global real estate transparency index

Real Estate Raises the BarData Disclosure and Technology Lift Transparency Levels

Global Real Estate Transparency Index, 2014

OCCUPIER SERVICE CHARGESOCCUPIER SERVICE CHARGES

SUSTAINABILITYINVESTMENT PERFORMANCE BENCHMARKS

REAL ESTATETRANSPARENCY

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2 Global Real Estate Transparency Index 2014

Data disclosure and technology lift transparency levels The eighth edition of JLL’s Global Real Estate Transparency Index, covering 102 markets worldwide, shows continued progress in the transparency of commercial real estate around the world. Over 80% of markets have registered improvement since 2012.

The key drivers of enhanced transparency are:• Arisingtrendamonggovernmentsandbusinesstoencourageaculture

of ‘open data’, supported by technological advancement.• Anincreasingacknowledgementbygovernmentsthatpoortransparency

notonlyhampersinvestmentflows,butalsoaffectsthequalityoflifeofits citizens and their relationship with local authorities responsible for taxing and regulating real estate.

• Theoccurrenceofseveralhigh-profilecorruptionscandalsandbuildingaccidentsthathaveputtheinternationalspotlightfirmlyonrealestatetransparency and led to a series of reforms in a diverse group of countries.

• Thefurtherriseincross-borderinvestment,withMNCsandinternationalreal estate advisors both extending their global footprints, is accelerating the pace of change.

• Thereturnofstrongereconomicgrowthandimprovingmarketfundamentals, which is enabling governments and the real estate industrytorefocusontransparencyissuesthatwereputontheback-burnerduringtheGlobalFinancialCrisis(GFC).

• Therisingexpectationsfromthe‘Millennial’generationformoretransparency and accountability of governments and commercial organisations, strengthened by the power of social media.

• Thewideradoptionofsustainabilitytools,suchasminimumenergystandards,greenbuildingratingsystemsandfinancialperformance measurement of sustainable buildings.

The world’s most transparent markets are still dominated by anglophone markets –theUK,UnitedStates,AustraliaandNewZealand.However,FranceandFinland, which are at the forefront of ‘open data’ initiatives, have consolidated their positions in the top ranks. Ireland has moved into the top tier of transparency as a resultofnewREIT-enablinglegislation.

Thetopimproversin2014aredominatedbySub-SaharanAfricancountries,astransparency pushes into the frontiers of global real estate. Five of the Global Top 10improversareintheregion–Kenya,Ghana,Nigeria,ZambiaandMauritius.However,whileprogressisbeingmadeacrossthecontinent,muchstillneedstobe achieved.

Real Estate Raises the Bar

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CentralandEasternEuropecontinuestofeatureamongthetopimprovers–notablyRomania,SerbiaandHungary.However,Ukrainehasregressed,highlightinghowpoliticaluncertaintyandgeo-politicalstrifecanquicklycompromise transparency levels.

ColombiaandPeruarethebiggestmoversintheAmericasunderpinnedbystrongeconomic growth, high FDI and rising real estate investment. Despite these improvements,noSouthAmericancountryappearsintheGlobalTop20oftheoverallindexoranyofthefivesub-indices–theonlycontinenttofailtoachieveatop-scoringposition.

TheMiddleEastandNorthAfrica(MENA)hasstruggledtomaintainmomentum– the notable exception is Qatar which is making concerted efforts to create a more open and transparent market. The country also illustrates the power of the international spotlight in forcing more stringent building controls and safety standards.

ImprovementsinAsiaPacifichavebeensteadybutunspectacular,andforthefirsttimetherearenoAsiaPacificmarketsintheGlobalTop10.ThecompetitionforthemosttransparentmarketinAsiahasintensified,asSingaporemovesaheadofHongKong,wherecoolingmeasureshavecompromisedtransparencylevels.


Ghana Nigeria

Algeria

Qatar Kenya

Zambia

Mauritius

Sub-Saharan Africa Middle East and

North Africa

Europe

Ireland

Colombia

Peru

Recognition of impacts by governments on FDI and quality of life

Sustainability tools more widely adopted

Renewed economic growth and more robust real estate markets

Expanding global reach of cross-border investment and growing MNC footprints

Rising expectations of Millennial generation

Media spotlight on transparency following corruption scandals / building accidents

‘Open data’ culture

Kazakhstan

Serbia

Romania

Hungary

Latin America

Asia Pacific

Top Transparency Improvers in 2014

Key Drivers of Transparency Improvement

India Tier 1 cities

Source:JLL,LaSalleInvestmentManagement


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ContentsJLL Global Real Estate Transparency Index, 2014 6Real Estate Transparency Timeline 8Global Overview: Key Findings in 2014 12 Outlook to 2016 17 RegionalHighlights 18

Americas 20AsiaPacific 26Europe 32MiddleEastandNorthAfrica 36Sub-SaharanAfrica 41

Real Estate Environmental Sustainability Transparency Index 46TransparencyinTablesandCharts 50TechnicalNote 56

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JLL’sGlobalRealEstateTransparencyIndexisauniquesurveythatquantifiesrealestatemarkettransparencyacross 102 markets worldwide. The Index is updated every two years and has been charting the steady progress in real estate transparency across the globe for 15 years. The 2014 Index is our eighth edition.

The Index aims to help real estate investors, corporate occupiers, retailers and hotel operators understand important differences when transacting, owning and operating in foreign markets. It is also a helpful gauge for governments and industry organisations who are seeking to improve transparency in their home markets.

In the 2014 Index, we have introduced much greater granularity as transparency levels come under greater scrutiny and the real estate industry seeks more detailed information to inform decisions. While the survey covers the same topics as the 2012 edition, it now breaks these down into 115 factors, representing nearly a 40%increaseonthe83coveredin2012.Althoughtheconsistencyofthesurveyisnotcompromised,theexplicitinclusion of many more factors does underpin some of the changes in score between 2012 and 2014.

CoveragehasbeenextendedfurtherintoSub-SaharanAfricatoincludeEthiopia,Mozambique,SenegalandUganda;MyanmarisanewadditioninAsiaPacific,whileLibyahasrejoinedtheIndex.

Asinpriorsurveys,teamsofresearchersandbusinessleadersfromJLLandLaSalleInvestmentManagementhaveworkedtogethertoassessthetransparencyineachofthe102markets.OurAlliancePartnershavealsohelpedtoprovideadditional‘on-the-ground’information.Accounting,financeandlegalexpertshavebeenconsulted too, especially in emerging markets, in order to supplement our collective real estate knowledge.

SincewelaunchedtheIndexin1999,itscomponentshaveevolvedandbeenrefinedtoreflectthechangingdemandsofcross-borderinvestorsandcorporateoccupiers.Therefore,toenablecomparisonstobemadeacrosstime,wehaverecreatedanhistoricTransparencyIndexbasedoncurrentweightsandquestions.Weshould like to emphasise that the recalibrated historic Indices differ from those published at the time of each survey.

In addition to this report, the results of the 2014 Transparency Index are also presented in an interactive website: www.jll.com/Transparency

The website allows users to explore the different components of real estate transparency at a global, regional and nationallevel.Datasetsforall102marketscoveringcompositeandsub-indexscorescanalsobedownloaded.Aseriesofinteractivevisualisationsfacilitateacomparisonoftransparencybetweenmarketsandovertime.

We trust that the 2014 Transparency Index will provide valuable insights into the changes in real estate transparencyacrosstheglobe.AcompletedescriptionofthemethodologyusedtocreatethisIndexissetoutintheTechnicalNote.

For more information about the Index and how we can help with your real estate decisions, please connect with one of the Global Real Estate Transparency Team.

JLL Global Real Estate Transparency Index, 2014

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Opaque Transparent Highly Transparent Low Transparency Semi-Transparent

Global Real Estate Transparency Index The 2014 survey covers 102 markets worldwide


Transparency Index Components Incorporating 115 different factors


• Direct Real Estate Performance Indices

• Listed Real Estate Securities Indices

• Unlisted Real Estate Fund Indices

• Valuations

• Market Fundamentals Data • Offices • Retail • Industrial • Hotels • Residential

• Financial Disclosure • Corporate

Governance

• Real Estate Tax, Land Use Planning, Building Controls, Enforceability of Contracts

• Property Registration • Compulsory Purchase • Debt Regulation

• Pre-Sale Information, Bidding Processes, Professional Standards of Agents

• Occupier Services

5 Sub-Indices

13 Transparency Topics

115 individual questions and datapoints for each market

Composite Score

Performance Measurement

Market Fundamentals

Transaction Process

Governance of Listed Vehicles

Regulatory and Legal


Measuring transparency since 1999

It has been 15 years since JLL started to track real estate transparency in response to the demandsofcross-borderinvestorsforamorerigorousandquantifiableassessmentoftherisksof transacting, owning and operating in foreign markets. Back in 1999, we reported on only 30markets,whichrepresentedtherangeofmostcross-borderinvestors’targets.Levelsoftransparencywerefarlowerthantoday;onlyfourcountries–Australia,theUnitedStates,theUnitedKingdomandCanada–wereclassifiedas‘HighlyTransparent’,andtheyrepresentedthebeaconsoftransparencyinalargelyopaqueinternationalrealestatemarket.Manycountriesthattodayareimportantcross-borderinvestmentdestinations–suchasPoland,SpainandChina–were well down the transparency spectrum in 1999.

2004 – Transparency deepens

Overthesubsequentfiveyears(1999-2004),levelsofrealestatetransparencysteadilyimproved,coinciding with real estate’s ‘coming of age’ as a global asset class. By 2004, when the survey moved to a biennial event, the Index had been extended to 50 markets. The survey was also refinedintofivesub-indicestoreflectthebroadrangeofissuesrelevanttotransparency.TheNetherlandsandNewZealandjoinedthe‘HighlyTransparent’category,whilenewercross-borderdestinations, such as Spain and Italy, registered notable movements up the transparency spectrum.

2006 – Cross-border investment: a powerful force for change

Theriseofcross-borderrealestateinvestmentduringthemid-2000sprovedtobeapowerfulforceforchange,withthestrongestimprovementintransparencyrecordedduringthe2004-2006period.Thelaunchofnewinvestmentperformancebenchmarks,morefinancialdisclosureandimprovedgovernance of listed vehicles helped to boost transparency. Once again, Southern European marketsfeaturedstronglyamongthetopimprovers,aswellasseveralCentralEuropeanmarkets,likePoland,underpinnedbyEUaccession.

2008 – Transparency moves into new markets

2008sawasignificantexpansioninthegeographicalcoverageofthesurvey,particularlyintotheMiddleEastandNorthAfrica(MENA).Theregion’smainrealestatemarkets–Dubai,EgyptandSaudiArabia–werealsoamongstthestrongestimproversbetween2006and2008.ThesurveyalsomovedintosecondaryandtertiarycitiesintheBRICeconomies.RecognisingthattheIndexwas being used extensively by corporate occupiers, new components were added to the survey relating to occupier service charges and facilities management.

Real Estate Transparency Timeline1999

2004 2006 2008

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2010 – The GFC puts transparency improvement on the back-burner

ThetwoyearsfollowingtheonsetoftheGFCsawanotableslowdownintheprogressofrealestate transparency across the globe, with real estate players focusing on survival rather than on advancement. The role that real estate debt had played in the crisis steered us to add new components relating to the availability of information on commercial real estate debt and the role of bankregulators.TheBRICmarkets(notablyChinaandIndia)wereheavilyrepresentedamongthetopimprovers–Chinahadcomeofage,withasharpriseinrealestateinvestmentvolumes.

2012 – Transparency back on track

By2012,transparencyimprovementswerebackontrackinthemajorityofmarkets.Technologywasmakingiteasierforfirmstomonitortheirrealestateplatformsacrosstheglobe,furthercontributingtothepaceofchange.Reflectingtheglobalfootprintsofcross-borderinvestorsandcorporateoccupiers,nearly100marketswerecovered,withthesurveyextendedintoSub-SaharanAfricaandCentralAmerica.Topimproversin2012includedtheso-called‘MIST’markets–Mexico,Indonesia,SouthKorea and Turkey. We also added features relating to Environmental Sustainability for a subset of markets, as the sustainability issue started to rise up the agenda of the real estate industry.

2014 – Extending the frontiers of transparency

Thisyear’ssurveyhasshowncontinuedprogressinthemajorityofmarkets,withSub-SaharanAfricathis time taking centre stage as transparency pushes into the frontiers of the global real estate industry. Kenya,GhanaandNigeriaarethestarperformers,althoughtheyareimprovingfromalowbase.Meanwhile,arisingcultureof‘opendata’andtechnologicalinnovationhasemergedasanewdriverof greater transparency across the globe, a trend that is likely to continue as we look ahead to the next survey in 2016.

