Luxury Insights

WSJ: Developer Courts the Global Elite

Interesting story in today's Wall Street Journal looks at "One57" -- a new condo development that targets the world's ultra-affluent and will be the tallest residential tower in NYC.  

Designed by French architect Christian de Portzamparc, One57's 95 condos for sale have a combined price tag of $2 billion, or an average per unit of more than $21 million, which would match Manhattan's 15 Central Park West as the most expensive building ever sold.

While a hallmark of the economic downturn has been the collapse of the housing market, the extreme top of residential markets in New York, London, Hong Kong and other select cities has been resilient.

Mr. Barnett says the number of billionaire and multimillionaire investors in the world has never been greater. In addition to Russians and Western Europeans, he says, "you're seeing Latin Americans in a big way. You're seeing Chinese in a big way. You're seeing the return of the Middle Eastern buyer."

Thanks to this demand, the ultraluxury market in select cities is looking healthier than practically any other corner of the housing market.

WSJ.com: Developer Courts the Global Elite

Wow! What an Event.

The Leaders in Luxury 2011 Advisory Board on stage at the LIL 2011 Awards Dinner: Carole Smith, Gretchen Lambeth, Leslee Farrell, Kathleen Bucher, Maria Babaev

 

A big "thank you" to the more than 140 top agents from the U.S., Canada, and Mexico who gathered at the Ritz Carlton Laguna Niguel and made Leaders in Luxury 2011 a smashing success.  

Special thanks to our Advisory Board (pictured above), our International Team of Dawna Borg and Toni Viola, and also to Dave Wilkinson and Lori McGuire for letting us tour their listings.  

Thanks too to our speakers and panelists for sharing their unique knowledge and insights.  The information and ideas were fantastic and so was the networking!  

What a fantastic group.  Thank you all.  

Here are some photos of the cocktail and Awards Dinner: 

We're already looking forward to next year!

 

October 'Wealth Report' Now Available

The October 2011 Wealth Report Newsletter is now available for Members.

In this month's issue:

• Luxury Retailers Again Show Strength In September
  Despite another 10% drop in the S&P 500 stock index, high-end retailers post increases in monthly comparable sales nearly double the growth seen in the overall retail universe in August. 
• WealthSurvey: The State of the Luxury Industry -A Global Comparison of Consumers in Top Markets
  Luxury spending surge picks up strength in China even as wealthy consumers report plans to throttle back on purchases in Europe, Japan and the U.S. 

There is some really interesting data on the attitudes of the wealthy in China.  Here's a peek:

 Nearly four out of five (78%) wealthy Chinese consumers say that luxury goods and services are more important in today's economy, although the reverse is true in the U.S. where 80% of wealthy shoppers say that luxury has become less important. 

Members can access this report and an archive of past reports on our website (login required). 

The report is produced by the New York based Luxury Institute, a uniquely impartial, independent and objective ratings and research organization that is the global voice of the high net-worth consumer. 

Rich...but oh so different

Today Robert Frank posted Remembering a Modest Billionaire, a thoughtful tribute to William Cook the billionaire founder of Cook Medical who died last month.  

By all accounts, William Cook was a modest, hard-working man who built his own fortune through hard work and lived extremely modestly in a small 3-bedroom house.  In his business he created the tools to save lives, and in his personal life pursued a passion for local historic preservation--giving millions to help preserve the spirit and historic architecture of his community.   As Frank notes:

Today, so much wealth (is) created through financial engineering, trading and investments that fail to add concrete value. The Cooks of the world are slowing being displaced on the Forbes list and the ranks of the rich by hedge-funders, private-equity chiefs, commodity traders, and passive tech investors.

Maybe Americans wouldn’t resent the rich so much if more of them were like Mr. Cook.

Contrast this with his post from Monday: Young, Rich and Shopping for a Mansion which highlights a new reality show in the UK on BBC3.  As Frank describes it:

...a new British reality-TV show starting today offers the ultimate in wealth escapism: following around rich kids as they shop for a starter mansion. It’s like “Gossip Girl” meets “House Hunters,” with a dash of Kardashians.

Here's the first episode on YouTube:

 

Some of the other online reviews have been a bit less forgiving of the show and it's cast.  

Criticisms and value judgements aside, what's really striking is the huge difference in the lifestyles--and presumably also the beliefs and values--of these young househunters and William Cook.  

Successful luxury businesses recognize these differences, have a meaningful model for grouping or segmenting their customers based on these attributes, and deliver a service or offering tailored to fit.

