A marriage made in luxury: Will Versace's designer-branded residential tower work in London?

Versace's residential tower in London is the latest major tie-up between high fashion and high-end property. But how does each partner benefit?

Luxury fashion and high-end property are making a go of it in business and climbing into bed together.

Three years ago Bulgari, the Italian jewellery brand, opened a glamorous hotel in Knightsbridge, west London, close to Harrods. Diane von Furstenberg has designed a suite at Claridge’s.

Burberry has opened a café named Thomas’s, after the brand’s founder, Thomas Burberry, located at the British group’s flagship Regent Street store.

And Ted Baker has agreed to provide a trademark licence and design services for the creation of flats to a private firm invested in by Ray Kelvin, the retailer’s chief executive. The Bournemouth properties will be marketed as “styled by Ted Baker”.

But earlier this week, Versace unveiled Britain’s biggest luxury brand/property tie-up yet when it announced plans to partner with a Middle Eastern developer to make its “fashion residences” UK debut.

Working with Dubai-based Damac International, the pair will develop a £600m tower of flats in London, which will be stuffed with Versace home products. Of the new 360 flats that Damac and Versace will create, some are expected to cost as much as £4m.

Damac and Versace have previously worked on homes together in Dubai and Lebanon. But fashion-property partnerships have typically been for hotels or individual flats, and are more likely to be seen in Italy or the Middle East. Armani runs a hotel in the Burj Khalifa tower, the world’s tallest, in Dubai.

So will a designer-branded residential tower work here?

“Our expansion is customer led and we have seen significant demand from our customer base for a development in London, which is one of the most sustainable property markets in the world” says Damac chairman, Hussain Sajwani.

But what about the location – in Vauxhall, south London – which has not traditionally been regarded as one of the most exclusive districts?

JLL residential research associate director, Nick Whitten, thinks the area choice makes sense. “The severe supply and demand imbalance in prime London, such as Mayfair, and the strength of price growth, has seen the emergence of ‘neo-prime’ locations, asserting a claim to prime status” he says.

In this category, Mr Whitten includes Fulham and Notting Hill, both in west London, and Vauxhall. “New developments [like the Versace tower] are invariably part of this shift, establishing a level of desirability and modernity that raises perception, and values across these new locations,” he says.

JLL says values in Vauxhall now reach in excess of £1,500 per sq ft. The firm anticipates this to increase by 4 per cent in 2015, making it an attractive investment.

But what does the fashion brand bring to the party? Cross-selling is part of the answer, according to Versace’s chief executive, Gian Giacomo Ferraris.

He says that Versace customers are in abundance in the capital – and suggests many could be potential flat buyers. “Versace is one of the most desirable luxury brands in the world, and is already hugely popular in London” he says.

Richard Chinn, a senior strategist at Wolff Olins, the brand consultancy, says there are other synergies. “A good brand can add significant value to a property. Its core ideas can attract tenants, enable new ways of living, working and play, and ultimately grow [a property’s] long-term value”.

However, Mr Chinn adds that the fashion designers must recognise that a flat, unlike a garment, could be a long-term purchase. “Their [interior design] choices must last longer than a season” he warns.

Woody Bruce, a director at retail leasing specialist Bruce Gillingham Pollard, thinks this is only the beginning of a wave of luxury brand/property partnerships.

“The property market is hearing a lot of serious talk about designer brands wanting to morph into more than just fashion” he says. “My company has been approached by several household names looking to partner on cafes, hotels and, more recently, homes.”

And Mr Bruce predicts that the residential market could be the biggest growth area of all. “I expect rivals will want to outdo Versace with even bigger and more flamboyant plans for homes on British soil” he says.

“These models are a business win for both landlords and designers. Building owners get access to a host of potential buyers that are fans of a designer [labels], while the luxury brand gets a revenue boost from winning the contract on the interior design job.”

Damac says it is looking for more sites. And Versace is “open to the prospect of doing further branded developments in London”.

If Versace’s designer rivals want to get involved in the capital, they might need to move quickly to bag land. The high fashion/luxury property bed might get rather crowded.