JLL’s Global Real Estate Transparency Index (GRETI) provides the world’s most comprehensive country comparisons to allow real estate investors, developers and corporate occupiers to evaluate the complexities and risks associated with operating or investing in foreign markets. Launched in 1999 and now in its 9th edition, the GRETI covers real estate performance measurement, data availability, governance, transaction processes and legal and regulatory frameworks in 109 markets globally.
The launch of GRETI 2016 comes at a time when the transparency of real estate is under intense scrutiny:
- There is widening recognition of the crucial role that a transparent real estate sector plays, not only as a facilitator of new investment and business activity but also in community wellbeing and inclusiveness.As capital allocations to real estate grow, investors are demanding further improvements in transparency, even among the world’s most transparent real estate markets.
- Technology is allowing a more granular assessment of real estate market patterns. Databases tracking buildings, investment transactions, tenants, leases and values continue to expand, providing more frequently updated and real-time information than ever before.
- And the 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.
Findings from GRETI 2016
2016 reveals continued improvements in transparency in the majority of real estate markets surveyed. Two-thirds of markets globally have shown progress over the past two years.
These encouraging results highlight a global real estate industry that is making steady advances through initiatives to deepen the availability and quality of market data and performance benchmarking by enacting new legislation to reduce roadblocks to progress; by setting higher ethical standards; and by taking steps to make transaction processes more fair and transparent.
There are 5 categories of transparency incorporating 139 different factors including Performance Measurement, Market Fundamentals, Governance of Listed Vehicles, Regulatory & Legal, and Transaction Process.
The factors mentioned above have largely formed the basis by which the markets globally have been graded into transparency tiers:
- Highly Transparent
- Semi Transparent
- Low Transparency and
- Opaque Markets
- 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. South Africa (25th) is a notable Sub-Saharan Africa presence and the continent’s most transparent market, albeit registering a noteworthy decline in overall score since 2014.
- 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. Botswana (41st), Zambia (57th) and Kenya (61st) represent the African continent in this group
- Nigeria (83rd) and Ghana (85th) have shown progress in transparency, although advances have been less notable than in 2014 when both nations were among the top improvers. Despite more moderate levels of progress, improvements in ‘Performance Measurement’ and ‘Market Fundamentals’ have nudged Nigeria and Ghana from ‘Opaque’ into the ‘Low Transparency’ category.
- Rwanda joins GRETI in 80th position (‘Low Transparency’) and is the highest new entrant in Sub-Saharan Africa. The implementation of the Kigali City Master Plan has provided an overarching vision for land use, as well as new building codes and urban planning regulations for the city (introduced in 2015).
The future of real estate transparency
A number of factors will influence real estate transparency in the next several years:
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.
JLL’s Global Real Estate Transparency Index can be used effectively by occupiers and investors alike as a tool to inform business strategies such as market entry or the evolution of certain market investment options. For real estate to compete effectively as an asset class, it needs to raise the bar for the highest level of transparency.
This is the first part of a 3 part series on the JLL Global Real Estate Transparency Index. The next part in the series will focus on Nigeria’s ranking in the 2016 edition, its implications and ways to improve transparency in its real estate industry.
Contributing author: Timi Adesanya