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Top luxury brands could save newly developed luxury residential projects

Opportunities 25 October 2009

Armani

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Almost a year into the current crisis, we can all agree that real estate remains the most affected sector of all economies in Eastern Europe. Romania, Bulgaria and Ukraine have been particularly more affected due to the large number of residential developments. At least 20% of the current real estate developments are premium and luxury residential complexes, most of them located in the outskirts of the capital cities. Most of them are low rise buildings with large apartments. Unfortunately, such complexes bear similar architecture and their marketing has made all too similar, with location being the only major differentiating factor. The crisis has almost halved the prices of such premium/luxury apartments, which reached a level of EUR 3.000/ sqm. Nowadays, completed apartments stay empty while many projects in construction phase have been halted. For those residential projects located in prestigious residential areas as well as in city centers, one of the solutions could be to market them differently and address an upper market. The only way buyers would be willing to pay a high price would be if those apartments would bear the signature of a major luxury brand. We have seen how such residentials have been snapped up even during the current crisis, when the interior design is signed by Armani, Versace or Missoni. Customers buy not only an apartment but also prestige and living in a branded building would provide the essential social status which customers, especially in emerging markets such as Eastern Europe are so eager. Armani completed this summer an apartment building in Rome and the units were sold before even works were started. Armani also signs the design of the Federation Towers, tallest building in Moscow. Sales of Armani residences apartments in Dubai's Burj Tower are selling well and so do the sales of Versace apartments in Dubai and Panama. The designer apartments concept brings customers an additional advantage, that of moving into a readily furnished apartment, without the hassle of hiring a designer and chasing various furniture suppliers. The business arrangements vary from brand to brand, yet they are similar in charging a royalty fee and a marketing fee. The developer also pays for the architecture work which is needed to create the presentation materials. Oliver Petcu CPP

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