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News release

Buenos Aires

Top ten 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, LONDON, SINGAPORE, BUENOS AIRES, 27 June 2016 – Two-thirds of real estate markets globally have shown progress in levels of transparency over the past two years, according to JLL and LaSalle Investment Management’s 2016 Global Real Estate Transparency Index (GRETI​). The ten 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 JLL-Top-World's-Most-Transparent-Countries-2016.jpgthat 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.
  • T​here 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 on Latin America and Caribbean
  • One driver behind Mexico’s standing as the most transparent country in Latin America is its rapidly growing and maturing REIT industry:  It did not exist just seven years ago, yet transparency of corporate governance of the FIBRA (REITs in Mexico) vehicles has steadily improved and is nearly on par with some advanced markets in Western Europe.
  • Across the ‘southern cone’ of Latin America – Argentina, Uruguay and Chile -  strides have been made and transparency is quite good in land use laws, processes and enforcement.  Uruguay is a particular standout, and in fact is a standout not just in South America but in the entire Americas Region as scores highly transparent across the board in its system of land use planning and clarity on obtaining variances with fair and consistent enforcement.
  • Argentina’s solid showing in the index in 2016 will potentially be bolstered by its recent return to the broader international community and markets:  capital flows are one are to watch in the year or two ahead, with any strengthening in activity likely to be accompanied by accelerated improvements in related areas of real estate transparency.
  • New entrant to this year’s index Ecuador had a reasonable showing overall.  Recent developments had a positive impact on the country’s score:  one example of this is a new digital-based land registry system has in the past yare or two boosted access to this information and aided the ease of use, and as these improvements within the market are still in the process of  being rolled-out, further transparency gains can be expected in the years ahead.
  • Most of the smaller Caribbean island markets, such as the Bahamas and Cayman Islands show transparent conditions with respect to ethical standards, adherence and enforcement in the process of transactions.  
  • A number of crises across select countries in Latin America is impeding progress on real estate transparency – and in some cases related to deterioration in the last couple years.  Most notably Brazil has suffered a severe recession, historic public corruption scandal and a current political crisis.  It’s not a surprise amidst these significant challenges that forward momentum in transparency has ceased – at least temporarily  - for the country.
  • Policy and industry focus is also being diverted away from issues of transparency in other countries with substantial economic and social upheaval, and as a result their showing in the index has suffered.  An ongoing economic and debt crisis in Puerto Rico is having notable deleterious impacts on society.  Economic, political, policy and social instability and very inconsistent rule of law are hampering any positive movement in transparency in Venezuela, Honduras and Guatemala.  
  • Venezuela is particularly opaque in the legal and regulatory area, as government taking of businesses, as well as assets including real estate, and expropriation thereof has increased notably in the last couple years.  Compensation in these cases is typically seen as negligible or non-existent, and business owners find themselves without legal recourse.  Recent news of major multinational corporations pulling operations out of the country reinforce this backdrop.
  • Going forward, some of the greatest opportunity for improvement across Latin America remains in the market fundamentals and performance measurement data category.  Few countries score highly in any of these areas, and a new focus on collecting, organizing and disseminating key property metrics is a foundational element to transparency that will yield significant dividends if put in place for years to come. 
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.