JLL: Global transparency in real estate improves but still weak

This article first appeared in City & Country, The Edge Malaysia Weekly, on August 24, 2020 - August 30, 2020.
JLL: Global transparency in real estate improves but still weak
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Malaysia has climbed one spot to 29 in the JLL Global Real Estate Transparency Index 2020 (JLL GRETI). According to JLL Malaysia country head Y Y Lau, the new ranking puts Malaysia as the second highest in Southeast Asia (behind Singapore at 14) and in the Top 5 in Asia.

“Amid the disruption in global investments, owing to Covid-19, Malaysia has proven its transparency with daily detailed statistics showing our tremendous success with a 98% recovery rate. The real estate data in Malaysia is highly valuable in helping global players make the optimum business decisions through analysis and big data. In tapping this huge potential, JLL provides various services involving market intelligence and consultancy,” says Lau.

The survey was completed just as the lockdown of economic activity happened in Europe and the Americas, and was already underway in East Asia. JLL says, because of the timing, the scoring of the fairness, effectiveness and clarity of the regulatory environment took place before many of the hastily enacted regulations intended to address a fast-moving pandemic were implemented.

“The Covid-19 crisis is shining a bright light on the transparency of the real estate’s legal and regulatory systems. New rules to establish how social distancing, virus testing and contact tracing intersect with existing property and privacy laws are being created in a compressed time frame. Sorting these challenges still lie ahead in 2H2020 and 2021,” says JLL.

The disruption caused by the pandemic could help fast-track digitisation and stimulate innovation by using technology. This is especially useful in an environment that needs accurate and just-in-time data to keep track of activity, in particular relating to health, mobility and the use of space.

Lau: The real estate data in Malaysia is highly valuable in helping global players make the optimum business decisions through analysis and big data (Photo by JLL)

“The pandemic is leading to an acceleration in new types of non-standard and high-frequency data being collected and disseminated, which is taking transparency to new levels because of its near-real-time nature,” observes JLL.

It notes that a few governments are actively engaging and consulting with the proptech sector to improve services and make government data more available. 

“Despite the hype, governments are still at a relatively early stage of [testing] the use of blockchain technology in transactions. Pilot projects in Dubai and Sweden are among the most advanced, while another 30 national governments are engaging with the technology.

“The use of technology will become more important in the record-keeping and forensic work used by governments to combat money laundering and insider trading. Cybersecurity regulators in many countries have enhanced their ability to impose penalties and provide enforcement to reduce outbreaks of ransomware or phishing attacks,” comments JLL.

While sustainability transparency has improved, there is still much room for improvement. JLL expects mandatory sustainability standards to become more prominent in the future, particularly in net zero carbon building frameworks and building resilience standards. 

The pandemic has created an elevated awareness of personal and environmental hygiene, health, work-life balance and social relations.

Transparency of ‘building health’ will become far more important — in terms of access to metrics that track not only light and noise, but also building ventilation, air filtration and cleaning. We could see the confluence of proptech and medtech in the next generation of smart buildings,” says JLL.

It also notes that the pandemic has raised awareness of unsafe conditions at building construction sites and in worker dormitories.

“While investment in commercial real estate is slowing during the pandemic, the overarching trend is towards rising allocations into real estate. Improving transparency will become even more important to attract capital in this environment, with investors gravitating to ‘highly transparent’ markets with robust regulations. There will be a race to move from simply making policies to enforcing policies,” says JLL.

New elements of transparency

The 11th edition of JLL GRETI covers 99 countries and territories and 163 city regions. JLL says the latest survey has been extended to quantify 210 elements of transparency, with additional coverage on sustainability and resilience, health and wellness, proptech and alternative sectors.

“The 2020 index reveals that transparency is progressing across most countries and territories, but overall improvement is the weakest since the period directly following the global financial crisis. While 70% of territories have registered an improvement in their score, many jurisdictions are struggling to maintain progress.

“With growing pressure from investors, businesses and consumers, real estate transparency will need to improve further and faster to compete with other asset classes and meet heightened expectations about the industry’s role in providing a sustainable and resilient built environment,” the JLL report says.

Anglophone countries continue to lead, with the UK, the US and Australia in the top three positions, while France (fourth) and Ireland (eighth) registered notable gains.

“Transparency has been boosted in these ‘highly transparent’ markets by a combination of proptech and new data, sustainability initiatives, anti-money laundering regulations and enhanced tracking of alternatives sectors,” says the report.

Meanwhile, the top improvers are in South and Southeast Asia, with India registering one of the largest improvements globally as progress in the country’s real estate investment trust (REIT) framework attracts greater interest from institutional investors. India is also in the Top 20 for sustainability transparency through the active role of organisations such as the Indian Green Building Council (IGBC) and Green Rating for Integrated Habitat Assessment.

Thailand, Vietnam, the Philippines and Indonesia are among the Global Top 10 improvers, with Bangkok and Ho Chi Minh City moving into the higher tier of “transparent” and “semi-transparent” respectively.

“Mainland China has also continued to advance, with improved market fundamentals data, an active proptech sector and more coordinated land-use planning contributing to its place among the top global improvers. This has helped to push its leading cities, Shanghai and Beijing, into the ‘transparent’ tier for the first time,” says JLL.

The top global improver in 2020 is Abu Dhabi, boosted by government initiatives to improve corporate and real estate sustainability. Other Top 10 global improvers are Costa Rica and Belgium. 

Meanwhile, large swathes of the Middle East, Sub-Saharan Africa and Latin America have had progress stalled because of political and/or economic headwinds.

“London once again takes the top spot as the world’s most transparent real estate market. Los Angeles, San Francisco, Sydney and Washington, DC, round off the Global Top 5. Paris takes the top global position on sustainability transparency,” says JLL.

Driving real estate transparency

JLL notes that there has been steady improvement in sustainability transparency across the board.

“The most significant progress since 2018 has been made in the sustainability components of the survey, where an increased focus on corporate social responsibility and acknowledgment of the need to create a sustainable built environment bring environmental, social and governance (ESG) considerations into the mainstream. Green building certification systems and energy-efficiency standards are widespread in the higher-performing countries,” says JLL.

Anticipating a rise in the number of zero carbon buildings, the GRETI survey now covers initiatives relating to net zero carbon building frameworks.

France and Australia lead globally on sustainability transparency and are among the first adopters of new sustainability initiatives such as the net zero carbon framework.

“Health and wellness building certification has been included in the transparency survey for the first time, although adoption is not currently widespread,” says JLL.

Meanwhile, the development and adoption of proptech platforms, digital tools and “big data” techniques are rapidly increasing the volume of real estate market data available. 

“Our survey reveals that the highest level of proptech adoption is unsurprisingly in the ‘highly transparent’ markets such as France, the Netherlands, Australia, the UK, Canada and the US, as well as high-income Asia-Pacific markets such as South Korea, Singapore and Hong Kong. Significantly, several less transparent, larger emerging markets also stand out on proptech adoption including India, South Africa, Brazil and China,” says JLL.

It notes that institutional investors are active in alternative sectors in more than half of the markets tracked by GRETI.

“A positive feedback loop between rising niche property-type institutional investment and greater market data availability has propelled sectors such as self-storage, data centres and life sciences to the leading edge of real estate transparency improvement,” says JLL.

It also notes that transparency in these niche sectors still has significant room for improvement and expects alternatives to be a primary driver of progress in the Transparency Index in the coming years.