SOURCE: JLL

JLL

June 29, 2016 09:30 ET

Top 10 Highly Transparent Real Estate Markets Attract 75% of Global Investment

JLL's Global Real Estate Transparency Index Ties Transparency to Real Estate Investment, Business Activity and Living Standards

CHICAGO, IL and LONDON, UNITED KINGDOM and SINGAPORE--(Marketwired - Jun 29, 2016) -  Two-thirds of real estate markets globally have shown progress in levels of transparency over the past two years, according to JLL (NYSE: JLL) and LaSalle Investment Management's 2016 Global Real Estate Transparency Index (GRETI). The 10 countries identified as 'Highly Transparent' by GRETI account for 75 percent of global investment into commercial real estate, highlighting the extent to which transparency drives real estate investment decisions.

A number of key factors are driving this progress and frame the broader issues raised by both high and low transparency:

  • Capital allocations to real estate are growing. JLL forecasts that within the next decade in excess of US$1 trillion will be targeting the sector, compared to US$700 billion now. This growth means investors are demanding further improvements in real estate transparency, expecting standards in real estate to be on a par with other asset classes.
  • There is a growing recognition that transparent real estate practices play a significant role in capital formation, municipal finance, and as a foundation to improve the quality of life in many communities. This foundation includes security of property ownership, safe housing and workplaces and the ability to trust agents to act honestly and professionally.
  • Technology is both a driver of the digitisation of all kinds of real estate data and also an enabler in disseminating and analysing this data; improvements in data capture techniques are allowing a more granular and timely assessment of real estate markets.

Jeremy Kelly, director, Global Research Programmes at JLL and main author of the report commented: "These results are encouraging as they highlight the steady advances the global real estate industry is making. Improvements are down to a number of factors: initiatives to deepen the availability and quality of market data and performance benchmarking, the enactment of new legislation in several countries, the introduction of higher ethical standards, and the wider adoption of 'green building' regulations and tools."

Highlights

  • The 'Anglosphere' dominates the top four positions: The UK, Australia, Canada and the U.S.
  • Core continental Europe is catching up with the Anglosphere, with Germany (ranked 9th) moving into the 'Highly Transparent' group for the first time and France (5th) has consolidated its position in the top tier.
  • A further 20 countries have been identified as 'Transparent', the category which accounts for 20 percent of global real estate investment. Fourteen of these 20 countries are European, and Poland (13th) is a stand out country in this group and is now close to joining the 'Highly Transparent' group. Singapore (11th) and Hong Kong (15th) remain neck and neck for the top spot in Asia, whilst Taiwan (23rd) has moved into the 'Transparent' category for the first time and Japan (19th) has moved up seven places.
  • The most rapid progress has occurred in the 37 markets that make up the 'Semi-Transparent' category. That said there is a notable disconnect between existence of regulations and their enforcement, particularly in land use planning, contracts and building codes. Mexico and the China 'Alpha' cities are on the cusp of joining the 'Transparent' category, India has improved on the back of regulatory reforms and Slovenia, Serbia and Bulgaria have moved into the 'Semi-Transparent' category for the first time.
  • While there is some progress in the 'Low Transparency' and 'Opaque' categories, many of these countries are struggling to advance.

The future of real estate transparency

Jacques Gordon, LaSalle Investment Management's Global Head of Research and Strategy, commented: "Our index shows steady advances which are a result of both industry and government efforts. That said there are too many examples of opaque and corrupt practices, poor corporate governance and failures in regulatory enforcement that are resulting in serious consequences for society, business activity and for investment. Investors and tenants will bypass countries unable to address these shortcomings, and will gravitate instead to more transparent markets."

The report highlights a number of factors which will influence real estate transparency in the next several years:

  • Revelations of the Panama Papers in early 2016 have led to mounting pressures for greater real estate transparency and put the fight against corruption decisively on the international political agenda. Beneficial ownership disclosure and anti-money laundering procedures will be embraced more widely and rigorously; we expect to see material progress in the coming years by many countries in their drive for greater transparency in corporate and real estate ownership.
  • As new data capture techniques get adopted, the pressure mounts for real estate to raise the bar and achieve even higher levels of transparency. JLL expects to see the rise of a new 'Hyper-Transparent' category in future years, where data feeds from sensors help inform owners and tenants about how buildings are used and how they perform.
  • The mounting intolerance of corruption within the world's growing middle classes will force the pace of change, especially amongst the Semi-Transparent countries, and social media will help people mobilise around this issue.
  • Technology will continue to advance and will allow some countries to leapfrog the traditional route to transparency; we are already seeing this happen in places like Kenya, Ghana and Ecuador.
  • There will be greater emphasis on regulatory reform, but also on enforcement, particularly in semi-transparent markets where the greatest disconnect currently exists.

Notes to Editors
JLL's ninth Global Real Estate Transparency Index, covering 109 markets worldwide, shows continued progress in the transparency of commercial real estate around the world. Two-thirds of markets have registered improvement since 2014. Improvement is generally correlated with higher foreign direct investment and corporate occupier activity, as investors and corporations help to accelerate transparency reforms and governments recognise that poor transparency will affect continued inward investment, long-term economic growth prospects and the quality of life of citizens.

Visit www.jll.com/Transparency to access the Global Real Estate Transparency Index in full, as well as interactive tools and multimedia content.

About JLL
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $58.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.

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