2010 2012 2014


Real Estate Transparency Timeline


50

Top Improver Groups by Year

102

Central Europe – Structural reforms following EU accession boost transparency, notably in Poland 2006

2004 Southern Europe – Cross-border investment forces the pace of change in Spain and Italy

MIST– Increased international investor and corporate occupier activity lead to transparency improvements in Turkey, Mexico and Indonesia

2012

Sub-Saharan Africa – Improving transparency pushes into the frontiers of global real estate. Top improvers - Kenya, Ghana and Nigeria

2014

Middle East – Booming real estate market drives transparency improvement in Dubai

2008

BRICS – Growing international investment triggers transparency improvement in China. India also among top improvers

2010

Coverage increased

from 50 countries in 2004

to 102 markets in 2014

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Transparency Level

2014 Composite

RankMarket

2014 Composite

ScoreTransparency Level Market

2014 Composite

Score

1 United Kingdom 1.25 52 Chile 3.192 United States 1.34 53 UAE - Abu Dhabi 3.203 Australia 1.36 54 China - Tier 3 3.264 New Zealand 1.44 55 Kenya 3.295 France 1.52 56 Cayman Islands 3.296 Canada 1.52 57 Argentina 3.377 Netherlands 1.57 58 Qatar 3.378 Ireland 1.62 59 Russia - Tier 2 3.379 Finland 1.69 60 Bahrain 3.4010 Switzerland 1.73 61 Peru 3.4411 Sweden 1.79 62 Slovenia 3.4712 Germany 1.79 63 Zambia 3.4913 Singapore 1.81 64 Colombia 3.5414 Hong Kong 1.87 65 Serbia 3.5515 Belgium 1.92 66 Bulgaria 3.5516 Denmark 1.96 67 Saudi Arabia 3.5717 Poland 2.02 68 Vietnam 3.5918 Spain 2.05 69 Jordan 3.6219 Norway 2.07 70 Russia - Tier 3 3.6320 South Africa 2.09 71 Macau 3.6521 Austria 2.10 72 Egypt 3.6722 Italy 2.10 73 Panama 3.7023 Portugal 2.18 74 Ukraine 3.7124 Czech Republic 2.20 75 Kuwait 3.7425 Hungary 2.21 76 Morocco 3.7626 Japan 2.22 77 Uruguay 3.7727 Malaysia 2.27 78 Costa Rica 3.8128 Brazil - Tier 1 2.44 79 Bahamas 3.8329 Taiwan 2.55 80 Oman 3.8830 Romania 2.56 81 Lebanon 3.9031 Israel 2.63 82 Uganda* 3.9732 Slovakia 2.66 83 Ghana 3.9833 Greece 2.71 84 Kazakhstan 3.9834 Turkey 2.72 85 Jamaica 4.0135 China - Tier 1 2.73 86 Nigeria 4.0336 Thailand 2.76 87 Venezuela 4.1137 Russia - Tier 1 2.82 88 Mozambique* 4.2038 Philippines 2.84 89 Guatemala 4.2039 Indonesia 2.85 90 Algeria 4.2040 India - Tier 1 2.86 91 Dominican Republic 4.2141 Mexico 2.89 92 Tunisia 4.2342 India - Tier 2 2.90 93 Pakistan 4.2543 South Korea 2.90 94 Belarus 4.2944 Puerto Rico 2.95 95 Angola 4.3645 Brazil - Tier 2 2.95 96 Honduras 4.4146 Croatia 3.00 97 Iraq 4.4547 China - Tier 2 3.04 98 Ethiopia* 4.4648 Botswana 3.09 99 Mongolia 4.4749 UAE - Dubai 3.11 100 Myanmar* 4.4850 India - Tier 3 3.14 101 Senegal* 4.5251 Mauritius 3.14 102 Libya 4.63

High Semi

Low

Opaque

Transparent

Semi

2014 Composite

Rank


*NewCountriesaddedtothe2014SurveySource:JLL,LaSalleInvestmentManagement


Growing expectations of market transparencyThe world’s dominant commercial real estate markets are in better shape than at any time since the Global FinancialCrisisof2008-2009.Levelsofcapitalmarketsactivityarereturningtopre-crisislevelsandrealestateinvestorsaremovinguptheriskcurveintonewgeographiesandpropertytypes.Meanwhile,corporatesarenowexecutinglong-termportfoliostrategiesandselectivelyextendingtheirfootprintsintoemergingmarkets.

Asmomentumbuildsacrosstheglobalrealestatemarkets,investors,developersandcorporateoccupiersaredemanding(andexpecting)evergreaterlevelsofrealestatetransparency-intermsoflegalandregulatoryenforcement,financialdisclosure,fairnessoftransactionprocessesandaccesstohigh-qualitymarketdataandperformance benchmarks.

Atthesametime,thereisagrowingrecognitionbygovernments,particularlyinemergingeconomies,thatpoorrealestatetransparencynotonlyhindersinwardinvestmentbutalsohasdeepimpactsonthequalityoflifeofitscitizensandtheirrelationshipwithlocalgovernment.Corruptionscandals(ofteninvolvingthepermitprocessforrealestatedevelopment)andseveralhigh-profilebuildingaccidentsareforcinggovernmentstopaymuchgreaterattention to regulatory enforcement. In addition, ‘open data’ policies, aided by technological advances, are playing a greater role in boosting transparency levels across the globe.

Average Change in Transparency Score, 2004-2014

Global Overview: Key Findings in 2014

Improvements stall due to Global

Financial Crisis

Increasing cross border investment

boosts transparency

Steady transparency improvements as real estate markets recover

0%

2%

4%

6%

2004 to 2006 2006 to 2008 2008 to 2010 2010 to 2012 2012 to 2014

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The World’s Most Transparent Countries, 2014DominatedbyAnglophoneMarkets


Top positions still dominated by anglophone marketsTheworld’smosttransparentmarketscontinuetobedominatedbythehighlyliquidanglophonemarkets.TheUKhasinchedpasttheU.S.tomoveintotopposition,whileAustralia,NewZealandandCanadasitinthird,fourthandsixthplacerespectively.Differencesintransparencyamongthese‘HighlyTransparent’marketsaremarginalhowever,andeachhasbeenjockeyingfortoppositionoverthepastdecade.

Moresignificantly,Francehasmovedintofifthpositionasitsgovernmentembracesapolicyof‘opendata’.ThisisFrance’sbesteverperformance,overtakingtheNetherlands(7th)asthemosttransparentmarketinContinentalEurope.Ireland’sposition(8th)hasbeenboostedbyanewREITregime.Finland(9th)completesthe‘HighlyTransparent’category,acountrythathasbeenattheglobalforefrontof‘opendata’policies.

Switzerland(10th),Sweden(11th)andGermany(12th),havingmadelimitedprogressoverthepasttwoyears,sitjustoutsidethe‘HighlyTransparent’category.InAsia,thereisnowacloserracefortopposition,withSingapore(13th)edgingaheadofHongKong(14th),wherepropertymarketcoolingmeasuresintroducedin2013 have compromised tax predictability and consistency.

Transparency Level 2014 Composite Rank Market 2014 Composite Score

HighlyTransparent

1 United Kingdom 1.252 United States 1.343 Australia 1.36

4 NewZealand 1.445 France 1.526 Canada 1.527 Netherlands 1.578 Ireland 1.629 Finland 1.69

Transparent

10 Switzerland 1.7311 Sweden 1.7912 Germany 1.7913 Singapore 1.8114 HongKong 1.87

2014 Index reveals steady transparency improvementsJLL’s latest Global Real Estate Transparency Index reveals continued progress in transparency over the past two years. Over 80% of markets have registered an improvement since 2012, although typically, increases in mostmarketshavebeen‘slowbutsteady’.Only14marketssawanotableupgradeintheiroverallscore(i.e.theirCompositeIndexscoreimprovedbymorethan25basispoints).


Sub-Saharan Africa shows greatest improvementInpreviousTransparencysurveystheCEE(CentralandEasternEurope)andAsianregions,andmorerecentlytheBRICandMISTmarkets,havedominatedthelistoftoptransparencyimprovers.Thisyear,Sub-SaharanAfricancountrieshavetakencentrestage,asimprovingtransparencypushesintothefrontiersofthecommercialreal estate industry. Over the past two years, we have seen a sharp rise in interest in commercial real estate opportunitiesinSub-SaharanAfrica,whichisfeedingthroughtogreatertransparency.Corporateoccupiersareleadingthemoveintothecontinent,butinternationalcapitalisalsobeginningtofocusonAfrica’spotential.

FiveoutoftheGlobalTop10improversinthe2014IndexarefromtheSub-Saharanregion,ledbyKenya(1st),Ghana(3rd)andNigeria(4th),whereconcreteeffortsarebeingmadetoimprovegovernanceandtheregulatoryframeworkinordertocreateamorebusiness-friendlyenvironment.ZambiaandMauritiusalsomakethetopcut.Nonetheless,AfricancountriesarerisingfromalowbaseandAfricaremainsthemostopaquecontinent,hometosixoftheworld’s10leasttransparentrealestatemarkets.DoingbusinessinAfricaisnoteasy,andwhile great strides have been made over the past two years, much still needs to be achieved.

Top Transparency Improvers, 2012–2014Sub-SaharanAfricaTakesCentreStage

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Wider adoption of sustainability toolsThere are further signs that sustainability considerations are becoming a more widely established element of the global real estate market. JLL’s 2014 Real Estate Environmental Sustainability Transparency Index, which now extendsto33countries,hasregisteredalargeincreaseinthenumberofmarketsinthe‘HighlyTransparent’and ‘Transparent’ categories. Improvements in country scores have been driven by two key factors: the greater availabilityofmarket-specificgreenbuildingcertificationschemes,whicharenowavailablein80%ofsurveyedmarkets;andthewideradoptionofenergybenchmarkingsystems–withminimumenergyefficiencystandardsnow in place in virtually all surveyed countries.

TheleadersoftheSustainabilityTransparencyIndexarethesameastwoyearsago,withAustralia,FranceandtheUKretainingthetopscores.Whatsetsthesetopthreeapartistheadoptionoftoolsthattrackthefinancialperformanceofsustainablebuildingsversusbuildingsthatlacksustainableattributes.CanadaandNewZealandhavemorerecentlyintroducedsuchtools.

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‘Open data’ policies boost transparencyMoregovernmentsappeartobeembracingapolicyof‘opendata’,allowingeasyonlineaccesstolandregistryinformation for example. France and Finlandaretakingmajorstepstowards‘opendata’whichisfurtherboostingtheiralreadyhightransparencylevels.Butthisisnotjustatrendinthemoretransparentmarkets–several initiatives are underway in countries traditionally characterised by low transparency. Qatar,inamajormove to increase transparency, announced a new ‘open data’ policy earlier this year which involves the release of alargequantityofgovernment-held,non-personaldatatoresidents.InUruguay, public land registry information is now available online, while Kenya is starting to digitise all its land records.

Extension of REIT structuresThe introduction of REIT structures continues to underpin improving transparency in several countries. Ireland is seeingtherenaissanceofthelistedsector,withGreen-REIT(launchedinsummer2013)beingthefirstcompanymaking use of the new REIT regime. In Mexico,followingtheinaugurationoftheFIBRA(MexicanREIT)marketin2011,dataavailabilityhascertainlyincreased.Meanwhile,proposedlegislationinPanama would allow for the formation of a listed REIT market, whilst the government in Kenya has also recently passed REIT legislation. In China, CITIChasrecentlywonregulatoryapprovaltoissuethecountry’sfirstREIT.

The unexpected power of sporting events Realestatetransparencyalsoappearstobeadvancingastheunexpectedconsequenceofinternationalmediaattentiononcountriesholdingmajorsportingevents.Qatar’ssuccessfulbidforthe2022FIFAWorldCuphasbrought transparency issues into sharp focus and is leading to more stringent building controls and higher standardsofsafety.Likewise,theglobalspotlightisnowfirmlyonBrazilasthehostofthe2014FIFAWorldCupand2016SummerOlympics,whichwillintensifyinternationalattentiononanydeficienciesintransparency.

The enhanced role of financial regulatorsApushforhighertransparencyhasalsocomeinanindirectway,asmorerigidregulationsinthebankingandfinanceworldpermeateintocommercialrealestate.Manycentralbanksaredemandingmoreinsightsandreportingonrealestatelendingandminimumcapitalrequirementsforpropertydebt.CentralbanksinGreece, the UAE and Qatar, amongst others, have launched initiatives to monitor commercial real estate markets more closely.

Limited launch of new investment performance indicesThe number of new performance indices launched over the past two years has slowed compared to previous surveys–thePerformanceMeasurementSub-IndexregisteredtheweakestimprovementofthefiveTransparencysub-indices.ThenotableexceptionswereinJapanwheretheAssociationforRealEstateSecuritization(ARES)launchedinlate2012anindextrackingtheperformanceofunlistedpropertyfunds;and Botswana,whereIPDinassociationwiththeRealEstateInstituteofBotswanahascreatedarealestateperformance index based on the portfolios of six leading property companies.

Enhanced data on residential real estateSupportingtheimprovementintheMarketFundamentalsSub-Index,greatestprogresshasbeenmadeinthe availability of data on the residential sector, in part fuelled by stronger interest in residential property from institutional investors and from central banks.

16 Global Real Estate Transparency Index 201416 Global Real Estate Transparency Index 2014

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Technology enhancing transparencyThe forces moving global real estate markets towards greater transparency will, over the next two years, be as strong as ever, as new technologies help to boost transparency, even for those countries already among the most transparentglobally.Newtechnology-baseddatavendorsandinnovativedatamodels,suchascrowdsourcing,promisemorereal-time,granularandspecialisedinformationonalargescale.TheUnitedStatesistakingtheleadincrowdsourcingplatformsforrealestate,whichareemergingwithincreasingfrequency.ThedatavendorCompStakisoneexampleofastart-upthatenablessharingoftransactioninformationbetweenmarketparticipants.AnotherisAuction.com,whichisbringingreal-timepropertysalestransactionstoanonlineplatform.Overthemediumterm,theproliferationofnewtechnology-basedcrowdsourcingdatacompaniescouldenable emerging real estate markets to leapfrog the traditional evolution of building market fundamentals and performance data sets.

Rising expectations from Millennials Therevolutionindigitalcommunicationandinformationisbeingdrivenbythe‘Millennial’generation(i.e.thoseintheir20sandearly30s),ademographicthatwillplayagreaterroleinreshapingtheglobalrealestatemarkets.Theiruseofsocialmedia,theirhyper-connectivityandthirstforknowledge-sharingisfeedingthroughtoincreasing demands for transparency in government and commercial organisations.

Measuring the performance of sustainable buildings Sustainability and the built environment will continue to rise up the agenda, and we are likely to see more tools totrackthefinancialperformanceofsustainablebuildings.GRESB,theGlobalRealEstateSustainabilityBenchmark, which assesses the sustainability performance of real estate portfolios around the globe, is making good progress through sharpening the attention of investors on building sustainability.

Sub-Saharan Africa continuing to show strong improvementAftershowingthelargestimprovementsinthepasttwoyears,Sub-SaharanAfricaislikelytocontinuetoregisterthemostrapidprogressbetween2014and2016.Asmoreinternationalplayersmoveintotheregion,thiswillinevitablyleadtofurtherstructuralchangesinthewayAfricanrealestatemarketsoperate.Manyoftheregion’smarkets, and indeed transparency initiatives, are at a nascent stage, and there remains a lot to be done before the continentcancompetewithotherregionsonmoreequalterms.