It's no different in real estate.   How you write copy, stage homes, show properties, even design listing presentations to better attract, communicate with, and satisfy affluent clients and customers should be informed by an understanding of their values and lifestyles.  

You certainly couldn't successfully market a home to Mr. Cook and these young househunters in the same way, could you?  

An Exclusive Summer Soiree in London

Looking to connect with the "jet set" this July?  

Try the Concours d'Elegance in London.  July 27-29 the exclusive, private Hurlingham Club plays host to one of the world's most exclusive garden parties.   Take an afternoon stroll through the lawns and explore the finest luxury offerings from top brands in fashion, jewellery, yachts, aviation, and collectible automobiles.  Promote your own exclusive properties, or explore those on offer.  

The soiree lasts well into the night, so there is ample opportunity to mix and mingle, see and be seen.

Consider it old fashioned social networking.

Is it really about the shoes?

There is a good article (To Sell an Apartment, No Detail Is Too Small) in the Times today  that highlights the importance of staging and enhancing how a property shows.  

Of course you know the importance of this already, but the article is novel because they attempt to put a dollar value on simple staging and repairs with examples from NYC agents and their listings.  For example:

• Clutter: Subtract 5 to 15 percent.
• Fresh towels and throw pillows: add $25,000. 
• Dirty rugs: subtract $5,000. 
• Regrouting tile: add $100,000 (to a $3 million apartment, that is). 
• New fixtures and appliances: add $250 in rent. 
• New lights: add $32,500. 
• Replacing cabinets: add $107,000. 

Of course in your market, mileage may vary!  They nailed it at the end though with an insight about the fact that buyers aren't buying a home, they are buying a LIFESTYLE:

An expensive shoe closet: worth every dollar. Michele Kleier of Gumley Haft Kleier has found that when buyers walk into a closet filled with Christian Louboutins, they are likely to pay more of a premium than what the seller spent on her shoe collection. She advises sellers, “You can buy 25 pairs of designer shoes, put them in your closet, and they’re going to get more than you spent on them.” That’s because, Ms. Kleier said, “people want to step into your life.”

If the shoe fits...

Living the SuperYacht Lifestyle

CNN.com is running a story highlighting 10 New Superyacht Playgrounds.

1. Ao Po Grand Marina, Thailand
2. Lusail Marina, Lusail City, Qatar
3. Marina Bizerte, Tunisia
4. The Victoria International Marina, Canada
5. Yas Marina & Yacht Club, Abu Dhabi, UAE
6. Port Adriano, Mallorca, Spain
7. Marina Pez Vela, Costa Rica
8. Karpaz Gate Marina, Cyprus
9. Yacht Club Costa Smeralda, British Virgin Islands
10. Porto Montenegro, Montenegro

Perhaps not surprisingly, none of them are in the U.S.   North America is represented on the list by Canada--specifically the Victorian International Marina at the southern tip of beautiful Vancouver Island, British Columbia.

In more yachting news, SuperYachtWorld reports that in April, San Diego will play host to DeLUXE San Diego a new luxury lifestyle event focusing on superyachts, private aircraft, fine automobiles, jewlery, watches and more...  

For those of you interested in the superyacht lifestyle (or working with those who are) this is probably an event worth checking out.

Laurie’s Luxury Market Predictions for 2011

2010 saw the beginnings of a recovery for luxury overall. What do you see happening in 2011 with luxury in general, including retail sales and demand for other luxury items?  

The number of “money millionaires” (those with a million or more in investable assets -- not including real estate) has rebounded after the drastic decline of 2008 and global wealth has returned to 2007 pre-crisis levels.  In addition, we’ve seen a recent resurgence of consumer confidence on the part of the affluent.  The growing number of wealthy who are feeling better about the economy (and feeling better about their own portfolios!) bodes well for luxury purchases next year.  In fact, luxury hotels and many high end retailers have already reported sales gains in 2010.

Will the recovery of wealth continue? 

Unless we have some “wild card” economic event that sends everything spiraling down, the wealth recovery will continue and it will continue to be more global.  North America and Europe will enjoy increasing numbers of wealthy, but China, Russia, Turkey, Brazil and many other countries will see an even greater percentage growth in the number of wealthy households. 

Has the global recession affected attitudes and buying preferences of the wealthy?

Attitudes of affluent consumers appear to have undergone some changes since the economic meltdown.  At least for now, “whispering wealth” rather than “flaunt it if you have it” seems to be a common philosophy.  Although some propose that this is the result of feelings on the part of many of the wealthy that the current economy demands some restraint, research actually shows that only a small percentage of the affluent report this as a reason to spend differently.  Instead, this new attitude may be driven by a growing desire for quality and exclusivity over bling. 

