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Global wellness real estate market will be worth $180 billion by 2022

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The wellness real estate development market has experienced an impressive 6.4% growth in recent years and shows no sign of slowing, according to a report by GOCO Hospitality.

With more and more people realising their lifestyle and surroundings have a direct impact on their health and longevity, the demand for wellness-promoting accommodation and experiences is growing at an impressive rate. These were among the key findings of a new report by GOCO Hospitality titled: The Wellness Real Estate Development Process Explained.

To cater to these developing needs, a new branch has emerged within the real estate industry: wellness real estate. Today, it forms one of the wellness economy’s key parts.

Growing demand for wellness destinations has led to new opportunities in hospitality.
Photo courtesy: GOCO Hospitality.

The origin of the wellness real estate market

The Global Wellness Institute defines wellness real estate as properties which incorporate intentional wellness elements into their design, materials, and buildings as well as their amenities and services.

While the explosion in demand is quite recent, numerous other movements have fed into this trend since the 1900s. Projects such as urban farms in the 1970s, design trends including Feng Shui and biophilic design in the 1980s and the growing shift towards sustainable building have all contributed to the recent emergence of wellness real estate.

Industry overview and potential for growth

In 2017, the global wellness real estate industry was worth $134.3 billion and has grown at a rate of 6.4% between 2015 and 2017.

This trend is set to continue as over 740 wellness real estate projects are currently in the pipeline worldwide. A year on year growth rate of 6% will bring the market to $180 billion by 2022.

Today, the largest market for wellness real estate is North America, where it was valued at $54 billion in 2017. Asia Pacific followed in second place with a market with $46.8 billion and Europe came in third valued at $31.7 billion.

Globally, the two largest national markets are the United States ($52.5 billion) and China ($19.9 billion). They are followed by Australia ($9.5 billion), the United Kingdom ($9 billion) and Germany ($6.4 billion).

Understanding the industry’s key components

For developers, operators and private buyers alike, two main components stand out in this area of real estate.

For one, there is actual wellness lifestyle real estate. This includes properties developed to purposely include aspects which promote wellness and health. Especially private buyers are finding it increasingly important to integrate this into their homes.

Developers, on the other hand, see the addition of wellness facilities as a chance to create a versatile facility with strong revenues.

The other important component is the wellness community. It is defined as a group of people living close together and sharing common interests, one of which is to pursue health and wellbeing.

Physical wellness communities which are master-planned by developers to help the target market live out their idea of an active, healthy life are a commercial example thereof.

Benefits of wellness lifestyle real estate

Buyers see the most direct benefit of wellness real estate if the project was appropriately developed. In that case, the buyer will be well on their way to achieving the goal of improved wellness by enjoying their new abode. Even lifestyle investors can benefit from this type of real estate, as it appreciates in value more quickly than traditional real estate.

Developers of larger, commercial wellness lifestyle real estate benefit from these projects due to their higher returns. While up-front costs are higher due to the need for more high-quality material, advanced technology, etc., the sales price will more than make up for the larger investment. Today sales price premiums in this industry are between 10% and 25% higher than in traditional real estate.

Operators of wellness resorts, for example, have several advantages including the potential to attract nearby residents to their property. This adds to sales in various departments and leads to increased revenues and profits.

A branded residence which is part of the resort development is more attractive to buyers and renters since it offers wellness facilities as part of the package and can benefit from the brand’s standards and marketing reach. In exchange for letting the developer use the brand name, the operator will charge between 2% and 5% of gross sales volume.

A peek into the wellness real estate development process

To create a successful wellness real estate development, most projects go through the same steps.

Initially an ideal site must be selected. Location in relation to sources of noise and pollution (e.g. cities, industrial zones), as well as accessibility (e.g. nearby highway or airport to facilitate travel), are considered.

The surrounding landscape and a plot’s topography also play a role. The area must be beautiful and contribute to the overall feel of rest and recreation. It should be flat and easily accessible for construction work and later for guests and staff.

Once a suitable location is found, a deep market study and feasibility analysis must be done. The market must be studied to identify competitors, potential partners, investors and clients as well as threats to the business.

Depending on this study’s results, the wellness concept development strategy is created. The type and scale of the project will be determined, it can be positioned appropriately for the target market and the overall amenities and services are decided.

Now, it is time to create the design and development brief which summarises all key components following the strategy and offers planners, designers and architects the guidance they need to create a master plan which will contain all project details.

The master plan will go deeper into how the property will be set up, where each component will be and how to create a smooth flow of guests and staff.

Design guidelines will be set during this phase as well, to ensure architects and interior designers can later work according to the developer’s brand standards and preferences.

Finally, once the last details such as desired materials and colour schemes are set, construction can begin. Here, some developers opt for prefabricated construction which means large elements are built off-site and put together rather quickly on-site. This greatly reduces costs and construction time but is not possible in all locations.

While the project approaches the construction phase and especially during this time, marketing and sales efforts must be ramped up. Pre-launch sales of apartment units can bring in cash flow and targeted pre-opening marketing of a resort property will lead to a full house from the beginning.

Overall, developing a wellness-oriented hospitality property is similar to developing a ‘normal’ hotel, yet there are some crucial details developers and operators need to consider in order to make their project profitable.

When the steps outlined above are followed and the entire team is moving in one direction, nothing stands in the way of creating a highly profitable wellness real estate project.

Source: GOCO Hospitality

(The story has been published from a wire feed without any modifications to the text)

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