While the rest of the world is battling with unfavourable conditions in the real estate market, luxury auto brands are rushing to build skyscrapers, with Mercedes Benz being the latest to announce a new high-rise project with Dubai-based firm, Binghatti.
[No, you’re not wrong: it is the same Binghatti working with Jacob&Co, as well as Bugatti on their own branded skyscrapers, all in Dubai.]
The world of architecture is a-buzz. Experts are debating its accessibility, aesthetics, and sustainability. First are the sceptics pointing at the real estate crisis in certain countries and wondering how easily the opulent apartments will sell out. These are followed by the purists questioning how seamlessly this gargantuan tower will blend with the existing urban landscape. Then there are the environmentalists whose questions about the environmental impact of yet another resource-consuming structure appear to be the most valid.
Finally, there’s the rest of us, the non-technical ‘inquisitors’ whose only question is why? Why are luxury auto behemoths like Mercedes-Benz suddenly raising skyscrapers and funding other real estate projects?
A little travel back in time
2020 will be the year to remember for a long time for different reasons, chief among them being the changes it forced global and local businesses to make. Almost all faced two choices – adapt or perish, and even the most traditional brands saw themselves embracing unplanned transformations.
This meant, among other things, exploring new channels of communication and commerce, adopting innovative work methods, and venturing into untapped niches destined to withstand the test of time.
It is perhaps why brands like Ferrari have been relentless in their pursuit to become full-fledged lifestyle brands or others like Aston Martin are steadily diversifying into the ever-profitable world of real estate.
Newer models offer an important lesson
2022 was a fantastic year for luxury brands, including those in the automobile business.
For example, Rolls Royce announced that it had sold its highest amount of cars ever – 6021 to be exact over 12 months. But its figures were nothing compared to Bentley which sold over 15,000 vehicles in the same period. At Porsche, it was even more impressive: 95,604 customers received their Cayennes, while 86,724 Macans were safely delivered to their owners.
One salient factor underscoring this unprecedented success was the rise of the true luxury SUV: for Rolls Royce, it was the Cullinan that brought in the most sales, while at Lamborghini, the Urus was its sales booster. As stated above, Prosche’s Cayenne probably sold the most units and although Ferrari’s Purosangue debuted later in 2022, the reception it got is a pointer to how it would have fared if it had dropped earlier.
Against this backdrop, it quickly became clear that giving customers precisely what they need, in a way that fulfils their desires and cravings is what brands must do to secure the coveted unforgettable spot in their minds.
Pivoting for success?
So it comes as no surprise that Mercedes Benz and other luxury auto brands have chosen to slap their names and logos on skyscrapers and other real estate projects in select locations. If consumers want properties that reflect the elements they love in their cars, then it only makes sense for the brands to give them what they want, right?
However, it appears it is not as simple as that.
Skyscrapers might reflect a country’s wealth and its architectural prowess, but they are expensive to build and maintain. Add to this an increasing demand to be mindful of their carbon footprint, and it is getting harder for construction companies to justify building one today. For continents like Asia with the highest number of such buildings, the government could provide financing or support, making it cheaper to take on such a project. But even that has now become scarce, and the companies who want to add skyscrapers to their portfolio today may have to self-fund or source for funds privately.
And who else again would have the huge funds required for these high-rises but luxury auto firms with fat accounts from record sales in the last 3 years?
They may be in decline now, but that does not make skyscrapers any less cheap. It also does not mean they are no longer in demand from the very demographic that luxury auto brands are also trying to target. Which is why they are a fantastic investment option: working with established real estate companies allows car maisons to take a cautious dip into the market with as little risk to themselves as possible.
Today, Mercedes Benz has joined Bugatti, Bentley, Lamborghini and Aston Martin in the skyscraper standoff. More may join tomorrow. Or not. Whatever the future brings, however, it looks like luxury auto brands are hedging their bets, and for now, in real estate.