 Expect the search for quality at a bargain to continue to make the Internet a stronger distribution channel for luxury goods and services.  Private online sale sites offering quality at a savings will grow in number and sales volume.  Quality, fine design, artisanship, and bespoke items will sell across categories from leather goods to women’s shoes and men’s clothing.  Since the use of the internet rises as wealth increases, also expect the luxury homebuyer to gather housing information and check out listings online.

How will changing attitudes affect luxury homebuyers in 2011?

Luxury homebuyers…

• Are demanding more and better information about the market and the property
• Are looking for value, will negotiate price, and are looking for prices well below those of 2006 and 2007
• Are skeptical of pre-construction offerings
• Are often looking for lower-key, less flashy properties
• Want neighborhoods with available health care, low cost of living, and safety (especially if they are boomers)
• View green as desirable; however, maybe not, if price is higher
• Want seamless service which saves them time
• Are looking for lifestyle experiences and stories to tell 

What do you see happening with luxury real estate in 2011? 

Nationally, the luxury market has already started to outperform the overall housing market.  According to NAR, the market segment which has seen growth in the number of transactions in 2010, is the over $1million price point.   This is true nationally and in every region.  However, recognize that this million dollar plus niche is small – somewhere between 2% and 2.5% of the total housing market.  The affluent are revaluating where to invest. Many are putting their money into residential real estate. My best guess is that the luxury housing market will lead the housing recovery.  Markets will have to work through existing inventory including luxury short sales and foreclosures, so the rate of recovery will vary across metro areas, but look for the number of high end home sales to rise slightly in 2011, even though prices will remain generally depressed.  This assumes that we don’t have another economic meltdown.  Real recovery may be a couple of years ahead.

What about international buyers in the U.S.? 

U.S. purchases by international buyers will be important in 2011.  The growth in wealth around the world will help fuel demand for foreign buyers to purchase in the U.S. The U.S. is still viewed as a safe haven for investment.  Visa challenges and other governmental issues may moderate international demand, but the potential is strong.  The U.S. second home market will benefit from this.  Some foreign second home markets are still overbuilt (Dubai) or dealing with ownership issues (Spain).  Economic problems in Europe and the resulting austerity problems will dampen recovery in 2011. Prime property in prime locations (especially waterfront with private docks or marina access) will lead the rebound when it comes.  

Is there any one thing that will be the big luxury housing story of 2011?

China! China! China!  The growing number of very affluent Chinese already makes them significant players in the luxury travel and high-end consumer goods categories.  Watch for them to move into U.S., Canadian, and other luxury home markets in a bigger way in 2011.  While this obviously won’t affect every community, major markets which attract international buyers may see increasing numbers of Chinese prospects. 

What Strategy should a luxury agent use in 2011?       

Four important strategies for building a strong position in the luxury market (regardless of the year):

1. Position yourself as THE luxury expert.  Do the research to define exactly what’s happening in each price band within your luxury market and compile that research on a monthly basis in a luxury market report.   Today’s affluent consumer wants to understand the market and will gravitate to the source of valuable market information.
2. Know your competition and network with them.  Analyze luxury listings and sales for the past year and determine which firms and agents really do the business in various price ranges (don’t assume you know).  This will not only identify your competition, it will give you a “hit list” of agents to target for networking.  Be sure you know what other firm’s luxury programs offer so you can build a competitive offering.
3. Work to build necessary competencies and make sure you have the right “marketing toolbox.”  An agent’s success is dependent upon understanding who the affluent are, how to reach them, how they choose their Realtors, what they expect in a marketing plan, etc.  You must also understand how to market a luxury property using lifestyle marketing and the concept of “best prospects.”
4. Know your inventory. 

How does one define luxury in the U.S. housing market?

At The Institute for Luxury Home Marketing (ILHM), we define luxury as the top 10% of a market’s residential sales (as determined by price) in the last 12 months, but never less than $500,000.   This formula recognizes market differences.  For instance, the top 10% in New York City may be in multiple millions of dollars, while in Dallas, it will be in the $500,000 range.  What you get for your money from one location to another differs, so we believe the definition of luxury should be specific to the marketplace.   

Luxury is About the Stories

In their Luxury Magazine supplement, The New York Times has been running a series of interviews with fashion insiders on the subject of LUXURY, asking each of them the following eight questions:

1. What is your most treasured possession?
2. What is the quality you most desire in a fine product?
3. If you were a handbag, what would it look like?
4. If “luxury” changed its name — what should it be called?
5. Is your idea of luxury tangible — or a sensation/ experience?
6. Can luxury be virtual as well as actual?
7. What do you consider the most overrated luxury?
8. Is your ultimate luxury time — for yourself?

