Transparency in global real estate is on the rise, and Central and Eastern Europe are among the most improved markets, according to a Property Wire article published August 1, 2012.
Transparency in global real estate markets is increasing with Central and East Europe improving and approaching the levels of Western European markets, a new index shows.
Recovering real estate markets have created new impetus for improvements in transparency following a slowdown in progress during the financial crisis of 2008 and 2009, according to the report from consultants Jones Lang LaSalle and LaSalle Investment Management.
Nearly 90% of markets have registered advances in real estate transparency during the past two years, driven by improving market fundamentals data and performance measurement, combined with better governance of listed vehicles.
The 2012 Jones Lang LaSalle index is published every two years and calculates transparency in 97 real estate markets worldwide by weighting 83 different factors, provides investors and corporate occupiers with data and analysis critical to transacting, owning and operating in global markets. The Index also assists governments and other industry organisations interested in improving transparency.
The United States ranks as the world’s most transparent real estate market in 2012, followed closely by the United Kingdom and Australia. Also in the highly transparent category are the Netherlands, New Zealand, Canada, France, Finland, Sweden and Switzerland.
The gap in transparency between Western Europe and some of the main Central European markets has been virtually eliminated as core CEE markets approach the mainstream.
For example, Poland ranked 19th globally, has transparency levels comparable to Western Europe and is now considered by some investors as a ‘core’ market, says the report.
Environmental sustainability has emerged as an important transparency factor with the United Kingdom, Australia and France the most transparent markets in terms of real estate sustainability. The Czech Republic, CEE leader in the sustainable development, comes in fifth.
The Index reaffirms the ascent of the MIST growth markets, that is Mexico, Indonesia, South Korea and Turkey, which all feature among the leading improvers. Turkey once again leads in transparency improvement, with Romania and Croatia rated fourth and fifth respectively.
Regionally, Latin America has seen the strongest progress in transparency. Brazil’s Tier 1 cities rank second globally in transparency improvement and now sits in the transparent category. Mexico sits in third position globally in terms of progress.
While the world economy is still in recovery, the 2012 Index reveals that real estate investors and corporate occupiers are widening their activity across a broader range of markets. This cross border activity encourages faster rates of transparency improvement in growth and emerging economies as the markets open up further to international competition and their real estate sectors embrace global best practices.
‘Central and Eastern Europe is a clear beneficiary of the greater cross border activity of investors. Strong market fundamentals are encouraging greater capital flows into the region which is now a leading outsourcing destination in Europe,’ said John Duckworth, managing director, Central and Eastern Europe at Jones Lang LaSalle.
‘Importantly, markets such as Poland, the Czech Republic, Hungary and Slovakia have seen transparency levels enhanced by the establishment of Research Forums in the major cities of these countries,’ he explained, adding that these collaborative forums were founded by international real estate service firms such as Jones Lang LaSalle to provide a platform to share non sensitive real estate market information.
Forums have been established for the Warsaw, Prague, Brno, Budapest, Bratislava, Bucharest as well as major Polish office markets, and there are plans to extend these forums into more CEE cities such as Zagreb and Belgrade. Industrial and Retail forums either exist, as for example in Poland, or are being organised.
Increased real estate market transparency in Central and Eastern Europe is also demonstrated by a growing number of research reports that international real estate consultancy companies are publishing, said Kevin Turpin, head of research, Central and Eastern Europe at Jones Lang LaSalle, LEED Green Associate.
‘This is particularly appreciated by global and European investors with no representation in the region,’ he added.
In recognition of the increasing relevance of environmental sustainability in real estate decisions, the 2012 Index now includes a separate Real Estate Sustainability Transparency Index for a sub-set of 28 countries, covering issues such as energy efficiency benchmarking and green building rating systems.
The United Kingdom, Australia and France have emerged as the most transparent markets in terms of real estate sustainability and the Czech Republic was ranked very highly in the Transparent segment. ‘Whilst the country is still quite some way behind markets like France and the UK in terms of legislation, it does have its own certification system, SB Tool, whose data is publicly available,’ said Turpin.
‘Sustainability in the property sector is rapidly becoming more important to a wide range of parties including, developers, investors and occupiers. As a result, the data and information behind it also needs to become increasingly transparent in order to benchmark our progress in reducing the damaging effects on our environment,’ he added.
The 2012 results also reaffirm the relationship between real estate investment volumes and transparency. Rising levels of transparency are associated with higher levels of foreign direct real estate investment, a powerful incentive for encouraging the free flow of information as well as the fair and consistent application of local property laws.
‘The gap in transparency between Western Europe and the main Central European markets has clearly been bridged, with Poland seen by an increasing number of investors as a core market,’ said Tomasz Trzóslo, head of capital markets, Central and Eastern Europe at Jones Lang LaSalle.
‘This is being confirmed by investment volumes. In the first quarter of this year for example, Poland’s retail investment transaction volumes stood at €465 million, behind only the UK and Germany. In addition, the two most transparent countries in the CEE, Poland and the Czech Republic, had by far the highest investment volumes in the region. This of course goes together with the macroeconomic picture of these two countries, but we believe the improved transparency picture increasingly adds to this investment trend, and will continue to have an impact in the future,’ he added.
