· Evergrande takes top ranking as Dalian Wanda begins pivots out of property
· Chinese real estate brands account for nine of the world’s top 10 most valuable
· Outside of China, Emaar, Simon Property, and CBRE top real estate brand rankings
Evergrande has become the world’s most valuable real estate brand with its brand value more than doubling over the last year to US$16.2 billion, according to the latest report by Brand Finance, the world’s leading independent brand valuation and strategy consultancy. The brand is China’s second-largest property developer and the owner of the Guangzhou Evergrande Taobao F.C. which won both the Chinese FA Super Cup and the Chinese Super League championship last season.
In addition to becoming the most valuable real estate brand in the world, the last year has also seen Evergrande emerge as the fastest-growing brand in the Brand Finance Real Estate 25 ranking at an eye-watering 118%. Other fast-growing brands included Longfor Properties (up 78% to US$4.8 billion), China Merchants Shekou (up 67% to US$1.3 billion), and Sun Hung Kai Properties (up 60% to US$3.9 billion) although each from lower bases.
The brand value of Dalian Wanda Commercial Properties (down 8% to US$7.8 billion) fell significantly over the last year, losing the number one ranking and dropping to third. This change of fortune coincided with the brand’s movement away from property development towards a focus on alternative business opportunities. This realignment represents a more brand-dependent long-term strategy based on operating various property services, and less focused on traditional property sales. Parent brand Dalian Wanda Group also saw its revenues drop over the past year, as it was investigated by Chinese authorities for unsustainable debt and questionable overseas acquisitions.
David Haigh, CEO of Brand Finance, commented:
“The global property market has endured cycles of boom and bust, and the Chinese property market is unlikely to be substantially different in the future. Evergrande is posed to ride the surge, but Dalian Wanda’s move away from traditional property development represents an effort to build the value of their brand outside the cyclical nature of this industry.”
Testing the mettle of Chinese real estate brands
The global real estate brand rankings are dominated by Chinese property developers, with the top nine most valuable real estate brands all from China. The Brand Finance Real Estate 25 ranking as a whole features 17 Chinese brands, including ten brands from mainland China, and seven from Hong Kong. These brands have experienced sky-rocketing revenues due to the boom in the Chinese market in recent years, but there are some indications that the boom is coming to an end.
The National Bureau of Statistics for China observed a housing prices contraction in tier-one cities such as Beijing, Shenzhen, and Shanghai, and a slowdown in the growth of prices in tier-two and tier-three cities. In a bid to pre-empt a sense of crisis or property market crash, the authorities have warned in recent months against speculation in the residential market.
Outside China, Emaar, Simon Property and CBRE, lead
Beyond the Chinese brands, the most valuable real estate brands in the world are the UAE’s Emaar Properties (up 39% to US$2.7 billion), followed by American brands Simon Property Group (down 9% to US$2.1 billion) and CBRE (down 23% to US$1.9 billion).
Emaar Properties is publicly listed in the UAE and continues to attract significant brand value for its role in developing the Dubai Mall, the world’s largest shopping mall, and the renowned Burj Khalifa, the tallest building in the world. In recent years, it has sought to lead a number of social responsibility efforts which have bolstered its brand, including support for the Dream for Future Africa Foundation. Most importantly, however, its brand continues to benefit from plans to build a range of ambitious and globally iconic developments, including the planned Dubai Creek Tower, which will overtake its own Burj Khalifa.
Simon Property Group and CBRE both operate a number of commercial real estate developments, focused on retail and offices. Both brands are facing challenges to serve their customers in a future driven by a movement to online retail and telecommuting. Similar challenges trouble also other brands from the established markets on both sides of the Pacific, with all of the US- and Japan-based real estate brands in the ranking recording a decrease in brand value over the past year.
Note to Editors
Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands. The 25 most valuable real estate brands in the world are included in the Brand Finance Real Estate 25 2018 league table.
Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is assessed through a balanced scorecard of factors (such as marketing investment, stakeholder equity, and business performance) and used to determine what proportion of a business’s revenue is contributed by the brand.
Additional insights, more information about the methodology as well as definitions of key terms are available in the Brand Finance Real Estate 25 2018 report.
Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.
Data compiled for the Brand Finance league tables and reports are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.
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About Brand Finance
Brand Finance is the world’s leading brand valuation and strategy consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands. Drawing on expertise in strategy, branding, market research, visual identity, finance, tax, and intellectual property, Brand Finance helps brand owners and investors make the right decisions to maximise brand and business value.
Definition of Brand
Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines a brand as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand Strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors. In order to determine the strength of a brand, we look at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding rating up to AAA+ in a format similar to a credit rating.
Brand Valuation Approach
Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Brand revenues are discounted post-tax to a net present value which equals the brand value.