BRICs showing renewed impetusTheBRICmarkets,wheretransparencyimprovementshavelostsomeimpetusin2014,havestrongpotentialtobuildmomentumonceagain.InChina,pressurefrompotentialbonddefaultsandregulatorsattemptingto reduce ‘moral hazard’ are leading investors to demand better information in order to price credit risk more accurately.Additionally,theplannedintroductionofanationalpropertyregistryandpropertytaxshouldalsoboost transparency.

India is likely to enact the Real Estate Regulation Bill, which seeks to improve regulation over real estate agents andthequalityoflandregistryrecords.Moregenerally,IndiacouldseefasterimprovementsinrealestatetransparencyinthefuturefollowingtheelectioninMayofthefirstmajoritygovernmentin30years;thenewgovernment will undoubtedly be in a stronger position to push through economic reforms.

Outlook to 2016


Sub-Saharan Africa shows strongest improvement, but much still needs to be achieved The2014surveyrevealsthatSub-SaharanAfrica(SSA)hasmadetheworld’sstrongestadvancesinrealestatetransparency.FiveoutofeightSSAmarkets-namelyKenya, Ghana, Nigeria, Zambia and Mauritius-havedemonstratedsignificantimprovementintransparencyscores(>25bps).AllthesemarketssecuredapositionintheGlobalTop10improvers,whilstAngolahasalsoseenmoderatetransparencyimprovementsince2012.Whiletangible progress is being made across the continent, much still needs to be achieved. Senegal, Ethiopia and Angola all feature in the bottom 10 of the Index.

Central Europe drives improvements on the continentWithinEurope,itisonceagaintheCentralandEasternEuropeansub-regionthathasseenthegreatestshiftsintransparency.Amongthetopimproversin2014areRomania, Serbia and Hungary. Romania’s improvement reflectsthegovernment’sconcertedactionstoenforceEUlegislation,aswellasongoingeffortstofightcorruption.SerbiahasstartedformalEUaccessionnegotiations,whichispushingthroughtostructuralreforms(ashasoccurredpreviouslyinotherCEEaccessioncountries).Hungaryisalsoamongsttheimprovers,makingupforlostground(comparedtoneighbouringPoland and the Czech Republic).

Political upheaval in Eastern Europe compromises transparencyBy contrast, the 2014 Index shows Ukraine and Russia (TierIIandIIIcities)strugglingtomaintainevenmoderatelevelsoftransparency,andonceagainhighlightshowpoliticalturmoilanduncertaintycanquicklyunderminetransparencylevels.ThedeteriorationintransparencyinUkraineisfarfromauniqueeventhowever,withEgypt (2012)andVenezuela(2008)bothmovingintoreverseinprevioussurveys.

Modest improvement in MENATheMiddleEastandNorthAfricaremainsoneoftheleasttransparentregionsintheworld.FollowingencouragingsignsofimprovementintransparencypriortotheGFC,theregionhasnotmaintainedmomentum.WhilethereisincreasingrecognitionacrossMENAoftheimportanceofimprovingrealestatetransparency,inmostcasesthishasfailedtotranslateintofirmaction.Thenotableexceptionis Qatar – which sits among the Global Top 10 improvers – where the government is taking measures to increase its global presence, which has involvedtakingamoreopenandtransparentstanceonseveralissues.NorthAfricancountries,suchasEgypt, havealsoshownprogressastheyregainsomelostgroundfromtheeffectsofthe‘ArabSpring’.

Economic growth drives transparency increases in Latin AmericaInLatinAmerica,thestrongestgainshavebeenachievedinColombia and Peru which, not coincidentally, have also been amongst the region’s fastest growing economies, attracting increasing FDI, and are now the targets of international real estate capital. Brazil (TierIcities)andMexico have maintained their positions as Latin America’smosttransparentmarkets.

Moderate progress in Asia Pacific TheAsiaPacificregionhasseenamoderatepaceoftransparencyprogressin2014followingadvancesin2010(duetoincreasesinChinaandIndia)and2012(duetoemergingSouthEastAsiasuchasIndonesia and Vietnam).Limitedimprovementinmarketdataavailabilityandslowforwardmovementinregardtopolicyreformsinthepasttwoyearshavecontributedtotheresultsin2014.Nonetheless,thereareselectiveexamplesofprogress including more rigorous reporting of transactions in Taiwan and the introduction of an index tracking the performance of unlisted property funds in Japan.

Regional Highlights

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Several dynamic markets lose impetusSeveral countries that have featured among the top improvers in previous surveys, including Turkey, Poland, Dubai, China and South Africa, appear to have lost some impetus and have been treading water over the pastcoupleofyears.InChina,forexample,advancesinstructuralreformsandthestrengtheningofregulatoryenforcement have been slow, and it continues to fall behind in the transparency of transaction processes. For manycross-borderinvestors,Polandhasreachedanacceptableleveloftransparency,whichmayhavetakenthepressure off further improvements.

Transparency levels within BRIC countries widenThesurveyalsorevealsevidenceofawideninggapintransparencywithinBRICcountries,betweentheirTierIcities(suchasShanghai, Mumbai, Moscow and Sao Paulo)andthelowertiercities,whereprogresshasbeenslower and, in the case of Russian Tier II and III cities, has deteriorated.

Transparency Index 2014, by Region


Transparency Change by Region, 2012-2014

*comprises only markets included in the Index in both updates Source:JLL,LaSalleInvestmentManagement

Global Americas Europe Asia Pacific MENA Sub-Saharan Africa

Performance Measurement 3.51 3.96 2.99 3.06 4.06 4.22Market Fundamentals 3.59 4.10 2.86 2.96 4.47 4.67Governance of Listed Vehicles 2.88 3.52 2.33 2.50 3.14 3.68Regulatory and Legal 2.64 2.66 2.11 2.59 3.48 3.04Transaction Process 2.68 2.57 2.08 2.83 3.63 2.99Composite Index 3.08 3.35 2.50 2.81 3.81 3.72

Region Average Score 2014 Average Score 2012 Change

Americas 3.35 3.43 0.09

Europe 2.50 2.55 0.05

2.73 2.83 0.11

Middle East & North Africa 3.76 3.89 0.14

Sub-Saharan Africa 3.43 3.75 0.32

Global 3.00 3.10 0.11

Asia Pacific


Inthe2014Index,theAmericasregionhasrecordedoverallmodestimprovementinrealestatetransparency.Notably,ithastendedtobethelargerandrelativelymoredevelopedLatinAmericaneconomiesandpropertymarketsthat have seen the greater shifts towards increasing transparency since 2012. These top improvers also generally correspond to those countries that have attractedsignificantand/orrapidly-growingforeigndirectinvestment,includingintotheirrealestatesectors.ThiscontrastswithmanyofthesmallerCentralandSouthAmerican,aswellasCaribbeanmarkets,whichonaveragehaveexperiencedsmallergains–ashasbeenthecasewiththeregion’stwo‘HighlyTransparent’ markets: the United States and Canada.

Poor real estate data and a small, still-emerging listed sector weigh on regional standing IntheAmericasregionoverall,PerformanceMeasurement,MarketFundamentals and Governance of Listed Vehicles remain decidedly less transparentsub-indices.Nonetheless,asinvestorscontinuetotakeinterestin a wider array of property markets in the region, this will lead to more and better property market fundamentals and performance data, as well as a higher standard of governance for listed property companies. In many countriesintheAmericas,nodisaggregateddatabasesareavailable,whileamajorityofmarketsalsohavelimitedavailabilityofrobusttime-seriesmarketdata.Additionally,instarkcontrasttoacountryliketheU.S.-inwhichrobustperformance measurement and other data is widely available for even such nichepublicly-listedsectorsasself-storageandstudenthousing-amajorityofLatinAmericanandCaribbeanmarketshavenobenchmarkreturnindicesforpublicly-ownedproperty,becausethosepublicly-tradedcompaniesthatdoexistlargelytendtobehomebuildersordevelopmentfirms.

… but signs of improvementEven so, this will likely change over time as REIT structures are gradually introduced into more markets. For example, there is currently proposed legislationinPanamathatwouldallowfortheformationofalistedREITmarket.InMexico,followingtheinaugurationoftheFIBRA(MexicanREIT)marketafew years ago, available data has certainly increased, although performance benchmark indices are generally still of fairly limited use. The recent introduction ofretailfundsprimarilyinvestedinFIBRAsislikelytochangethisinthenearfuture.Furthermore,thelargestFIBRAhassuccessfullyplacedoverUS$1billion in the public debt market. Finally, a corollary of the multiple reforms undertaken by the government in 2013 will be greater private investment in energy markets and ports which will likely trigger institutional real estate investment and greater transparency in these markets.

Americas Continues on Gradual Path to Transparency

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Initial steps in private performance measurement taken in Latin AmericaFormostLatinAmericanandCaribbeanmarkets,therearenoprivaterealestateindicesinuse,andthusnolocalprivately-heldreturnbenchmarks.Infact,inseveralcountriesthereisstillquitelittleinthewayofinstitutionalownership of commercial property within the private realm. In Brazil, however, thereisahome-grownprivaterealestateindex–theIGMI-C–thatwaslaunched in 2011. The index was created by FGV, an institution that publishes avarietyofpriceandassetindices,anotherbeingtheIGP-M,whichiswidelyusedforthepurposesofadjustingrentsinthemarket.TheIGMI-Cindexwasdevelopedinlargepartwiththeobjectiveofbringingmoretransparencytothereal estate market in the country.

In another example, though, of how the stage is being set for much greater realestateperformancemeasurementdataavailabilityinLatinAmerica,theintroductioninrecentyearsofCapitalDevelopmentCertificatesinMexico’sprivateinstitutionalinvestment(mainlypensionfund)arenawillproducetherawdatavitaltothecreationofprivately-heldpropertyperformancemeasurementindices. With the historical instruction of many more mature real estate markets,itseemsprobablethatsuchprivateindicesinMexicowillbecomeavailable in coming years.

Information on real estate debt still relatively scarceThroughouttheAmericas,detailedrealestatedebtinformationisstill,onthewhole, neither very extensive nor widely available. The United States, largely through its Federal Reserve, is the global ‘gold standard’ in this respect, with itstrackingofdebtflows–overallandbyspecificlendertypes–andavailableinformation on mortgage originations and maturities. Canada also has a good degree of accessible information, but notably has substantially less data widely available to the public in terms of mortgage originations.

Theroleofthefinancialregulator(s)invariousmarketshasalsostrengthenedand contributed to improved transparency in the region. Even in Argentina, in a perhaps somewhat counterintuitive example, much stricter capital controls enactedbythegovernmentinrecentyearshaveledtogreaterrequirementsforpropertylenderstomonitorcashflowsandcollateralvalues,andalsotoappraisalrequirementsandassociatednon-compliancepenalties.


Selected geographic and country highlights For the second consecutive Transparency survey, Brazil TierICitiescontinuestobethemosttransparentmarketinLatinAmerica,followedbyMexico, Puerto RicoandBrazilTierIICities.BrazilTierIhasmaintaineditsmovement towards greater transparency, despite the emergence of economic and real estate market challenges aswellascapitaloutflowsoverthelast12-18months.Progressinrecentyearshasbeenconcentratedintheregulatory and legal system, as well as transaction processes. Even here, though, opportunities for further improvementcertainlyremain–forexample,transactioncostconventionsinthemarketarequitecomplexandcan vary greatly. In addition, title insurance is also not obtainable, and property title records, while publicly available, are not yet accessible online. This actually contrasts, interestingly, with Uruguay, a much less transparent country overall but one in which more public land registry information is available online.

Continuedprogressinrealestatetransparencyin Brazil is perhaps now of even greater relevance for the market, giventheglobalspotlightthatwillshineintenselyonthecountryoverthe2014-2016period,withitsstagingoftheFIFAWorldCupandSummerOlympics.Thepotentialtoreapinvestmentbenefitsfromgreatertransparencywillperhapsbeespeciallyamplifiedoverthenextseveralyears.

In Mexico, the largest improvements in transparency can be attributed in part to the dramatic deepening of the country’s real estate capital markets over the past few years, with respect to the still very young and growing REIT andprivatedomesticpensionfundrealestateinvestmentmarkets.However,thegovernmenthasalsoembarkedonaseriesofsignificantreformsacrossavarietyofsectorsincludingenergy,telecoms,educationandtaxes.One way in which real estate taxation changes have challenged transparency is through the recently approved lengtheningoftheholdingperiodforpropertytoqualifyfortax-exemptstatus.

TheleasttransparentrealestatemarketsintheAmericasareconcentratedintheCaribbeanBasin.Thesecountries include Honduras, Guatemala, the Dominican Republic, Venezuela and Jamaica, and generally rate very poorly in the areas of market and performance data as well as governance of listed vehicles.

Colombia and Peru log largest gains in transparencyThe two most improved larger markets since the last survey are Colombia and Peru.Notcoincidentallythesearethe two countries that have seen among the most consistently strong economic growth over the last several years and have garnered striking increases in foreign direct investment within the region.

Colombiainparticularhasseennotableimprovementsintheavailabilityofpropertymarketdata–especiallyintheofficeandindustrialsectors,asglobalrealestateinvestors,brokeragesandotherservicesfirmshavebeenexpandingtheirpresenceandactivities.Asaresult,moredataisbeingcollected-includingagreaterdepthofdetailedpropertyfundamentalsdata,bysubmarketandinsomecasesbysector-anditisoftenimprovinginqualityandbecomingmorewidelyavailable.Inaddition,formalRFPsforrealestateprojectandtransactionassignmentsarenowfarmorecommonplaceintheprimarycitiesthanwasthecasejusttwotothreeyearsago.

