Closing the real estate transparency gap
Markets look to sustainability and tech to overcome widening differences
Efforts in some countries to make real estate markets more transparent have gained ground in recent years. But in many others, transparency has stalled or is in retreat.
The line between the two is increasingly familiar: developed economies that already had a high level of transparency have continued to progress, while more opaque markets are falling further behind.
For instance, European countries on average saw the biggest improvement in real estate transparency over the last two years, according to JLL and LaSalle’s Global Real Estate Transparency Index 2022. Other Anglophone countries like the U.S. and Canada also made notable strides.
Dubai and Abu Dhabi saw the biggest improvements since the last time the biennial index was published in 2020, benefitting from concerted government focus on increasing market transparency.
But many markets in parts of Africa and Central America saw limited change and fell further behind the higher standards being set in the leading countries. This meant that across the globe, the average change of transparency scores since the 2020 GRETI report was one of the slowest in the survey’s two-decade history.
“The highly transparent markets are forging ahead on the back of technology adoption, climate action, capital markets diversification and regulatory change,” says Jeremy Kelly, JLL’s Lead Director, Global Cities Research. “Meanwhile, most other markets are treading water, even regressing, or in some cases, regrettably disappearing off the radar.”
He notes that as the divergence between highly transparent and opaque countries grows, closing the gap to encourage investment will become even more difficult.
What’s driving the divergence?
Real estate transparency is an essential part of thriving cities with productive, competitive business environments. Transparency demonstrates accountability and quality of governance – as well as open, active private markets – which in turn attracts investors, development, and growth.
Countries that embrace sustainability accountability, technology adoption and making data publicly available are leaders in transparency. However, the availability of technology and commitment to sustainability varies greatly between markets.
“Sustainability is the biggest driver of transparency improvements across markets, with increased adoption of mandatory energy efficiency and emissions standards, reporting, and green certifications for buildings putting some countries well ahead of others,” says Kelly.
“The increased uptake of technology and digitization has also boosted transparency in many countries by making detailed data more available than ever before. This results in a more in-depth understanding of how buildings and markets operate and allows for more accurate planning and forecasting to increase investor confidence.”
An example of the difference this can make to a GRETI ranking: Japan joined the top tier of “Highly Transparent” markets for the first time in 2022 following new initiatives around sustainability targets and reporting as well as improvements in data availability.
While many countries’ real estate industries are embracing digitization, lack of uniform standards and a highly fractured technology landscape means much of the data remains siloed and may be difficult to compare. Initiatives to overcome these barriers have been implemented in recent years, like the OSCRE Industry Data Model, which aims to align reporting and data across the industry. Tools like this will be needed to ensure the full potential of technology can be harnessed in driving market transparency.
Real estate transparency is an important element of a strong economy, creating a more competitive and thriving business environment. Closing the gap between highly transparent and opaque markets will build increased trust and encourage more international investment.
“During these times of global economic uncertainty, we will see transparency become more important than ever as a means to provide a solid foundation for real estate occupiers, investors and lenders to operate and make decisions with confidence,” says Kelly.