Taking Real Estate Transparency to the Next Level
Global Real Estate Transparency Index
reveals which countries provide the most favourable operating environments for investors, developers and corporate occupiers. Covering 109 markets worldwide, JLL’s Global Real Estate Transparency Index quantifies transparency based on 139 variables relating to transaction processes, regulatory & legal frameworks, corporate governance, performance measurement and data availability. Higher real estate transparency is associated with stronger investor and corporate real estate activity.
The world’s 10 most transparent markets account for 75% of global direct investment into commercial real estate and are home to nearly half of the world’s 2,000 largest public companies.
United Kingdom, Australia, Canada and the
United States hold the top positions and are taking real estate transparency to a new level; making improvements that go beyond other transparent markets, particularly in the granularity, quality, frequency and geographical spread of performance measurement, valuations and market fundamentals data, which now also extend to niche property sectors.
These ‘Highly Transparent’ markets are setting a high bar, but the pressure is now on for them to show the way for other markets. In the wake of the Panama Papers the world is looking to these countries to take the lead in tightening beneficial ownership disclosure and anti-money laundering procedures.
‘Core’ Continental Europe is gradually catching up.
Germany has joined the ‘Highly Transparent’ group for the first time, in part due to growth in its listed sector, while
France has consolidated its position among the top tier.
A further 20 countries have been identified as ‘Transparent’ and 14 of these are in Europe.
Poland is now close to joining the ‘Highly Transparent’ group with operating conditions similar to those in its Western European neighbours.
Asia Pacific has been the most consistently improving region in recent years and is well represented in the ‘Transparent’ tier.
Hong Kong remain neck and neck for top spot in Asia, although, once again, they have fallen just short of the ‘Highly Transparent’ category. Several high-income Asian countries have made solid gains;
Taiwan elevated itself into the ‘Transparent’ category for the first time, while
Japan has moved up a healthy seven positions.
The most rapid progress in real estate transparency is found in the 37 markets that make up the ‘Semi-Transparent’ category. This group offers the substantive opportunity to tap into dynamic markets that are undergoing major structural change.
Regulatory reforms are essential for further progress and many governments appear to be taking steps forward, with recent examples including
India. However, our survey reveals that among the ‘Semi-Transparent’ group there is a notable disconnect between the existence of regulations and actual enforcement – particularly in land use planning, contracts and building codes.
At the top of this category,
China’s Alpha cities are on the cusp of moving into the ‘Transparent’ category. Meanwhile,
India’s key cities are benefiting from proactive measures to increase transparency in the real estate sector.
South Korea has also progressed but, given its economic maturity and real estate investment levels, is an outlier in the ‘Semi-Transparent’ category.
Among the 42 largely emerging markets that sit in the ‘Low Transparency’ and ‘Opaque’ categories, transparent real estate practices play a particularly significant role in the effort to raise living standards and enhance community well-being.
There is wide recognition among international organisations that security of property ownership, safe housing and workplaces and being able to trust agents to act honestly and professionally are all key ingredients of well-functioning, inclusive and stable communities.
While concrete steps towards greater real estate market transparency are being made in several ‘Low Transparency’ and ‘Opaque’ countries, many others are struggling with forward momentum as the complexities of implementing new regulatory structures become apparent, or other priorities – such as the impact of slowing commodity markets – have taken precedence.
While sustainability considerations are becoming more widely established, the pace of progress in creating new tools and regulations is slow. There are encouraging signs that two cornerstones of environmental performance transparency (minimum energy efficiency standards and green building certification schemes) are available in the majority of key markets.
France is the top scorer globally through the roll-out of legislated mandates to transition to a low carbon economy.
Japan has joined France,
Australia and the
UK in the highly transparent group for the first time this year through the introduction of several new sustainability tools.
The GRETI 2016 survey reveals a dynamic global real estate sector that is continuing to evolve and becoming more transparent. Yet there are too many examples of opaque and corrupt practices, poor corporate governance and failures in regulatory enforcement that are having serious consequences for society, for business activity and for investment. Investors and tenants will bypass countries unable to address these shortcomings, gravitating instead to more transparent markets.
JLL's Global Real Estate Transparency Index contains the most comprehensive country comparisons of data availability, governance, transaction processes, property rights, and the regulatory/legal environment around the world. The Index is updated every two years and has been charting the evolution of real estate transparency across the globe for 17 years. The 2016 Index is our ninth edition and covers 109 markets.
The Index is an essential guide for cross-border investors, developers and occupiers of real estate - as well as government and industry bodies looking for international benchmarks.
In the 2016 Index we have introduced greater granularity as the real estate industry demands more detailed data to inform decisions. Additional elements have been included relating to the availability of disaggregated datasets; data on alternative sectors (such as student accommodation and self-storage); and aggregate data on debt and financing conditions. This has increased the number of individual factors covered by 21% to 139 factors. Although the consistency of the survey is not compromised, greater scrutiny and the explicit inclusion of more factors underpin some of the changes in score between 2014 and 2016.
Coverage has been extended further into Africa to include Djibouti, Ivory Coast, Rwanda and Tanzania. Ecuador, Luxembourg, Iran and Sri Lanka are also new to the Index. Recognising that cities are becoming more of a focus for real estate players, we have deepened the survey to include an extra city tier in China and have assessed market fundamentals data availability for an additional 28 cities across the globe.
As in previous surveys, teams of researchers and business leaders from JLL and LaSalle Investment Management have worked together to assess the transparency in each of the 109 markets. Our Alliance Partners have also helped to provide additional 'on-the-ground' information. Accounting, finance and legal experts have been consulted too, especially in emerging markets, in order to supplement our collective real estate knowledge.
Since we launched the Index in 1999, its components have evolved and been refined to reflect the changing demands of cross-border investors and corporate occupiers. Therefore, to enable comparisons to be made across time, we have recreated an historic Transparency Index based on current weights and questions. We should like to emphasise that the recalibrated historic Indices differ from those published at the time of each survey.
We trust that the 2016 Transparency Index will provide valuable insights into the changes in real estate transparency across the globe. A complete description of the methodology used to create this Index is set out in the technical note.
For more information about the Index and how we can help with your real estate decisions, please connect with one of the Global Real Estate Transparency Team.
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