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CA

DO

US

MX

CR CO

VE

PE BR

AR CL

PM

UG

PR KY

BS

JM HN

GT

Brazil – based on Tier 1 citiesSource:JLL,LaSalleInvestmentManagement

UnitedStates,Canada HighlyTransparent

Brazil(Tier1) Transparent

Mexico,PuertoRico,Brazil(Tier2),Chile,CaymanIslands,Argentina,Peru Semi-Transparent

Colombia,Panama,Uruguay,CostaRica,Bahamas Low Transparency

Jamaica,Venezuela,Guatemala,DominicanRepublic,Honduras Opaque

Real Estate Transparency in the Americas, 2014

Low Transparency

Highly Transparent

Semi-Transparent Transparent

Opaque Not Covered


TopregionaltransparencyimproverColombiahasenjoyedincreasesindatacoverageinrecentyears.Onemanifestationoftheimprovingmarketdataqualityhasbeenastrongerconvergenceamongindependentanalystsas to basic indicators, including the overall size of the market and other standard supply and demand metrics. This enhancedqualityandavailabilityofdataisjustonefactorbehindtheentranceintoanddevelopmentwithinthemarketofmoreestablishedrealestateinvestmentfundsanddevelopers.TheseincludeU.S.-basedparticipantssuchasEquityInternationalandPaladin;German-sourcedcapital–Jamestown;domesticfirmsthatareraisinginstitutionalcapitalfrommultiplegeographies(includingtheU.S.)–suchasOspinas;internationalshoppingcentrespecialistSonaeSierra;andlargerandincreasinglysophisticateddomesticgroupsthatareraisingcapitalandoperating/executing on multiple platforms across various sectors, such as Terranum.

Inadditiontoimprovementsindataqualityandavailability,Colombiahasachievedtransparencygainsinitsregulatory and legal environment. For example, market participants’ expectations for entering into contracts have becomemuchmoreprofessionalisedandroutine.Ahigher,more‘internationalstandard’hasdeveloped,withenforceabilityofcontractsbeingtakenquiteseriouslybyparticipantswiththebackingofthecourtsinthemajorcitiesofBogota,Medellin,BucaramangaandCali.Atthesametimehowever,insecondarycitiesandontheCaribbeancoast, legal norms still remain much more lax and informal.

AnotherimportantsetofdevelopmentsistheongoingproliferationofFreeTradeandotherbilateralagreements,suchasthosewiththeU.S.,SouthKorea,IsraelandtheEU,aswellasthestockmarketmergerbetweenColombia,PeruandChile.Suchagreementshavenecessitatedmoreuniformityandastandardisationofstockmarkets,traderegulations,andlegalandregulatoryframeworks.Asanexample,therehasbeenanincreasingregulatoryandenforcement focus over recent years on cracking down on money laundering in order to facilitate transparency in international trade agreements. One result of such efforts has been more stringent legal standards for accounting and contract enforcement, including in real estate transactions.

Colombia

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Peruhasregisteredrelativelystrongtransparencyimprovementwhichhasedgeditintothe‘Semi-Transparent’category. The country has experienced transparency increases in its regulatory and legal practices, as well as in transaction processes and governance of listed vehicles. There are some interesting distinctions to be drawnbetweenPeru’sstandingandthatofColombia.Limaiswidelyconsideredtobeamoreglobalcity,anditsexceptionallystrong‘centreofeconomicandrealestategravity’withinPerucontributestothecountrybeing highly urbanised overall, with a variety of more extensive international connections than Bogota or the othermajorColombiancities.Thiscouldplayaroleincertain‘standard’globalmarketpracticesbeingadoptedearlieroratasomewhatquickerpacethaninColombia.Forinstance,insomerespectPeruvianpropertyfirmsingeneralareseentohavehigherprofessionalstandards,withbroaderadoptionof,adherencetoandenforcement of its industry body’s code of ethics.

This difference also has at least partial cultural underpinnings, as there is a much greater acceptance and ‘culture’ of outsourcing business services – particularly in this case property services – in Lima than in Colombia’sprimarycities.InColombia,mostfirmsattempttokeepallfunctionsin-house,whichmaysupporttheperceptionofmoreunevenandgenerallylowerprofessionalstandardsthaninPeru.Inperhapsasimilarvein,PeruisalsomodestlyoutpacingColombiaintermsofgovernancestandardsandpracticesoflistedpropertycompanies.Atthesametime,morewidespread‘internationalstandard’practicesinPeruhavealsomadethemarket somewhat easier to understand for foreign investors than many other emerging markets. Furthermore, localpartnershipopportunitiesinPeru–oftencriticalforforeigninvestorsfirstenteringnewmarkets–cansometimesbemoreeasilyidentifiedanddefinedthaninotherLatinAmericancountries,includingColombia.Assuch,foreignREITshavefoundapathtoentryandsuccessinPeru.Forexample,U.S.REITKimcoRealty,inadditiontoothers,hasbeenanactiveplayerinthecountry.Bycontrast,themarketinColombiahasbeenonbalancedominatedbymoreprivateandlocally-basedinvestorstothispoint.

Peru

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TheAsiaPacificregioncontinuestodisplaythewidestdiversityinrealestatetransparency worldwide – Australia(3rd)andNew Zealand(4th)toptheregion’sranks,while Mongolia (99th)andMyanmar (100th)aresomeoftheleasttransparentcountriesglobally.Inthelatestsurvey,thetoptierinAsiaPacifichaspushedforwardintermsofglobalrankings(NewZealandfrom5thto4th),butmostoftheregionhasnotseenmuchchange. In fact, the lower rungs have fallen in terms of global rankings – Vietnam(from62ndto68th)andMacau (from64thto71st)duetofasterprogressseenelsewhereintheworld, and Mongolia (from93rdto99th)duetoscoresworseningsince2012.

Overall transparency in the region has seen a moderate improvement in the 2014 survey, buildingonadvancesin2010(duetoprogressinChina and India)and2012(ledbyemergingSouthEastAsiancountries).Onlyfivemarkets(Japan, Thailand, India Tier I and II cities and South Korea)haveregisteredmoderatescoreincreases,butnonerankamong the global Top 10 improvers; the rest of the region has seen generally small gains.

Limited improvement in the availability of market fundamentals data and slow progress in regard to policy reforms in the past two years have contributed to the results in 2014:

• China’s limited improvement in overall real estate transparency is mainly restricted to its Tier I cities.

• SingaporehasinchedaheadofHongKongonceagain(alsoin2010)inacloseraceforthetoptransparencypositioninAsia,withthelatterseeingitsscoresfallsince2012 in the areas of corporate governance and property taxation.

• TransparencylevelsarestilllowinJapan and South Korea relative to these two countries’ economic maturity. This is largely due to a comparative lack of market fundamentals intelligence as well as low transparency regarding reconciliation of service charges for facilities management.

• India has seen moderate improvements in overall transparency scores for Tier I and II cities(mainlyinmarketfundamentals)andlimitedgainsforTierIIIcities.Amongthedifferent categories, India still scores the lowest in the transparency of its transaction processes(e.g.highcostsofinvestmenttransactions;weakprofessionalstandardsforlocalagents).

• AllcountriesinemergingSouth East Asiahaveseensomeadvances(butlesssignificantthan2012whenthesub-regionaccountedfor3outofthetop10globalimprovers).Thesub-regionhasgenerallyseenprogressinregulatory/legalandthetransaction process.

Moderate Improvements in Asia Pacific

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Selective examples of improvementNotwithstandingtheseresults,thereareafewnotableexamples of improvements across the region over the last two years. In Taiwan, the price of all property transactions must now be reported to the government within 30 days after the sale has been registered. In Japan,theAssociationforRealEstateSecuritization(ARES)launchedinlate2012anindex tracking performance of unlisted property funds. There have also been small improvements in regulation of real estate lending in a few markets including China, Taiwan, New Zealand and Macau.

Going forward, the region should see further progress in transparency improvements stemming from both public and private sector players. Demand from international investors and corporate occupiers should continue to lead tobetterinformationonmarketfundamentals.Anotherarea that is moving in a positive direction is the regulatory and legal environment. For example, China plans to introduce a national property registry before 2018, which will probably precede the expansion of a property tax nationally. Elsewhere, Taiwan is currently examining a bill which requiresallpre-salestobedeclaredand,laterthisyear,Indiais likely to enact its Real Estate Regulation Bill, which seeks toimproveregulationoverrealestateagentsandthequalityof land registry records. India could see faster improvements in real estate transparency in the future following the election inMayofthecountry’sfirstmajoritygovernmentin30years;the new government will undoubtedly be in a stronger position to push through economic reforms.


ChinaandIndia–basedonTier1citiesSource:JLL,LaSalleInvestmentManagement

MO

KR JP

TW IN

ID

SG MY

VN PH

HK

TH

CN

NZ

AU

MN

MM

Australia,NewZealand HighlyTransparent

Singapore,HongKong,Japan,Malaysia Transparent

Taiwan,China(Tier1),Thailand,Philippines,Indonesia,India(Tier1-2)SouthKorea,China(Tier2),India(Tier3),China(Tier3) Semi-Transparent

Vietnam,Macau Low Transparency

Mongolia,Myanmar Opaque

Real Estate Transparency in Asia Pacific, 2014

Low Transparency

Highly Transparent


Opaque Not Covered

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China

Similarto2012,China’soveralltransparencyscorehasseenlimitedimprovementinthe2014surveyafterstrongadvances in 2010. Enhanced data availability in the country’s secondary and tertiary cities contributed to 2010’s improvement, while slow but steady progress was made on the regulatory and legal fronts in both 2010 and 2012. In 2014,Chinascoresrelativelywellgloballyininvestmentperformancemeasurementandmarketfundamentalsbutcontinuestolaginareassuchastransactionprocess(particularlystandardsforagentsandreconciliationofservicechargesforfacilitiesmanagement).Progressinstructuralreformsandstrongerregulatoryenforcementhasbeenslow since 2012, and the gap between Tier I and the lower tier cities has slightly widened as bigger improvements have been generally limited to the primary cities.

Progresssince2012hasbeenrestrictedtoafewareassuchaslanduseplanning(predictabilityofchangeoflanduse;stricterenforcement)andcompulsorypurchasebyapublicbody(fewerinstancesofunreasonablenoticeperiods).However,thesehavebeenpartlyoffsetbylowerscoresintaxationconsistencyandpredictabilityaswellasa setback in accuracy of data on real estate debt, which has suffered from the increase in trust lending and debt from shadow banking channels.

Ironically, pressure from potential bond defaults may promote greater transparency in the future, as attempts by regulators to reduce ‘moral hazard’ are leading investors to demand better information in order to price credit risk more accurately.AnotherkeyareathatismovinginapositivedirectioninChinaistheplannedintroductionofanationalproperty registry and property tax. The national property registry is being implemented on a pilot basis in several Tier IIcitiesandshouldleadtomorecompleteandeasilyavailablerecords,andtherebyhelptopromotealessstratifiedoperatingenvironmentbetweencitytiersforrealestateplayers.Athirdareatowatchforimprovementwillbeinthelistedrealestatesectorwherethecountry'sfirstexchange-tradedREITbegantradinginMay.

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Sittingclosetothe‘HighlyTransparent’category,onaparwithmanyWesternEuropeancountries,andwiththefourthmosttransparentmarketintheAsiaPacificregion,HongKonghasseenitstransparencyscorefallmarginally in 2014 and it now sits one place behind Singapore.

Thecityranksamongthetopquartilegloballyineverytransparencycategory(highestformarketfundamentalsat7thplaceglobally),buthasseenscoresfallinafewareassince2012.Propertymarketcoolingmeasuresintroducedin2013(e.g.standardstampdutyratesweredoubledforalldirectpropertytransactionsaswellasbeingleviedonallsub-salesofnon-residentialproperty)haveloweredtaxpredictability.Intheresidentialsector,theintroductionin2012ofa15%buyer’sstampdutyonnon-localshasalsoreducedtaxconsistencyforforeignpurchasers.

Moreover,marketexpertshaveloweredtheiropinionssince2012onbothaccountingstandardsandcorporategovernance.Forinstance,agreaterlevelofdetailisneededinfinancialreports(e.g.individualassetperformanceoflandlords).Lowercorporategovernancescoresreflecttheslowpaceoflistedcompanies’compliancewithrecentchangestotheCorporateGovernanceCodeoftheHongKongStockExchange;e.g.moreindependentnon-executivedirectorsoncompanyboards.

HongKongislikelytomaintaingenerallyhighlevelsoftransparencygoingforward.However,localcompaniesmay continue to be slow to accept best practices in corporate governance. In addition, property market cooling measures will probably remain in place for the foreseeable future, leading to ongoing uncertainties over tax consistency and predictability for local and foreign investors.

Hong Kong


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Australia

Alreadyoneoftheworld’smosttransparentmarkets,Australiahasseenitstransparencyscoreimproveslightlysince 2012 and it has maintained its global ranking at third place.

AustraliaissecondgloballybehindtheUKintermsofinvestmentperformancemeasurement,reflectingthecountry’swideuseofallperformanceindices,coupledwithsophisticatedlistedrealestatecompanies(highlysecuritisedwiththesecondlargestREITmarketgloballybehindonlytheU.S.)andhighstandardsofvaluationmethods.Globally,itisplacedonlybehindtheU.S.intermsofmarketdataavailability,withlongtime-seriesofdataformostrealestateindicatorsandcomprehensivedatabasesatadeal/propertylevelforthemajorityofsectors.

Australiaalsorankswellinregulatoryandlegalprocesses(in4thplace)withnearperfectscoresonlanduseplanning,enforceabilityofcontracts,compulsorypurchaseaswellasavailabilityandqualityoflandregistryrecords(albeitscoringslightlylowerontaxconsistencyandpredictability).Ingovernanceoflistedvehiclesitisranked 7th worldwide, with near top results for accounting standards and corporate governance.TheonlycategorywhereAustralialagsbehindtheGlobalTop10(in13thplace)isinthetransparencyoftransactionprocesses,butthisisprincipallyduetothefinedifferentiationatthetopendoftheladder.AlmosteveryaspectofthetransactionprocessinAustraliaisverytransparent.

HighrealestatetransparencyisamajorfactorbehindthestrongdemandforAustralianrealestateassetsfromglobalinvestors.Full-year2013commercialrealestatetransactionvolumessetanewrecordatUS$22billion,up33%on2012.Cross-borderpurchaseswereamajorcontributortothisgrowth,accountingfor30%oftotalinvestmentvolumesin2013,arecordindollarandpercentageterms.ArangeofforeigninvestorsrecentlyactiveintheAustralianmarketincludepensionfunds,globalfundmanagers,sovereignwealthfunds,foreignlistedREITsand high net worth individuals.

JLL | Global Real Estate Transparency Index, 2014 31


RealestatetransparencyacrossmostofEuropehasnotregisteredsignificantchangesinceourlastsurveyin2012; unsurprising given that the region houses many of the world’s most transparent markets. Europe remains themostinternationallytradedregion,attractinghighinflowsofcapitalfromacrosstheglobe.