The interview with Imran Amed, the Founder of Business of Fashion and a strategic consultant for international luxury brands, particurarily caught my eye. 

Here are a few of his answers:

What is your most treasured possession?
It’s a tie between a durable, boiled cashmere blazer by the Japanese bespoke tailors ICHO and a vintage Heuer Carrera watch from the late 1960s. Both are high-quality, versatile items suited to my taste and style, with deeply personal stories attached to them. And both — if cared for properly — will last forever.

What is the quality you most desire in a fine product?
It must enable me to reflect my own personality and fit with the way I live, rather than stamp me with a logo or reflect the current fashion trends.

If “luxury” changed its name — what should it be called?
During a period of unrestrained economic expansion, prices of so-called luxury products had risen to an all-time high, while quality and workmanship suffered. In short, consumers were paying more for less. This is why new luxury must focus on traditional luxury values: craftsmanship, personalization, heritage, quality at a fair price.

Is your idea of luxury tangible — or a sensation/ experience?
For me, luxury is about the stories, feelings and meaning attached to objects, as opposed to the actual objects themselves. For example, a traditional, handmade Alpaca scarf I discovered in a small, hidden shop in the San Telmo district of Buenos Aires is so much more luxurious to me than a mass-produced cashmere scarf piled up next to hundreds of others in a generic luxury flagship. True luxury must offer life-enriching experiences and stories, as well as attractive objects. Indeed, these kinds of stories may be the most enduring form of luxury of all, because they never expire.

Think about this as it might be applied to luxury real estate.  Many of your potential buyers may share Imran's values and outlook.  Will your marketing materials resonate with them?  Does your copy reflect these or similar values?  What are the values of your targeted buyers?  As we've long said, "Every home has a story.  It is your job to find it and tell it well."   

Old Money, New Money, Patricians and Parvenus

When looking at the attitudes and spending habits of the affluent, many people think in terms of "Old Money" and "New Money."  It is a simple model, but it is not always accurate or useful. 

As we discuss in our training, categorizing the affluent is more a function of attitudes than the age of the money.

In his post, "The Four Species of Wealthy Consumers" Robert Frank of The Wealth Report highlights a recent study that looks at the issue of social status and brand prominence and suggests a new segmentation model that uses attitude to build on the Old/New Money model.  The study groups people into four categories based on their relative level of wealth, desire for social status, and desire to associate or disassociate themselves with their own or other groups:

Patricians are wealthy and understated.  Their primary concern is associating themselves with other Patricians using subtle cues.  They buy high end luxury goods without prominent logos and branding.

Parvenus are relatively wealthy and crave status.  They seek distance themselves from less affluent the Poseurs and Proletarians, and to associate themselves with other affluents, both Parvenus and Patricians.  The study suggests that they like prominent logos, particularly Louis Vuitton.  (What we might call "flamboyants").

Poseurs want to be Parvenus but lack the financial means.  They are "highly motivated to consume for the sake of status" but often can't afford luxury goods.  They are consumers of counterfeit luxury goods.

Proletarians are generally not consumers of luxury goods.  They are neither affluent nor status conscious (when it comes to brand prominence).  They don't seek to associate themselves with the "haves," nor do they seek to distance themselves from others of "humble means."

Robert raises an interesting question in his post when he asks,"Which category do you think you fall in? Or is there a fifth category? (Would Warren Buffett be a billionaire proletarian?)" 

This study looked only at wealth, logo prominence, and desire for social status.  The resulting data suggested these four segments.  If these are overly broad and you want a fifth category, you need a new study!  (For a more detailed model that will accommodate folks like Warren Buffet nicely, I would suggest PKG Lifestyles).

Let's cut to the chase:  Is this a useful model?  Can you apply this in your business? 

I would say maybe.  In luxury real estate, you'll only be dealing with the affluent Patricians and Parvenus (you'll screen out any Poseurs that try to sneak in when you qualify your prospects), so this model doesn't provide many useful insights beyond the old notions of Old  and New Money.  It is certainly not as specific or as useful as the PKG Lifestyles model. 

That said, using the notion of Patricians/Parvenus is certainly better than nothing at all.  Identifying prospects and clients as Patricians or Parvenus and determining which group a property is likely to most appeal to could be quite useful, particularly when it comes to understanding client wants and needs and choosing the language that you use in dealing with clients or prospects and in positioning properties.