Jeremy Kelly, Director of Global Research Programmes, JLL tells us how poor real estate transparency not only hinders inward investment, but also has deep impacts on the quality of life of citizens and their relationship with local government
JLL has been tracking the transparency of real estate markets since 1999 as part of our Global Real Estate Transparency Index, a unique survey that quantifies transparency across more than 100 markets.
The Index was originally created with the aim of helping real estate investors, corporate occupiers, retailers and hotel operators understand important differences when transacting, owning and operating in foreign markets. But as issues of real estate transparency have risen up the agenda, the Index has found a new function as a benchmark tool used by national governments and industry organisations who are seeking to improve transparency in their home territories.
In the 15 years that JLL has been tracking transparency, we have witnessed steady progress as international investors, developers and corporate occupiers have demanded (and expected) ever greater levels of real estate transparency – in terms of legal and regulatory enforcement, financial disclosure, fairness of transaction processes and access to high-quality market data and performance benchmarks.
At the same time, there has been a growing recognition by governments, particularly in emerging economies, that poor real estate transparency not only hinders inward investment, but also has deep impacts on the quality of life of its citizens and their relationship with local government. Corruption scandals (often involving the permit process for real estate development) and several high-profile building accidents are forcing governments to pay much greater attention to regulatory enforcement.
The results of our Index confirm that the world’s most transparent markets are found in the highly liquid Anglophone markets, notably the UK, the U.S., Australia, New Zealand and Canada. But unsurprisingly, the greatest improvements in recent years have been made in emerging markets. The CEE (Central and Eastern Europe) and Asian regions, and more recently the BRIC (Brazil, Russia, India and China) and MIST (Mexico, Indonesia, South Korea and Turkey) markets, have dominated the list of top transparency improvers. In our most recent survey (2014), Sub-Saharan African countries have taken centre stage, as improving transparency pushes into the frontiers of the commercial real estate industry.
As we look towards the publication of our 2016 Index, the forces moving global real estate markets towards greater transparency are as strong as ever, with new technologies helping to boost transparency, even for those countries already among the most transparent globally. Over the medium term, the proliferation of new technology-based data companies could enable emerging real estate markets to leapfrog the traditional evolution of building market fundamentals and performance data sets.
Sustainability and the built environment will also continue to rise up the agenda, and we are likely to see more sustainability tools, measuring minimum energy standards and tracking the financial performance of sustainable buildings.
The current revolution in digital communication and information is being driven by the ‘Millennial’ generation, a demographic that will play a greater role in reshaping the global real estate markets over the medium term. Their use of social media, their hyper-connectivity and thirst for knowledge-sharing is feeding through to increasing demands for transparency in government and commercial organisations.
More on the Global Real Estate Transparency Index