Highqualityofvaluations,thedepthofmarketdataandperformancebenchmarks,clearandenforceableruleson land use and taxation, and bidding processes that are fair and do not discriminate against any party involved, havebecomekeyelementsofa‘safehaven’andare(amongotherfactors)reasonswhyEuropecontinuestobeone of the most international investment destinations.

Theimportanceoftransparencyforinvestmentdecision-makingfromaroundtheworldisclearlyvisibleinmarketssuchasLondon,ParisandtheGermancities,whicharekeyinvestmenttargets,notonlybecauseoftheirsizeandliquidity,butalsogiventheirmarkettransparency,withtheUK coming top of the global ranking this year, France up to 5th place and Germany sitting in 12th position.

Key features of this year’s survey in Europe are:

• OnceagaintheCentralandEasternEuropeansub-regionhasseenthegreatestshiftsin transparency across Europe. Two of the top improvers in 2014 have been Romania and Serbia. In January 2014, Serbia started formal EU accession negotiations which willinvolvesignificantregulatoryreforms.Meanwhile,Romaniahasshownstrongimprovement,withEUlegislationbeingmorefirmlyenforcedandevidenceofongoingeffortstofightcorruptionandincreasetheefficiencyofthejudicialsystem.

• Hungary isalsoamongsttheimproversin2014.FollowingfrontrunnersPolandandtheCzechRepublic,thecountryisbuildingitspositionasaCEEinvestmentdestination,which is supporting increases in the transparency of its investment processes. Poland and the Czech Republic,whichbothleadthetransparencyrankinginthesub-region,haveshownlimitedimprovementin2014.Formanycross-borderinvestors,transparency levels are now ‘acceptable’, which may explain the loss of some impetus of transparency advances in the two countries.

• Furthereast,Russia’s Tier II and III cities, as well as Ukraine, have struggled to maintain even moderate levels of transparency, with a notable gap emerging not onlywithMoscow,butalsowiththerestofEurope.OurIndexshowsdecreasesin transparency in both countries due to lower scores across a range of indicators. Transparency in Kazakhstan and Belarus, though improving, remains very poor and bothcountriesstillsitinthe‘Opaque’category.

• Turkey, which for the past two surveys topped the ranks of global improvers, has been unable to maintain momentum in 2014 with its overall score improving only slightly.Perceptionsoftransparencymayhavebeenimpactedbytherecentheadlines.Nevertheless,theIstanbulrealestatemarketcontinuestoshowstrongexpansion.

Europe’s Transparent Markets Underpin Strong Cross-Border Investor Activity

JLL 33

• AmongthebigimproversinWesternEuropeisIreland,whichiscurrentlyexperiencingastrongmarketrecoveryandhasmovedintothe‘HighlyTransparent’categoryin2014.Theupwardchangehasbeendrivenbytherenaissanceofthelistedsector,withGreen-REIT(launchedinsummer2013)beingthefirstcompanytomakeuseofthecountry’snewREITregime.Atthesametime,Irish‘badbank’NAMAcontinuestomakefurtherprogressonworkingthroughthedebt/propertyportfoliosacquiredfromdistressedIrishbanksatthepeakofthefinancialcrisis.

• Portugalhasalsoshownreasonableimprovementsinthe2014survey.Thecountrywashithardbythefinancialcrisis,whichimpaireditsabilitytoimprovetransparency,particularly as a lack of investment activity reduced the amount of available information on transactions. The government has, however, introduced profound economic and banking sector reforms, and investment activity has started to increase again. During thecrisis,italsointroduceda‘GoldenVisa’programme-offeringnon-EUinvestorsvisasiftheyinvestedinPortugal,includinginrealestate-whichopenedthemarkettoanewsourceof(global)capital.

WhileEuropehasn’tseenamajorpushinregulationsbetween2012and2014,therehasstillbeenimprovementin transparency in the way that existing frameworks are more rigorously applied and enforced. The crisis of 2009 has clearly shown how a lack of risk management and overly optimistic valuations and also the neglect of analysis of market fundamentals can create huge problems. It appears that there is now a renewed focus on deepening realestatemarketanalysis,andmajorindependentdataprovidersinthedirectandindirectmarketscontinuetorefinetheiranalytictools.



UnitedKingdom,France,Netherlands,Ireland,Finland HighlyTransparent

Switzerland,Sweden,Germany,Belgium,Denmark,PolandSpain,Norway,Austria,Italy,Portugal,CzechRepublic,Hungary Transparent

Romania, Israel, Slovakia, Greece, Turkey, Russia(Tier1),Croatia,Russia(Tier2) Semi-Transparent

Slovenia,Serbia,Bulgaria,Russia(Tier3),Ukraine Low Transparency

Kazakhstan, Belarus Opaque

RU

RO

FI

BY

SE NO

HU PL

AT SL

IT

DE BE DK

FR ES

PT

NL

GB

IE CZ SI

CH HR

UA

G R BG IL TR

KZ RS

Real Estate Transparency in Europe, 2014

Low Transparency

Highly Transparent


Opaque Not Covered

JLL 35

Despite already high levels of transparency, France has continued to show steady improvements and has overtakentheNetherlandstobecomecontinentalEurope’smosttransparentmarket.Thecountry’slistedrealestatesectorishighlydiversifiedandisgrowingonceagain,increasingtheuseofperformancebenchmarks.Afurther positive development is the high number of listed companies that now report in English as well as French. However,thelargestimprovementconcernstheavailabilityofdata–inParis,ORIE(theregionalobservatoryofrealestate)hasre-launcheditsofficialofficestockstatisticsfortheÎle-de-Franceregionwiththejointsupportofvariousmarketplayers,whoalreadyprovideahighleveloftransparencythrough‘ImmoStat’.Atthesametime,public institutions appear to be increasingly embracing a policy of ‘open data’, allowing easy access to the land registry. It is now also possible to buy information about the real estate stock for every city in France, based on thepropertytaxfiles.Thisoffersthepotentialtopreciselycalculatetheoffice/retail/industrialstocksforanytown,and to access details of ownership.

France

JLL 35


Ofthe16MiddleEastandNorthAfrica(MENA)marketscoveredintheTransparencyIndex,14haveshownanimprovementintransparencysince2012.However,thesechangeshavebeenrelativelymodest(comparedtopre-GFC)andMENAremainsoneoftheleasttransparent regions in the world.

Dubai is still the most transparent market within the region but has seen little progress since 2008. The strongest advances over the past two years have been recorded in Qatar, with moremodestimprovementsinNorthAfricanmarkets,suchasEgypt and Tunisia, where the effectsofthe'ArabSpring'havenowlargelysubsided.Whiletransparencyhasmadegainsin less developed markets, such as Algeria and Pakistan, these remain among the least transparent real estate markets globally. Lebanon has struggled to maintain momentum over the past two years as the country faces increased political instability and strains relating to the continuedconflictinneighbouringSyria.

Dubai remains the region’s most transparent real estate marketTheUAEhasretaineditspositionasthemosttransparentrealestatemarketintheregion,although there has been little further progress made over the past two years. Even so, DubaicontinuestobenefitfromtheUAE’sstatusasoneofthebestregulatedandopenrealestate markets in a still volatile region. It has built upon its position as the leading business destinationintheMiddleEastoverthepasttwoyearsandhasthelongesthistoryofofferingfreehold ownership to overseas parties, dating back around 15 years.

In advances that have been made, the Dubai government has introduced a number of measures to improve the legislative and regulatory environment in an attempt to avoid anotherrealestatebubble,withtherealestateregulator(RERA)remainingthemostdevelopedsuchbodyintheregion.Amongtheseadoptedmeasuresistherecentdoublingofthetransferfeeseenasan‘anti-flipping’measure.Furthermore,theDubaiLandDepartment(DLD)hasannouncedthelaunchofunifiedrealestatecontracts.Thesenewagreementshave been designed to regulate the relationship between the parties involved in property transactions, and to help avoid any problems that may arise from misinterpretation of documents.ThecontractshavebecomeamandatoryrequirementsinceMay2014.

Moreover,theCentralBankoftheUAEhastakenstepstobetterregulatethemarket(bycontrolsonlendingtorealestatedevelopersandtheimpositionofloan-to-valueratiosonmortgages).

InlinewiththeDubaiStrategicPlan2015,thelatestregulatorychangeinDubaihasseentheMunicipalitymandateaseriesofgreenbuildingregulations,whichincludespecificationstobeappliedtoallnewly-constructedbuildingswithintheEmirateofDubai(includingFreeZones)sinceMarch2014.

Modest Improvements in Middle East and North Africa

JLL 37

Abu Dhabi treading water In Abu DhabithequalityofrealestatemarketdataishigherthaninDubaiinseveralsectorsandtheplanningsystemismoreregulated(throughtheUrbanPlanningCouncil).ImprovementsintheseareashavereinforcedAbuDhabi’spositionasthesecondmosttransparentmarketintheMENAregion.Therehas,however,beendisappointinglylittleprogress elsewhere, including crucial real estate legislation which has been drafted for a number of years but has still to be enacted.

AnexampleofthisinertiaisinAbuDhabi’screationofanewfinancialFreeZoneonAlMaryahIsland;itslegislativeframeworkhasyettoberatified,andthisisresultinginalackofclarity around the status of existing tenants.

Lebanon loses momentumLebanon has struggled to maintain momentum over the past two years. It has faced serious economic, security and political hurdles since the last Index was published, and the security situation remains unstable, exacerbated by the continued civil war in neighbouring Syria. These challenges have hindered any progress towards improved regulations and real estate transparency, effectively reversing the gains that were registered in previous surveys.

North Africa gains from improving stability NorthAfricancountries(notably Egypt, Algeria and Tunisia)haveseenapositiveimprovementintransparencysince2012.Thisisareflectionofthemorestablepoliticalenvironmentinthesecountries,whichwereembroiledinthe'ArabSpring'atthetimeofthe2012 survey. While progress towards democracy has been limited, this stability has resulted in some improvement in the real estate operating environment.

Egypt, in particular, has seen a modest increase in transparency over the past two years andtherearesignsemergingthatconfidenceintheCairorealestatemarketisreturningtopre'ArabSpring'levels.ThedecisiveresultofpresidentialelectionsinMay2014islikelytoincreasecertaintyandconfidenceintherealestatemarket.

Libya in, Sudan outIndicating increased interest from international investors and corporate occupiers, Libya has rejoinedtheTransparencyIndex.InvestinginLibyacomeswithchallengesincludingsecurityconcerns,alackofpolicyenforcementandahighlevelofcorruption.Asaconsequence,Libyahasre-enteredthesurveyastheleasttransparentmarketintheMENAregionandatthebottomoftheglobalrank.GiventhecurrentviolentconflictinSudan and the imposition of international sanctions, business interest has declined and Sudan has therefore been excluded from the 2014 Index.



QA

OM

UAE

BH PK

EG SA

LB

JO ALG

KW MO TN

IQ

NG

LY

LY

UAE-Dubai,UAE-AbuDhabi,Qatar,Bahrain Semi-Transparent

SaudiArabia,Jordan,Egypt,Kuwait,Morocco,Oman,Lebanon Low Transparency

Algeria,Tunisia,Pakistan,Iraq,Libya Opaque

Real Estate Transparency in MENA, 2014

Low Transparency

Highly Transparent


Opaque Not Covered

JLL 39

QataristheonlymarketwithintheMiddleEastthathaswitnessedasignificantimprovementintransparencyoverthepasttwoyears,andfeaturesamongthetopglobalimproversintheIndex,movingintothe‘Semi-Transparent’categoryforthefirsttimein2014.Despitethis,itremainssomewaybehindtheUAEintermsofrealestatemarket activity and transparency.

Behind the improvement has been a determination by Qatar to take measures that will increase its regional and global presence, and this has involved taking a more open and transparent stand on several issues. These changesareinlinewiththemoreyouthfulandmodernapproachbeingadoptedbySheikhTamimbinHamadal-Thani, who assumed power from his father in June 2013.

The other catalyst to Qatar’s improved openness and transparency has been the international criticism of its successfulbidtoholdtheFIFA2022WorldCupandongoingconcernsaboutworkingconditionsforthoseinvolvedin constructing the necessary infrastructure to support the event.

Inamajormovetoincreasetransparency,Qatarannouncedanew‘opendata’policyearlierthisyearwhichinvolvesthereleaseofalargequantityofgovernment-held,non-personaldatatoresidents.Thispolicyisinsupportof‘NationalVision2030’whichstatestheneedfor“atransparentculturewhereknowledgebasesarekeptcurrentandeasilyaccessible”inordertofurtherQatar’saimofbecomingaknowledge-basedeconomy.Aspartofthis general initiative to improve public access to data, access to the land registry and other real estate data will be increased.

Other improvements to transparency have stemmed from the increasing maturity of the real estate market over the past two years, as well as the greater involvement of international real estate consultancies, which have helpedtoboostprofessionalstandardsandenhancethequalityofrealestatemarketdata.Elsewhere,inthewakeofthetragicfireattheVillaggioMallinDohainMay2013,theauthoritiesinQatarhaveimplementedmorestringent building control measures, including adherence to higher standards of design and safety.

While there has been no new legislation regarding corporate governance, there is a perception that standards have been improved as Qatar seeks to run its listed real estate vehicles in a more professional manner with the existinglawsbeingenforcedwithgreaterefficiencyandconsistency.Atthesametime,Qatar’sCentralBankisalso taking a more active role in monitoring and overseeing real estate appraisals and lending, and is enforcing theregulationsmorefrequently.

AnotherimportantmilestoneisthedecisionbyNewYork-basedindexMCSItoupgradetheQatarstockexchangefrom`frontiermarket’to‘emergingmarket’status.Theupgradeisapositivestepthatwillresultinamajorincrease in international capital being invested in the stock exchange. This will magnify existing international attention on Qatar and is likely to result in calls for improved openness and transparency of market data and reporting over the next few years.

