inclusive” apartments which were supposed to include full amenities and proper management. Unfortunately, what ensued was a tragic series of horror stories of badly maintained buildings, lack of utilities, unprofessional management. The list goes on.
Many of these buyers were caught with poorly maintained projects, which caused them a lot of grief, heartache and financial loss.
With that said, there was a need in the market for serviced residences that were of quality and value. Property buyers started to look for apartments that were built by developers with a good track record.
The bigger picture here is that there are highly motivated property buyers who have the means to purchase a property that comes with peace of mind and convenience.
Hence, since 2015, we have ushered in the concept of “branded serviced residences” into the Malaysian market with YOO8 serviced by Kempinski at 8 Conlay.
In 2019, Kuala Lumpur saw record highs in branded apartment sales. The data showed that these properties actually sold with a premium of 69% more as compared to the non-branded luxury residences.
These sale prices were the second-highest premiums compared to the other Asian cities according to the Branded Residences Report: 2019 issued by Knight Frank.
It is worth noting that these premiums are also positively affected by the location of the project. It is important to understand that even within the city, prices can be greatly affected depending on the micro-location. For example, Kuala Lumpur City Center projects pricing depends on the proximity of these projects to the golden triangle of Kuala Lumpur.
For players within the branded residences sector, market differentiation and brand enhancement is the key. Whereas for buyers, the important factors to consider are consistent rental income returns, followed by quality amenities, security and capital gains.
What defines Branded Serviced Residences?
Traditionally, these consist of hotel developments interspersed into residential properties. It is a symbiotic system whereby the hotel brand lends credence to the residences, which in turn enjoy the services and amenities of the hotel.
The hotel brand usually lends its quality, management and services to the residences, giving potential investors a sense of security that their property is in good hands.
It also provides the people residing there a sense of contentment and dependability of a home environment and yet they can luxuriate in the benefits of a hotel.
Over the last few years, this type of “branded serviced residence” has variegated into several different concepts. They are getting more popular because many buyers are starting to view these properties as “collectors’ assets” resulting in these residences emerging as the New Normal.
Here are six reasons why branded serviced residences are the New Normal:
Many property investors feel that purchasing a branded serviced residence is a safe investment due to the nature & economics of the property.
Since the property is tied to an international brand name and has a proven track record, it is safe to say that investing into these units will stand the test of time. It is also a hedge against inflation as the property will hold its value, and it can be passed on to the next generation.
Affluent investors and home buyers will continually be drawn to these types of properties, as they fit into their investment portfolios & values of being high quality and credible.
It is estimated that more than 2000 units of branded serviced residences will be added into the Malaysian market in 2021.
This will undoubtedly cause the market to be extremely competitive. Property analysts, however, say that this will not be a cardinal problem as developers will ensure that their properties will be constructed with the best quality, to keep up with the competition.
Branded serviced residences established itself as a viable property asset class when One Hyde Park in London set a precedent of being one of the most expensive service residences. It was launched in 2011, and its average selling price was about MYR 30,000 per square foot, and yet it was experiencing record sales.
It had a simple formula – it was anchored next to the Mandarin Oriental Hotel, and it had coveted luxury retail brands such as Porsche, Ferrari and Hermes opening their stores within it.
With this formula in hand, the creme de la creme of accredited developers started launching various similar residential projects all across the globe.
To date, there are only about 400 branded serviced residences around the world. This makes these properties a niche class – with a lot of upside and value.
Buyers in the branded residence market are always on the lookout for credible companies they are tied to. One such notable example, our YOO8, offers residences serviced by Kempinski which is immediately recognised as an established luxury hospitality brand.
The Kempinski group is one of Europe’s pioneering and stellar luxury hotel groups. It is over a century old. This acclaimed five-star hotel brand is synonymous with exquisite hospitality and flawless service. As always, Kempinski service is always delivered with an exceptional European flair. Some of the services Kempinski will feature at YOO8 include bespoke concierge services, 24-hour valet and security, and on-call services such as personal chef and butler, among others.
Quality of Build
When a branded serviced residence is launched with the right partnership, it is guaranteed that the management services and building maintenance will be up to par with the brand itself.
There will be a standard operating procedure that maintenance companies will have to always adhere to with key performance indicators to achieve in order to fulfil their contractual obligations.
Furthermore, the key brand owners will always be reinvesting back into their brand, enabling the property to always be well maintained ensuring that its value will also be sustained if not increased.
To investors, this is an assurance of build quality that not many non-branded serviced properties out there can provide. With this assurance in mind, investors and end-buyers alike, are willing to pay a higher premium.
As the Malaysian property sector has seen its fair share of horror stories, this brand guarantee is a very welcome change in building standards.
Attracting the Right Clientele with the Right Brand
There is a universal saying that you get what you pay for. When it comes to properties, if it is not located in an ideal location and is badly maintained, the cold hard truth is that it will be hard to find a buyer. This is especially true in this soft real estate market.
It is also correct to say that if the property is poorly maintained, it will be unable to fetch a decent rental rate as well.
Statistics show that branded serviced residences do get better clientele in terms of renting and reselling. For example, going back to the One Hyde Park, London, it has maintained its selling price, without much of a dip, even in a global recession.
It is also still a highly sought after address to rent, with many units taken up by the uber-rich. In Kuala Lumpur, one of the serviced residence brands that are echoing around the investor circles is the YOO8 serviced by Kempinski.
As Malaysia sees a slow down in the property sector, branded serviced properties can be the key to set the property market apart from the others.
Developers will start to follow this trend, and focus on collaborations with branded management companies as well as architecture and design companies. These considerations can set a project apart from the rest.
It is known that a strategic brand involvement can make a property project visible, and increase value to the project. In other words, if developers play by this rule, they are likely hedging their bets and ensuring that their project will be successful in the long run.
What is the future for Branded Serviced Residences?
These types of residences are still a niche in Asia. Thus, it makes sense to understand that to differentiate oneself from the hundreds and thousands of apartments out there in Malaysia, partnering up with a brand is key.
Developers and brand owners understand that the new generation of investors are millennials. They are prioritising experiences and quality of life, overstock standard boxed-in apartment living. They seek to find others who share the same interests. Millennial parents want a quality living to include great experiences as a family.
Based on the facts discussed, it is clear that branded serviced residences are here to stay and it is the new normal. As we weather through the aftermath of a pandemic, and a soft property market, a change in the status quo of property type is always welcomed.
Buyers and investors are always on the lookout for the next property jackpot, hoping to make a comfortable return of investment by flipping properties in Malaysia.
The days of reselling a property very quickly after its purchase are all but over. The next property winner that is emerging now like a diamond in the rough branded serviced residences.
Pick the correct brand that will look after your property value, and you will not go wrong. The up and coming branded serviced residences at 8 Conlay, called YOO8 serviced by Kempinski, are one such project to keep an eye out for. This project has all the hallmarks of good capital returns as well.
For more information, contact the 8 Conlay sales team here.