The real estate industry's transparency challenge - and how it can solve it

Real estate transparency is an essential ingredient of a well-functioning economy and society and therefore touches on multiple aspects of life.

JLL defines a transparent real estate market as one in which stakeholders have ready access to high-quality market data and performance benchmarks; where there is certainty, consistency and where rigorously enforced rules and regulations exist. Corporate governance standards are found to be robust, and real estate transactions are carried out fairly and ethically.

A transparent real estate market helps governments, public bodies and the private sector make smarter decisions about urban infrastructure, also enabling sound long-term urban planning. It plays a key role in attracting new investment to a city, in boosting business efficiency, and in raising employee wellbeing and productivity.

Then there’s the matter of enhanced quality of life thanks to robust and well-enforced legal and regulatory frameworks, protecting citizens and their property rights.

Perhaps the most salient point is that transparency relating to regulations, standards and metrics for sustainable buildings will be an essential requirement as we move to a significantly decarbonized economy.

JLL has recently published its latest Global Real Estate Transparency Index, a biennial survey of the world of real estate transparency. The 2020 Index was compiled at a time of massive economic and societal disruption during which governments, businesses and communities grappled with the impacts of COVID-19.

The Index is now being referenced well beyond JLL’s traditional audience of real estate investors and developers, as governments at all levels begin to recognize how crucial real estate transparency is to the urban environment.

Transparency is improving, but not fast enough

Our latest survey results, covering 163 cities in 99 countries and territories, tell us that improvements to real estate transparency continue to be made across the globe. However, overall progress is still not fast enough for a society demanding ever higher ethical standards and one in which businesses are being held to account to invest and operate transparently and sustainably.

Although 70% of the world’s territories measured have seen an improvement in transparency in the last two years, many jurisdictions are struggling to maintain progress and large swaths of the world continue to have low levels of real estate transparency.

Yet, there is reason to be optimistic.

A familiar roll call of highly transparent countries at the top of the ranking, led by the UK, US, Australia, France and Canada, continues to push the boundaries of transparency, setting new benchmarks for other countries to follow. Transparency has been boosted in these top countries by a combination of proptech and new data, sustainability initiatives, and anti money-laundering regulations.

Sustainability becoming an exemplary measure of real estate transparency

Encouragingly, the most significant progress since 2018 has been made in the components of the survey relating to sustainability, where an increased focus on corporate social responsibility and acknowledgement of the need to create a sustainable built environment are bringing ESG considerations into the mainstream.

Green building certification systems and energy efficiency standards are now widespread in the higher-performing countries. France, Australia, the UK, the US, Canada and Singapore are taking the global lead on sustainability transparency and have been among the first adopters of new sustainability initiatives. For example, several Green Building Councils, such as UKGBC in the UK and GBCA in Australia, have developed national frameworks for net zero carbon buildings.

Top global improvers powered by sustainable moves

We have also seen several territories further down the transparency ranking making notable gains, and particularly so in relation to sustainability.

Abu Dhabi has emerged as the top global improver in 2020, with its score boosted by government initiatives to improve corporate and real estate sustainability.

India has registered one of the largest improvements globally, edging into the top 20 for sustainability transparency through the active role of organizations like the Indian Green Building Council (IGBC) and Green Rating for Integrated Habitat Assessment (GRIHA).

Meanwhile, in mainland China improvements continue inmarket data, the active proptech sector, more coordinated land-use planning, and a wider adoption of green and healthy building standards.

Given that the COVID-19 pandemic has brought the health agenda to the fore, there is also increasing pressure for the development of frameworks that can ensure healthy buildings. The WELL Building Standard and Fitwel, both originating in the US, remain the foremost certification systems internationally, and nationally developed systems are beginning to emerge such as Australia’s NABERS Indoor Environment and Singapore’s BCA-HPB Green Mark for Healthier Workplaces.

Technology and transparency go hand in hand

As we look ahead to the next few years, technology is likely to play an increasing role in driving transparency improvements across the globe. Until recently, real estate markets were having trouble implementing new tech fast enough, but the current disruption may well force the pace of change.

The mass adoption of technology, together with advancements in data availability and sensor technology, will accelerate the integration of proptech, helping to boost real estate transparency. Technologies from shared economy platforms and asset management tools through to digital twins and smart buildings will serve to create greater transparency too.

The real estate industry is now harnessing huge amounts of data, but we will need to ensure that privacy and security are protected by ethical behavior.

As these technologies become more widespread, progress will depend even more on the private real estate industry working closely and collaboratively with governments and civil society to achieve greater transparency. A few governments are now actively engaging and consulting with the proptech sector on how to improve services and make government data more available.

Relatively few are doing so in a structured way, but there are signs of change. The UK’s Digital Street program is one of the best examples, running research programs and funding local authorities to trial digital property solutions.

Transparency in real estate feeds into the wider global agenda for good

The global mandate to tackle climate change and build a significantly decarbonized economy will also lead to new transparency pressures.

Mandatory sustainability standards are still the exception; however, they are likely to take on much greater prominence in the coming years, particularly in net zero carbon building frameworks and building resilience standards. The latter will become the new marker of ‘gold standard’ real estate transparency.

The major challenge to the real estate industry is to increase transparency across the globe through greater collaboration between the public and private sector.

A transparent market is an essential requirement for the delivery of sustainable, resilient and healthy cities, in particular, as we transition to a net zero carbon future.