Qatar

JLL 41

Findingsfromthe2014surveyrevealthatSub-SaharanAfrica(SSA)hasmadetheworld’sstrongestadvancesinrealestatetransparency.FiveoutofeightSSAmarkets–namelyKenya,Ghana,Nigeria,ZambiaandMauritius–havedemonstratedsignificantimprovementintransparencyscores(>25bps).AllofthesemarketshavesecuredapositionintheGlobalTop10improvers,whilstAngolahasalsoseenamoderatetransparencyimprovementsince2012.Significantimprovementsinthesub-indicesscoresofinvestmentperformance,regulation,governance, and transaction process across most markets have underpinned the positive movement in scores fortheregionasawhole.WhilesignificanttransparencychallengesremaininSub-SaharanAfrica–particularlyinSenegal,EthiopiaandAngolawhichallfeatureinthebottom10oftheIndex–tangibleprogressisbeingmadeacross the region.

Three of top five global transparency improvers in SSA Thefast-growingeconomiesofKenya,NigeriaandGhanaareamongstthetopfiveimproversglobally,andtheyare now clearly on the radars of international corporate occupiers seeking regional hubs for operations in East andWestAfricarespectively.Growthinmanufacturing,technologyandtelecoms,finance,outsourcing,retailingand hospitality sectors has created an urgent need for modern commercial real estate as the continent continues to attract interest from international investors and occupiers. The improvement in transparency in these markets is an outcome of concrete efforts taken by the respective countries to upgrade their physical infrastructure, and to improvegovernanceandtheregulatoryframeworktocreateabusiness-friendlyenvironment.

Kenya emerges as the top global improver Kenya has demonstrated an impressive 50 basis points improvement in its transparency score, and now occupies 55thpositionglobally,comparedto67thin2012.Thecountryhasmadesignificantprogressintheareasofinvestmentperformanceandregulatoryandlegalpractices.Moreover,asKenyahascontinuedtoestablishitselfastheeconomichubforEastAfrica,growinginterestfrominternationalinvestorshascreatedaneedforgreater regulation of the real estate market. One example of this is the Kenyan government’s introduction of aframeworkforREITsinthecountry.WiththegovernmentmandatingtheCapitalMarketsAuthority(CMA)todevelopREITregulations,REITlegislationwasfinallypassedinmid-2013.Propertylegislationisalsoundergoingamajoroverhaul.TheMinistryofLandswiththesupportofUSAIDhassetagoalofdigitisingalllandrecordsandcreating a land rent database. The strength of market fundamentals data has also started to improve as private companies are beginning to collect real estate data in a systematic way. There is growing evidence of published property market research and analysis, with the increased entry of international real estate advisors bringing improvements in data availability, consistency and collection.

Ghana and Nigeria also show positive signs of increasing real estate transparency Ghana’soveralltransparencyscorehasalsoimprovedsignificantly,pushingthecountryforwardbysixpositionsto 83rd in the global ranking. Several reforms undertaken by the Ghanaian government have enhanced the regulatoryandlegalpracticesinthecountry.TheestablishmentofCreditReferenceBureaushasenabledthe creation of a database on borrowers, making the country one of the easiest places in the region to register property,enforcecontractsandaccesscredit.TheWorldBank’sSecondLandAdministrationProjectishelpingto consolidate and strengthen land administration and management systems and, increasingly, real estate developersoperatinginGhanaarefollowinginternationally-acceptedprocessesandstandardswithregardtonewdevelopmentprojects.

Sub-Saharan Africa: Largest Improver Globally


Nigeriaisalsomakingconcertedeffortstoimproverealestatetransparency.LagosStatehasbeenanimportantfocusofWorldBankoperationsinrecentyears,reflectingthestate’scommitmenttopursuingreformsanddevelopmentobjectives.ThenewcomprehensiveSecondLagosStateDevelopmentPlan(LSDP),adoptedin2013, aims to streamline the regulatory environment and improve incentives for private investment and business; forexample,landregistrationinitiatives,thecreationofGISmapsandthepilotingofane-approvalsystemfordevelopment permits. The World Bank’s Doing Business 2014 report on "Understanding Regulations for Small andMedium-SizeEnterprises"foundthatNigeriawasalreadyimplementingsomeoftheglobalbestpracticesinthe areas of ‘doing business’ and that, since 2009, it had moved closer to those relating to business regulations.

South Africa remains the most transparent market in SSASouthAfricaisstillheadandshouldersabovetherestofSSAintheglobaltransparencyrankings,buthasmadelittleprogressintransparencysince2012.ItremainstheregionalleaderandtheonlymarketfromtheSSAregionto feature amongst the world’s top 20 transparent markets. Despite recording only a slight movement in its overall scoreover2012,SouthAfricahasmovedupinitsglobalrankingfrom22ndto19thinthelatestsurvey,closetoItalyandPoland.

Botswana and Mauritius – SSA’s second and third most transparent markets BotswanaandMauritiuscontinuetofeatureinthe‘Semi-Transparent’category.Botswanahasseenasignificantimprovementinitsoverallscore,movingupthreerankstooccupy48thpositionontheglobalIndex.Improvements across a host of indicators such as investment performance, market fundamentals, governance of listed real estate vehicles and regulatory and legal practices have helped enhance the country’s transparency. TherecentlaunchofanIPDindexinBotswanaisakeymilestonetoachievinggreaterrealestatemarkettransparency.ThisinitiativeisinassociationwiththeRealEstateInstituteofBotswana(REIB),whichistherecognised body representing the interests of the country’s property profession. REIB also liaises with the Real EstateAdvisoryCounciltoaddressmattersofprofessionalincompetenceandunethicalconduct.

BothMauritiusandBotswanahavebenefitedfromhighlevelsofdevelopmentandinvestment,andmorerobustlegal and regulatory frameworks than some of their regional counterparts. The real estate markets in each country have matured over the past two years, with greater involvement of international real estate consultancies helping toboostprofessionalstandardsandenhancethequalityofrealestatemarketdata.

While challenges remain, the outlook is positive Despite the region being the largest global improver in terms of overall rankings, it is still some distance away fromitsglobalcounterparts,withtheseimprovementscomingfromalowbase.However,theregion’simprovingfundamentalsandlong-termgrowthprospectswillcontinuetoattractforeigninvestment.RealestateinvestmentinSub-SaharanAfricaisontheincrease.Inrecentmonths,Grosvenorhasannouncedthatitwillinvestupto£250millionintherealestatemarketsintheregion,whileprivateequityfirmActisLLPhasmadeacommitmenttoleadinvestmentofasmuchasUS$1.5billioninshoppingcentres,officetowersandnewindustrialandlogisticsparksinkeySSAmarkets.

The penetration of more international players into the region will inevitably lead to structural changes in the wayrealestatemarketsoperate.Itshouldalsoincreasetheaccuracy,timelinessandflowofinformationanddatarelatedtorealestate,makingtheSSAmarketsmoretransparentandpredictable.Manyoftheregion’sreal estate markets, and indeed transparency initiatives, are at a nascent stage, and there remains a lot to be donebeforetransparencyintherestofSub-SaharanAfricareachesthelevelofSouthAfricaorindeedothermatureinternationalmarkets.Nevertheless,thepaceofchangeisimpressive,andwithcontinuedfocusfrompolicymakers, alongside growth and international investment, transparency looks set to improve.

JLL 43


EG

SD

SA

ZA

BW MU

KE

ZM

GH

AO

NG

SD

ET

MZ

SN

UG

SouthAfrica Transparent

Botswana,Mauritius,Kenya Semi-Transparent

Zambia,Uganda Low Transparency

Ghana,Nigeria,Mozambique,Angola,Ethiopia,Senegal Opaque

Real Estate Transparency in Sub-Saharan Africa, 2014

Low Transparency

Highly Transparent


Opaque Not Covered

JLL 45

Transparency in Kenya’s real estate market has improved notably over the past two years, evidenced by the country’sgrowingattractivenessasadestinationforFDI.EY’sAfricaAttractivenessSurvey2014reportedmorethan25%growthinFDIprojectsin2013.Increasinginvestmentandthepresenceofinternationalcorporateshastriggered construction activity across the country, from individual commercial buildings and industrial parks through tonewcities.Forexample,aUS$14.5billioninformationtechnologyhub–KonzaTechnologyCity–isbeingbuilttostrengthenthecountry’spositionasanemergingTMThub.Furthermore,flagshipprojectsunder‘KenyaVision2030’–anationallong-termdevelopmentblueprint–includethecreationoffivesmallandmedium-sizeenterprise(SME)industrialparksinkeyurbancentres.

Therapidlyexpandingrealestatemarketisencouragingtheindustrytoimprovedataquality.Thereisgrowingevidence of published property market research and analysis, with the increased entry of international real estate advisors bringing improvements in data availability, consistency and collection. Local players such as the Kenya PropertyDevelopersAssociationarealsokeentoidentifysectordatagapsandhavebeendevelopingregularoutputsliketheAnnualStateofDevelopmentReportwithaviewtocreatinganddisseminatingcomprehensivemarket information.

Atthesametime,Kenya’slandregistryisbeingcompletelytransformed;followingthenewconstitution,alllandisnowrequiredtoberegistered.Allocationorsaleofpubliclandtoprivateindividualsorentitiesisnowconductedbyaspecialcommissiontocutdownonopportunitiesforcorruption.TheMinistryofLandshasalsosetagoalofdigitisingalllandrecords.Progresstowardsthesegoalsincludestheconstructionorrefurbishmentoflandregistrybuildings in several districts, the digitising of some paper records, and the creation of a land rent database. In supportofthisinitiative,USAID’sKenyaTransitionInitiative(KTI)hashelpedtheMinistryofLandRegistrieswithimproving land record storage and access. In due course, the government aims to provide public electronic access to all information on land registration. In 2013, digitisation of the land registry was estimated to have increased governmentrevenuefromUS$9milliontooverUS$100million.

AsKenyacontinuestoestablishitselfastheeconomichubforEastAfrica,growinginterestfrominternationalinvestors has created a need for greater regulation of the real estate market. One example of this is the Kenyan government’sintroductionofaframeworkforREITsinthecountry.WiththegovernmentmandatingtheCapitalMarketsAuthority(CMA)todevelopREITregulations,REITlegislationwasfinallypassedinmid-2013.TwoREITlicensesweregrantedinDecember2013(CentumAssetManagersLimitedandUAPInvestmentsLimited)andthreemorewereapprovedinApril2014(STANLIBKenyaLimited,FusionInvestmentManagementLimitedandCICAssetManagementLimited).

Following extensive deliberations of the ‘Kenya Vision 2030’ Delivery Board, the government is working towards itsforthcominginitiativetomakeinvestmentprocessesfaster,efficient,simplerandtransparent.Thisincludessettingupaone-stopshopwhereinvestorscanobtainbusinesspermits.ThemoveseekstohelpboostKenya’spositioning as an investment destination that can compete with emerging regional competitors.

Kenya


In recognition of the growing relevance of environmental sustainability to the real estate industry, JLL in 2012 created a Real Estate Environmental Sustainability Transparency Index for a subset of 28 countries. The Index assessesthetoolsandregulationsforbuildingenergydesignefficiency,operationalperformance,carbonemissionreportingandgreenbuildingcertifications.

For the 2014 survey we have been able to expand the Index to include 33 countries. Whilst the overall average transparency score has not changed since 2012, there has been a large increase in the number of countries in the‘HighlyTransparent’and‘Transparent’categories.Thesetwogroupsnowaccountforjustoverhalfofallcountries and contain almost twice as many countries compared to the last survey. This is a further sign that sustainability considerations are becoming a widely established element of the real estate market.

ThethreeleadersarethesameastwoyearsagowithAustralia,FranceandtheUKkeepingtopscores.Sevencountries,representingallthemajorregions,improvedtheirscoressufficientlytojointhe‘Transparent’category-Belgium,Canada,Denmark,HongKong,Italy,NewZealandandSpain.

Improvementsincountryscoresweredrivenbytwokeyfactors:thegreateravailabilityofmarket-specificgreenbuildingcertificationschemesandthewideradoptionofenergybenchmarkingsystems.However,whatsetsthetopthreecountriesapartistheintroductionoffinancialperformanceindicators.Suchindicatorstrytoestablishalinkbetweenlevelsofsustainablebuildingsandfinancialperformance.

Minimumenergyefficiencystandardsarenowinplaceinvirtuallyallcountries,with73%evenmakingitamandatory compliance element for new buildings. In parallel with the high penetration rate of minimum energy efficiencylevels,country-specificgreenbuildingsystemsareavailablein80%ofsurveyedmarketswithamajorityofthemprovidingpubliclyavailableinformationoncertifiedbuildings.AnotherindicatorofthepopularityofgreenbuildingratingschemesisthepresenceoftheU.S.LEEDcertificationschemeinallofthe33countries.

Real Estate Environmental Sustainability Transparency Index

JLL 47

Insomeofthelargermarketswithsignificantpresenceofinstitutionalrealestateinvestmentactivity,severalgreenbuildingratingsystemsareavailable,somehome-grownandsomeadaptedfrominternationalassessment schemes.

Forinvestors,someofthemostsignificanttransparencytoolsarefinancialperformanceindicatorsforsustainable buildings. In our last survey only the top three countries had this type of tool at their disposal: Australia,FranceandtheUK.Thisyear,twomorecountriesintroducedsuchanindicator:CanadaandNewZealand.

Whilst average scores of most categories improved, still only half of all surveyed countries have building energy benchmarking systems in use. In Europe, EU member states have, as a result of the 2002 European EnergyPerformanceinBuildingsDirective,introducedenergyconsumptionbenchmarkingsystemsbasedonbuildingdesignoractualconsumption.Sinceourlastsurvey,buildingenergybenchmarksarerequiredtobemade available through print and electronic communications to potential tenants who intend to let a building, ortopotentialpurchaserswhotargetbuildingsforinvestmentpurposes.Anotherverypopularandwidely-used energy benchmarking system around the world is the U.S. Energy Star initiative that rates building energy consumptions and benchmarks them, taking into account local climate conditions.

These U.S. and EU energy consumption benchmarking systems, and similar ones that exist in other countries, helpestablishconsumptionbaselinesandprovideabasisforenergyreductionmeasures.However,onlyveryfewcountriesimposeanymandatoryenergyefficiencyimprovementworksdespitealargeproportionofexisting stock – in some mature economies up to 20% or more – that is in need of such measures. Energy efficiencyimprovementsreducebuildingobsolescenceandhelpfuture-proofassetsagainstmorestringentenvironmental regulations expected to be introduced over the coming years and decades.

