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Study: The Greater the Transparency, the Higher the Gains
It’s a given that the more potential investors know about a specific property or property, the more interest they might have in it (assuming, of course, that said property meets certain criteria). JLL’s recently released biennial Global Real Estate Transparency Index 2024 quantifies the assumptions, pointing out that investment performance and deal volume go hand-in-hand with transparency in legal and regulatory environments, transaction processes, market fundamentals and sustainability.
For instance, the “highly transparent” group of nations, which includes the United States, Canada, France and Australia, attracted over $1.2 trillion in direct commercial real estate investment over the past two years, representing over 80% of the worldwide total. “And with the lowest risk and highest levels of transparency around demand and pricing dynamics . . . they are positioned to lead the cyclical recovery in liquidity as capital markets activity increases,” the report pointed out.
The top five countries with the highest transparency are:
- United Kingdom
- France
- United States
- Australia
- Canada
Meanwhile, the following countries are ranked as “Opaque” when it comes to CRE information, sustainability, data and market fundamentals:
- Iraq
- Ethiopia
- Guatemala
- Dominican Republic
- Honduras
The report also highlighted the following:
AI becomes more important. Investment in artificial intelligence is “growing exponentially,” the report explained. The technology improves transparency by “helping to sift through and summarize huge volumes of legal documents, automating building management powering interactive urban and architectural design and enabling unprecedented speed and granularity in valuations and analytics.
Sustainability is a critical factor. The report commented that sustainability “has been the largest driver of transparency improvements in the 2024 index.” However, the report says sustainability metrics “continue to be among the least transparent globally” due to a lack of standardized information and processes.
Diversification is an ongoing theme. The report points out that issues like demographic chances, technology integration, changing occupier preferences and shifting supply chains are impacting investor decisions on real estate, as well as a “significant reallocation of capital.”
Debt markets continue to change. While commercial real estate has historically been financed by “regulated banks with stringent reporting requirements,” the report pointed out that “the lender landscape is broadening.” New liquidity is coming from debt funds, pensions, life companies and other sources, leading to a more balanced market. The report noted that investors raised $120 billion across 411 closed-end debt funds since 2020.
- ◦Sale/Acquisition
- ◦Policy/Gov't
