Cross-border investors are demanding higher transparency in the real estate sector, says a new report.
Proptech can help boost openness and honesty, according to the 2020 Real Estate Transparency Index from JLL. But more needs to be done.
Christian Ulbrich, Chief Executive Officer of JLL, explains, “Improvements to real estate transparency are being made across the globe, but overall progress is still not fast enough for a society demanding higher ethical standards and businesses being held to account to invest and operate transparently and sustainably.”
Cross-border investors want more market transparency, says the report. “While investment into commercial real estate is slowing during the pandemic, the overarching trend is toward rising allocations to 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.”
UK is most transparent market
The in-depth 85-page index ranks the UK as the most transparent property market in the world and London as the most transparent city.
European countries make up most of the top 10, with France in 4th place, Netherlands 7th, Ireland 8th, Sweden 9th and Germany 10th. Ireland is one of the top improvers in 2020, with France, Sweden and Germany all advancing.
They are praised for pushing the boundaries of transparency through technology, a focus on sustainability, anti-money laundering regulations and enhanced tracking of alternatives sectors.
The 2020 Global Real Estate Transparency Index covers 99 countries and territories, and 163 city regions and features 210 elements of transparency, with additional coverage on sustainability and resilience, health and wellness, proptech and alternatives sectors.
Better transparency is crucial to creating healthy real estate markets which work for all participants, not just the few, and JLL expects new technologies will accelerate improvements and enable some countries to leapfrog up the ranking in coming years, says Richard Bloxam, Member of the Global Executive Board, Global CEO, Capital Markets JLL.
Although transparency is progressing across most countries and territories, overall improvement is the weakest since the period directly following the Global Financial Crisis. Proptech can play an important role in this, says the report.
“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.
“Innovative new technologies are changing how real estate data is gathered and analyzed, and as these technologies become more widespread and the regulatory landscape rapidly evolves, improvements in transparency will depend even more on working closely and collaboratively with governments and civil society to achieve greater transparency.
Rise of proptech
“We continue to see the rise of proptech across all parts of the real estate industry. The growing adoption of proptech platforms, digital tools and ‘big data’ techniques are rapidly increasing the volume of real estate market data available. Online marketplaces, shared economy platforms and asset management tools through to digital twins, smart cities and smart buildings are all serving to improve transparency.”
The highest level of proptech adoption comes in highly transparent marketing, including the UK, France and the Netherlands. Real estate markets have had trouble implementing new tech fast enough, but the global pandemic may increase implementation.
“The COVID-19 pandemic could help to fast-track digitization and stimulate innovation in the use of technology due to the need for accurate and just-in-time data to keep track of activity – especially relating to health, mobility and space usage.”
A few governments are now actively engaging and consulting with the proptech sector on how to improve services and make government data more available, but few are doing so in a structured way.
The biggest improvements have been made in sustainability elements, but COVID-19 has brought health and welfare issues to the fore.
The transparency survey was completed in February and March 2020, just as the lockdown of economic activity was underway in the Americas and Europe, having already occurred in East Asia.
“The COVID-19 crisis is shining a bright light on the transparency of real estate’s legal and regulatory systems. New rules to establish how social distancing, virus testing and contact tracing all intersect with existing property and privacy laws are being created in a compressed time frame.” Sorting out these challenges still lies ahead in the second half of 2020 and in 2021, the report says.
Read about the Benefits of Fee Transparency, on the Consorto blog