Real Estate Environmental Sustainability Transparency Index, 2014 TransparencyHierarchy


Transparent

Semi-Transparent

Low Transparency

Australia France, UK

Austria, Belgium, Canada Czech Republic, Denmark Germany, Hong Kong, Italy

Japan, Netherlands, New Zealand Singapore, Spain, Sweden

Brazil, China, Croatia, India Ireland, Poland, Russia, Switzerland, United States

Romania, UAE – Abu Dhabi , South Korea, Slovakia UAE – Dubai, Mexico, Turkey

Highly Transparent

JLL 49

Financial Performance Transparency of Sustainable Buildings Infivecountriesaroundtheglobe–Australia,Canada,France,NewZealandandtheUK–investorsareabletotrackthefinancialperformanceofsustainablebuildingsandcancomparethisassettypewithcomparablenon-sustainable buildings.

Afewyearsago,therealestateanalyticscompanyIPD,nowpartoffinancialindexandanalyticsproviderMSCI,establishedaframeworkwiththegoaltotrackthefinancialperformanceofsustainablebuildings.Themethodologyvariesfromcountrytocountrybutincludesaseriesoffactorsthatdefineabuildingas‘green’or‘sustainable’.Inmostcases,IPDusesasetofenvironmental,energyperformanceorGreenBuildingcertificationcriteriatodefinesuchbuildings.Itthencalculatesthesamefinancialcriteria,i.e.incomereturnandcapitalgrowthvalues in order to provide total return performance data. This environmental or sustainable assets data set can thenbecomparedwithbuildingsthatlacksustainablefeaturesorshowdifferentenvironmentalqualities.

WhilsttheaggregateresultsarepublishedbyIPD,individualassetperformanceisonlyavailabletotheassetowner.IPDiscurrentlyexploringtheexpansionofthisapproachtoadditionalcountriesandwemayseetheresultin our next Real Estate Environmental Sustainability Transparency Index.

Real Estate Environmental Sustainability Transparency Index, 2014ScorebyCategory


1

2

3

4

5

Sust

ainab

ility T

rans

pare

ncy S

core

Opaque

Transparent

Energy Efficiency (New Build)

Green Building Ratings System

Energy Benchmarking

Overall Green Lease Clauses

Energy Efficiency (Existing Buildings)

Carbon Reporting

Green Performance Index


Sub-Index Rank

Market2014

Composite Score

1 United Kingdom 1.01 1.252 Australia 1.40 1.363 United States 1.40 1.344 Netherlands 1.44 1.575 Switzerland 1.46 1.736 France 1.61 1.527 New Zealand 1.79 1.448 Japan 1.86 2.229 Germany 1.98 1.7910 Sweden 2.03 1.7911 Canada 2.04 1.5212 Singapore 2.05 1.8113 Italy 2.09 2.1014 Finland 2.09 1.6915 Hong Kong 2.14 1.8716 Austria 2.31 2.1017 Belgium 2.38 1.9218 South Africa 2.41 2.0919 Norway 2.45 2.0920 Portugal 2.49 2.18

2014 Sub-Index

ScoreSub-Index

RankMarket

2014 Composite

Score1 United States 1.32 1.342 Australia 1.48 1.363 New Zealand 1.52 1.444 United Kingdom 1.56 1.255 Netherlands 1.64 1.576 Canada 1.69 1.527 Hong Kong 1.70 1.878 Poland 1.71 2.049 France 1.80 1.5210 Germany 1.93 1.7911 Finland 2.02 1.6912 Denmark 2.15 1.9613 Ireland 2.15 1.6214 Czech Republic 2.18 2.2015 Sweden 2.22 1.7916 Spain 2.23 2.0517 Belgium 2.24 1.9218 Singapore 2.25 1.8119 Russia - Tier 1 2.38 2.8220 China - Tier 1 2.50 2.73

2014 Sub-Index

Score

Real Estate Transparency by Sub-Index, Top 20

Transparency in Tables and Charts

Sub-Index Rank Market

2014 Composite

Score1= United States 1.00 1.341= Ireland 1.00 1.623 United Kingdom 1.04 1.254 Belgium 1.08 1.925 Switzerland 1.08 1.736 New Zealand 1.09 1.447 Australia 1.11 1.368 Finland 1.18 1.699 Sweden 1.19 1.7910 Singapore 1.22 1.8111 Netherlands 1.25 1.5712 Canada 1.25 1.5213 South Africa 1.28 2.0914 France 1.28 1.5215 Denmark 1.35 1.9616 Norway 1.48 2.0917 Austria 1.50 2.1018 Italy 1.53 2.1019 Mexico 1.59 2.8920 Spain 1.61 2.05

2014 Sub-Index

ScoreSub-Index

RankMarket

2014 Composite

Score1 Ireland 1.05 1.622 Canada 1.21 1.523 United Kingdom 1.29 1.254 Australia 1.31 1.365 Denmark 1.34 1.966 Singapore 1.35 1.817 United States 1.41 1.348 New Zealand 1.43 1.449 Israel 1.45 2.6310 Austria 1.53 2.1011 Norway 1.53 2.0912 Finland 1.55 1.6913 France 1.55 1.5214 Belgium 1.57 1.9215 South Africa 1.59 2.0916 Switzerland 1.60 1.7317 Sweden 1.64 1.7918 Poland 1.69 2.0419 Malaysia 1.74 2.3520 Romania 1.76 2.56

2014 Sub-Index

Score

Performance Measurement Market Fundamentals

Governance of Listed Vehicles Regulatory and Legal

JLL 51

Note:Scoresshownroundedtotwodecimalplaces;rankingsarebased on unrounded scoresSource:JLL,LaSalleInvestmentManagement

Sub-Index Rank

Market2014

Sub-Index Score

2014 Composite

Score 1= New Zealand 1.00 1.44 1= Ireland 1.00 1.623 France 1.07 1.524 Finland 1.20 1.695 Canada 1.22 1.526 United Kingdom 1.27 1.257 Germany 1.31 1.798 Netherlands 1.31 1.579 Hungary 1.31 2.2110 United States 1.33 1.3411 Switzerland 1.33 1.7312 Spain 1.38 2.0513 Australia 1.40 1.3614 South Africa 1.42 2.0915 Sweden 1.53 1.7916 Czech Republic 1.56 2.2017 Portugal 1.60 2.1818 Denmark 1.80 1.9619 Norway 1.82 2.0920 Slovakia 1.82 2.66

Transaction Process

JLL 51

JLL 53

Real Estate Transparency by Topic Area

2

3

4

5

2014

Tran

spare

ncy S

core

Performance Measurement Market Fundamentals Listed Vehicles Regulatory and Legal Transaction Process

Opaque

Transparent

Regu

lation

Valua

tions

Emine

nt Do

main

Land

and P

rope

rty

Regis

tratio

n

Occu

pier S

ervic

es

Finan

cial D

isclos

ure

Sales

Tran

sacti

ons

Over

all

Corp

orate

Gov

erna

nce

Debt

Regu

lation

Listed

Rea

l Esta

te S

ecur

ities I

ndice

s

Marke

t Fun

dame

ntals

Data

Dire

ct Pr

oper

ty Ind

ices

Unlis

ted F

und I

ndice

s

Transparency by Topic Area, 2014


1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2014

Tra

nspa

renc

y Sc

ore

Dire

ct Pr

oper

ty Ind

ices

Listed

Rea

l Esta

te Se

curiti

es In

dices

Unlis

ted F

und

Indice

s

Marke

t Fu

ndam

ental

s Data

Finan

cial D

isclos

ure

Corp

orate

Go

vern

ance

Regu

lation

Land

and P

rope

rty

Regis

tratio

n

Emine

nt Do

main

Valua

tions

Debt

Regu

lation

Sales

Tra

nsac

tions

Occu

pier S

ervic

es

Opaque

Transparent

Transparency – Score Distribution by Topic Area, 2014



Transparency Compared

Real Estate Transparency Index and CorruptionAMulti-DimensionalMeasureCloselyCorrelatedwithCorruption

Sources:JLL,LaSalleInvestmentManagement,TransparencyInternational

Real Estate Transparency Index and Investment Volumes (2009 – 2014)TransparencyRiseswithInvestmentActivity

Basedondirectcommercialrealestatevolumes,2009-2014Sources:JLL,LaSalleInvestmentManagement,OxfordEconomics

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

10 20 30 40 50 60 70 80 90 100

2014

Tra

nspa

renc

y Sc

ore

Corruption Perceptions Index (Transparency International)

New Zealand

Libya

Russia

R 2 = .55

Algeria

AustraliaUSA UK

Italy

SouthKorea

Brazil

Japan

Dubai

China

Chile

France

Most Corrupt Least Corrupt

Saudi ArabiaUruguay

Tunisia

Portugal

Ghana

IndiaBotswana

Poland

Israel

Spain

Ireland Germany

Norway

Iraq

Egypt

DenmarkHong KongSouthAfrica

Qatar

Opaque

Transparent

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1 1.5 2 2.5 3 3.5 4

Tran

sact

ion V

olum

e as

% of

GDP

2014 Transparency Score

Australia

UK

Italy

Norway

Hong Kong

Sweden

South KoreaMacauNetherlands

USAGermany

Taiwan

Ireland

Singapore

Brazil Russia

China

R2= 0.3434

JLL 55

Real Estate Transparency by Region and Sub-Region

Real Estate Transparency – Regional Divergence, 2014 Regional Divergence

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2014

Tran

spar

ency

Sco

re

Europe Asia Pacific Americas Sub-Saharan Africa

Middle East & North Africa

Opaque

Transparent

Highest

75th Percentile

25th Percentile

Lowest

1.01.52.02.53.03.54.04.55.0

2014

Tra

nspa

renc

y Sc

ore

North

Ame

rica

Centr

al Am

erica

South

Ame

rica

Austr

alasia

North

Asia

Grea

ter C

hina

Britis

h Isle

s

Centr

al Eu

rope

South

ern E

urope

Sout

h Ea

st Eu

rope

Wes

tern E

urope

Leva

nt

Sout

h Ea

st As

ia

South

Asia

Nordi

cs

Easte

rn Eu

rope

North

Afric

a_

Sub-

Saha

ran A

frica

Gulf S

tates

Opaque

Transparent

Real Estate Transparency 2014 – Composite Index by Sub-Region




The Transparency IndexTheJLLGlobalRealEstateTransparencyIndexisbasedonacombinationofquantitativemarketdataandinformationgatheredthroughasurveyoftheglobalbusinessnetworkofJLLandLaSalleInvestmentManagementacross102markets.Foreachmarket,weuse115separatefactors,bothquantitativedatapointsandsurveyquestions,tocalculatethecompositescore.Thesurveydataandquantitativemeasurescomplementeachother.For instance, knowing the market coverage and length of a country’s direct real estate index is only one half of the story;foracompletepicture,wealsogatherqualitativedataonwhetherinvestorsactuallytrustandusetheindex.Local research teams, in consultation with business leaders and real estate professionals active in each market, completethesurvey.AtablesummarisingthefactorsbehindtheIndexisattheendofthisnote.

Inthe2014Index,wehavecontinuedtobreakgeneralquestionsintomorespecific,granularcomponents,movingfrom83constituentfactorsto115.Forexample,inplaceofasinglequestiononvaluationqualityin2012,wehavebrokenitintothreequestionsin2014:theindependenceofthird-partyappraisers;theextentmarket-basedappraisalmethodsareused;andthecompetitioninthemarketforthird-partyappraisals.Thesechangesallowus to drill deeper into where markets differ and to reduce measurement error by making the overall scoring less reliant on any single factor.

Quantitative Factors56ofthe115scoringfactors,accountingfor35.5%oftheoverallfactorweighting,arequantitative.Thesequantitativefactors,addedtotheIndexin2012,includethenumberofyearsfundamentals’dataseries(likevacancy)havebeenavailable,themarketcoverageofpropertyreturnindices,andthefreefloatofpubliclistedrealestatesecuritiesmarkets.Wescoremostofthesequantitativefactorsonacontinuousscalefrom1to5,with 1.00 indicating very high transparency. For datapoints on performance measurement indicators, such as the marketcoverageofpropertyreturnindices,wehavesetthetopscoreof1equaltothe90thpercentileobservationin2012.Thecut-offthresholdstoqualifyasa‘highlytransparent’markethavebeenfixedattheir2012level,sothat markets can improve to higher tiers over time. For datapoints on market fundamentals data, such as the lengthofamarket’sofficevacancyseries,wehavesetthetopscoreof1equaltoatimeseriesof30yearsormore, which we view as the ‘gold standard’.

ResearchersatJLLandLaSalleInvestmentManagementhavecollecteddetaileddataontheavailablemarketfundamentals’time-seriesforeachoffivepropertytypes:office,retail,industrial,residentialandhotels.Wehaveincluded all available data series, not only those produced by JLL. The market fundamentals data is based on conditionsintheprincipalcityofeachcountry,withtheexceptionsofBrazil,China,IndiaandRussia,wheretheIndex differentiates between primary, secondary and tertiary cities.

Dataonproperty-levelreturnsindicesisfromInvestmentPropertyDatabank(IPD),NCREIFandotherindustryassociations.DataonpubliclistedrealestatecomesfromtheEuropeanPublicRealEstateAssociation(EPRA),Bloomberg,NAREITandtheLaSalleInvestmentManagementSecuritiesgroup.Fund-levelindexdataisprimarilyfromINREV,NCREIF,IPDandANREV.

Global Real Estate Transparency Index: Technical Note

JLL 57

Qualitative Survey FactorsThebalanceofthescoringfactors,totalling59datapoints,arequalitativesurveyquestionsscoredbylocalJLLandLaSalleInvestmentManagementteams.Foreach,localresearchteamsareprovidedwithadetailedrubricoffiveanswerchoices,rangingfrom1–mosttransparent–to5–opaque.Basedonwheretheirmarketfitswithinthatrubricofoptions,localexpertsassignascore.RespondentsconsultJLL’slocalaccounting,finance,assetmanagementandlegalexpertstoinformtheirresponsestoquestionsinthosetopicareas.

Scoreswithineachregionarethenreviewedbyregionalandthenglobalco-ordinatorstoensureobjectivityandrigour.Globalandregionalreviewersinterrogatecountryteams’responsesandchallengeteamstojustifychangesinquestionscoresfrompriorupdates.Thereviewprocess,highlevelofdetailprovidedintheanswerchoices,andimprovedquestiongranularityreducesubjectivebiasinscoring,andallcontributorsstriveforimpartialityintheir responses.

Compiling the Composite Transparency IndexWe group the 115 individual transparency measures into 13 topic areas, summarised in the table at the end of this note.ThesetopicareasaregroupedandweightedintofivebroadSub-Indices:

•PerformanceMeasurement–25%•MarketFundamentals–20%•GovernanceofListedVehicles–10%•RegulatoryandLegal–30%•TransactionProcess–15%

TheTransparencyIndexscoresrangeonascalefrom1to5.Acountryormarketwithaperfect1.00scorehastotalrealestatetransparency;acountrywitha5.00scorehastotalrealestateopacity.Marketsarethenassignedtooneoffivetransparencytiers.ThethresholdsforthesetiersarebasedonJenks’NaturalBreaksclassification.2012scoresareusedtofixthethresholds,sothatmarketscanmovebetweentiersastransparencychangesovertime,eveniftheirrelativepositiondoesnotchange.Thisalgorithmfindsthecut-offsthatminimisewithin-groupvarianceandmaximisebetween-groupdifferences.Wecreate10groupsusingthismethodandthenaggregatethemintofivetierswiththefollowingthresholds:

• Tier1:HighlyTransparent TotalCompositeScore:1.00–1.70• Tier2:Transparent TotalCompositeScore:1.71–2.45• Tier3:Semi-Transparent TotalCompositeScore:2.46–3.46• Tier4:LowTransparency TotalCompositeScore:3.47–3.97• Tier5:Opaque TotalCompositeScore:3.98–5.00


Transparency Index Time Series2014 marks the eighth edition of the JLL Global Real Estate Transparency Index. Since its inception in 1999, the TransparencyIndexhasevolvedandbeenrefinedtoreflectthechangingdemandsofcross-borderinvestorsandcorporate occupiers.

In2008,newquestionswereaddedtoembracetheperspectiveofcorporateoccupiersrelatingtooccupierservicechargesandfacilitiesmanagement.Questionsconcerningdebtfinancingandthefrequencyandcredibilityofproperty valuations were also added.

In2010,theexistingquestionsregardingdebtfinancingweresubstantiallyrevisedtomoreappropriatelyreflectthe key issues of debt transparency, relating to the availability of information on commercial real estate debt and theroleofbankregulatorsinmonitoringcommercialrealestatelending.Therewerealsorevisionstoquestionsonthetransactionprocesscoveringpre-saleinformationandthebiddingandnegotiatingprocess.

In2012,majoradditionsweremadetoincorporateagreaternumberofquantitativemeasuresofinvestmentperformanceandmarketfundamentals.Ineachofthesetwoareas,generalquestionsweredividedintomanydifferentgranularquestionstobettercapturenuanceddifferencesbetweenmarkets.Inall,50newfactorswereaddedbydecomposinggeneralquestionsintomoredetailedquestions.

In2014,wecontinuedtodecomposegeneralquestionsintomorespecificones,resultingintheadditionof32new factors. These additions were spread across categories, as shown in the table below. For example, rather thanaskingasinglegeneralquestionontaxfairnessaswedidin2012,weincludefourquestionsontaxin2014,covering the consistency of enforcement and predictability of tax rates for both domestic investors and foreign investors.

Factor Comparison Number of Factors in 2012 Number of Factors in 2014DirectPropertyIndices 5 6Listed Real Estate Securities Indices 5 7Unlisted Fund Indices 2 3Valuations 2 4MarketFundamentalsData 47 47Financial Disclosure 2 4CorporateGovernance 2 3Regulation 6 13LandandPropertyRegistration 3 7Eminent Domain 2 3Debt Regulation 2 7Sales Transactions 3 5Occupier Services 2 6

InpreviousTransparencyIndices,wecalculateda‘Composite’scoreforthecurrentupdateandanadditional‘Classic’scoretomakecomparisonsovertime.Ratherthancontinuingtocalculatetwoparallelindices,inthisupdate we have cleaned the historical data to make a single time series, from 2004 to 2014. For factors added over time, we have included them historically where available. Where no historic data is available, we have extended back 2012 data so that changes in the added factors do not drive movement in the historic scores.

JLL 59

Real Estate Environmental Sustainability Transparency IndexAseparateRealEstateEnvironmentalSustainabilityTransparencyIndexhasbeendevelopedforasubsetof33countries. The Index is based on a survey completed by JLL Energy and Sustainability Services experts in each country.Thesurveycomprisessevenquestionsrelatingtodifferentcomponentsofenvironmentalsustainability,covering:

1. FinancialPerformanceIndicesforGreenBuildings2. Green Building Rating Systems3. CarbonReportingFrameworks4. Energy Benchmarking Systems5. EnergyEfficiencyRequirementsforNewBuildings6. EnergyEfficiencyRequirementsforExistingBuildings7. GreenLeaseClauses

Foreachquestion,ourexpertteamswereprovidedwithadetailedrubricofthreeanswerchoices,rangingfrom1–mosttransparent–to5–opaque.Basedonwheretheirmarketfitswithinthatrubricofoptions,respondentsassignedascore.Thequestionswereansweredwithrespecttocommercialofficerealestate.AnoverallRealEstateEnvironmentalSustainabilityTransparencyIndexwascalculatedbyequallyweightingthescoresforthesevenquestions.


Global Real Estate Transparency Index, Transparency Components


Sub-Index 13 Topics Factors (115 Total)Existence of Direct Property IndexReliability of the Index and Extent to which it is Used as a Benchmark of PerformanceType of Index (Valuation-based vs. Notional) Length of Direct Property Level Returns Index Time SeriesSize of Institutional Invested Real Estate MarketMarket Coverage of Direct Property IndexDominant Type of Listed RE Securities (i.e. Long-term Holders of Real Estate vs. Homebuilders and Conglomerates) Use of Listed Real Estate Securities Data on the Real Estate MarketYears Since the First Commercial Real Estate Company was ListedValue of Public Real Estate Companies as % of GDPExistence of a Domestic Listed Real Estate Index and Its Use as a BenchmarkExistence of an International Listed Real Estate Index and Its Use as a Benchmark Length of Public Real Estate Index Time SeriesExistence of a Domestic Fund Index and Its Use as a BenchmarkExistence of International Fund Index and Its Use as a BenchmarkLength of Unlisted Fund Index Time SeriesIndependence and Quality of Third-Party AppraisalsUse of Market-based Appraisal ApproachesCompetition in the Market for Valuation ServicesFrequency of Third-Party Real Estate Proposals Existence and Length of Time Series on Property Rents (Office, Retail, Industrial, and Residential)Existence and Length of Time Series on Take-up/Absorption (Office, Retail, Industrial, and Residential)Existence and Length of Time Series on Vacancy (Office, Retail, Industrial, and Residential)Existence and Length of Time Series on Yields/Cap Rates (Office, Retail, Industrial, Residential, and Hotels)Existence and Length of Time Series on Capital Values (Office, Retail, Industrial, Residential, and Hotels)Existence and Length of Time Series on Investment Volumes (Office, Retail, Industrial, Residential, and Hotels)Existence and Length of Time Series on Revenue per Available Room for HotelsExistence of a Comprehensive Database of Individual Buildings (Office, Retail, Industrial, Residential, and Hotels)Existence of a Comprehensive Database of Leases (Office, Retail, Industrial, Residential, and Hotels)Existence of a Comprehensive Database of Property Transactions (Office, Retail, Industrial, Residential, and Hotels)Stringency of Accounting StandardsLevel of Detail in Financial StatementsFrequency of Financial StatementsAvailability of Financial Reports in EnglishManager Compensation and IncentivesUse of Outside Directors and International Corporate Governance Best PracticeFree Float Share of the Public Real Estate MarketExtent to which the Tax Code is Consistently Applied for Domestic InvestorsExtent to which Real Estate Tax Rates are Predictable for Domestic InvestorsExtent to which the Tax Code is Consistently Applied for Foreign InvestorsExtent to which Real Estate Tax Rates are Predictable for Foreign InvestorsExistence of Land Use Rules and ZoningPredictability of Changes in Land Use and ZoningEnforcement of Land Use Rules and ZoningExistence of Building Codes and Safety Standards for BuildingsEnforcement of Building Codes and Safety Standards for BuildingsSimplicity of Key Regulations in Contract LawEfficiency of the Legal ProcessLevel of Contract Enforceability for Domestic InvestorsLevel of Contract Enforceability for Foreign InvestorsExistence of Land RegistryAccessibility of Land Registry Records to PublicAvailability of Title Insurance Accuracy of Land Registry RecordsCompleteness of Land Registry Records on OwnershipCompleteness of Public Records on Transaction PricesCompleteness of Public Records on Liens and EasementsNotice Period Given for Compulsory PurchaseFairness of Compensation to Owners in Compulsory PurchaseAbility to Challenge Compulsory Purchase in Court of LawAvailability of Data on Real Estate Debt OutstandingAvailability of Data on Maturities and Originations of Real Estate LoansDepth and Length of Real Estate Debt DataData on Delinquency and Default Rates of Commercial Real Estate Loans Regulatory Requirements for Lenders to Monitor Property Collateral Values and Cash Flow Regulatory Requirements for Lenders to Carry Out Appraisals Strength of Regulatory EnforcementQuality and Availability of Pre-Sale InformationFairness of the Bidding ProcessConfidentiality of the Bidding ProcessProfessional and Ethical Standards of Property AgentsEnforecement of Professional and Ethical Standards of Property AgentsProviders of Property Management Services Known to OccupiersService Expectations for Property Management Clear to OccupiersAlignment of Occupier and Property Manager InterestsFrequency of Service Charge ReconciliationAccuracy and Level of Detail in Service Charge ReportsAbility for Tenants to Audit Landlord's Accounts and Challenge Discrepancies

Performance Measurement

Regulation

Land and Property Registration

Eminent Domain

Regulatory and Legal

Debt Regulation

Direct Property Indices

Listed Real Estate Securities Indices

Unlisted Fund Indices

Valuations

Sales Transactions

Occupier Services

Transaction Process

Market Fundamentals Market Fundamentals Data

Governance of Listed Vehicles

Financial Disclosure

Corporate Governance

JLL 61JLL 61

JLL 63

Global Jeremy KellyJLL, [email protected]+44 20 3147 1199

Jacques GordonLaSalleInvestmentManagement,[email protected]+1 312 228 2760

Anne KoemanLaSalleInvestmentManagement,[email protected]+44 20 7852 4520

Dan MahoneyLaSalleInvestmentManagement,[email protected]+1 312 228 2054

AmericasJosh GelorminiJLL,[email protected]+1 312 228 2060

Manuel ZapataLaSalleInvestmentManagement,[email protected]+52 55 5980 8090

Asia PacificJane MurrayHeadofResearch,APAC +852 2846 [email protected]

Myles HuangJLL,[email protected]+852 2846 5793

Global Real Estate Transparency Index Team

Paul GuestLaSalleInvestmentManagement,[email protected]+65 6494 3599

EuropeOliver KummerfeldtJLL, [email protected]+44 203 147 1170

Middle East and AfricaCraig PlumbJLL, [email protected]+971 4 436 2492

Tom CarrollJLL, [email protected]+44 20 3147 1207

SustainabilityFranz JenoweinJLL, [email protected]+44 20 3147 1752

ContributorsContributing Authors: DaliaAkhras,TomCarroll,JoshGelormini,MylesHuang,FranzJenowein,AnneKoeman,OliverKummerfeldt,DanMahoney,MatthewMcAuley,CraigPlumb,MashaSeymour,Richa Walia

Editors:RosemaryFeenan,JacquesGordon,PaulGuest,JeremyKelly,JaneMurray

COPYRIGHT©JONESLANGLASALLEIP,INC.2014.Thisreporthasbeenpreparedsolelyforinformationpurposesanddoesnotnecessarilypurporttobeacompleteanalysisofthetopicsdiscussed,whichareinherentlyunpredictable.Ithasbeenbasedonsourceswebelievetobereliable,butwehavenotindependentlyverifiedthosesourcesandwedonotguaranteethattheinfor-mationinthereportisaccurateorcomplete.Anyviewsexpressedinthereportreflectourjudgmentatthisdateandaresubjecttochangewithoutnotice.Statementsthatareforward-lookinginvolveknownandunknownrisksanduncertaintiesthatmaycausefuturerealitiestobemateriallydifferentfromthoseimpliedbysuchforward-lookingstatements.Advicewegivetoclientsinparticularsituationsmaydifferfromtheviewsexpressedinthisreport.Noinvestmentorotherbusinessdecisionsshouldbemadebasedsolelyontheviewsexpressedinthisreport.

JLL Regional Headquarters

Chicago200 East Randolph DriveChicago,IL60601USA+1 312 782 5800

London30 Warwick StreetLondonW1B5NHUnited Kingdom+44 20 7493 4933

Singapore9RafflesPlace#39-00RepublicPlazaSingapore 048619+65 6220 3888

AspecialthanksgotothefollowingorganisationsthathavehelpedJLLcompletethe2014 Global Real Estate Transparency Index:

• AbacusAngola–www.abacusangola.com• ApexProperties,Botswana–www.apexproperties.co.bw• AkershusEiendomAS,Norway–www.akershus-eiendom.no• AthensEconomics,Greece–www.athenseconomics.gr• BluePointConsultantsLtd.,CaymanIslands–bluepointproperty.com• EmergingMarketsConsultants–www.emergemarkets.com• Mr.EphraimKMunshifwa,DeptofRealEstateStudies,CopperbeltUniversity,Zambia–[email protected]• GonzalezCalvillo,S.C.,Mexico• KPMG,CaymanIslands• M.A.D.InvestmentSolutions,Mongolia–www.mad-mongolia.com• RECRealEstateConsultancy,Mozambique• Sadolin&Albæk,Denmark–www.sadolin-albaek.dk

global real estate transparency index

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