Where transparency broadens, real estate capital flows and market change follows. JLL now reports this trend has finally made its way to one of the "final frontiers" of commercial real estate: Sub-Saharan Africa (SSA), which has claimed five of the global top 10 spots for greatest improvements in real estate market transparency: Kenya, Ghana, Nigeria, Zambia and Mauritius. With an influx of corporate occupiers, the region's top-rising economies are moving to encourage more global real estate interest.
Across the globe, key drivers of transparency improvement include:
Governments' recognition that poor transparency affects investment and quality of life
Media spotlight on corruption, scandals and building accidents
A rise in cross-border investments fuelled by more robust real estate markets
Millennials' expectations, pushing "Open Data" and sustainability practices up the agenda
According to the 2014 release of JLL and LaSalle Investment Management's bi-annual Global Real Estate Transparency Index, SSA countries are in the very early stages of building and reforming their commercial real estate industry infrastructure; their responses to outside interest, however, mirrors top improvers from previous surveys, such as the MIST (Mexico, Indonesia, South Korea and Turkey) countries, which dominated the 2012 Global Top 10, and BRICs (Brazil, Russia, India and China) in 2010.
"The top improvers in each cycle generally correlate with a surge in foreign direct investment, as investors push through transparency reforms and because governments quickly realize that poor transparency will deter continued inward investment," said Jeremy Kelly, Director, JLL Global Research. "Kenya is a great example. It saw a spike in FDI projects in the last year, and not coincidentally, it made the greatest leap in real estate industry transparency this year."
Kenya has initiated a number of real estate industry infrastructure improvements, including land record digitization, enhanced property market research and analysis, and the introduction of a REIT framework for the country. These measures propelled Kenya to 55th place in the Transparency Index from 67th in 2012.
The cross-border catalyst
Whether in Africa or elsewhere, cross-border activity is a key driver of improvement in market transparency. In Latin America for example, strongest gains have been achieved in Colombia and Peru, which are key targets of international real estate capital. Progress is generally moving at a slow - though still forward - pace in other parts of the world. In Asia Pacific, none of the regional players made the Top 10 improvers list this year as compared to three in 2012, largely due to limited improvement in market data availability and slow progress in policy reforms. "The same applies to other top improvers in previous cycles, like Turkey, South Africa, Dubai and Poland, though the reasons for this vary considerably," said Craig Plumb, Head of MENA Research, JLL. "In Poland, the sluggish pace of transparency change could be attributed to the fact that many cross-border investors have demonstrated overall satisfaction with its current level of transparency, whereas in the MENA region, promising signs of reform leading up to the global financial crisis have not been maintained at the same pace, with the notable exception of Qatar."
Only in a handful of markets has transparency actually worsened. These include Ukraine, highlighting how political uncertainty can quickly undermine transparency levels.
Nowhere is the relationship between market sophistication and incremental change more apparent, however, than the top tier of the Transparency Index. Highly Transparent markets have had the types of reforms that may propel other countries from the Low to Semi-Transparent rung for many years. As a result, progress at the highly transparent end of the scale, which remains dominated by Anglophone markets, largely comes down to innovation and technological developments such as open-data initiatives.
"These kinds of innovations will be critical catalysts of change in real estate transparency moving forward. We can count on that, since the digital information revolution is being fuelled by a young, hyper-connected, information hungry, highly transient workforce generation," Jacques Gordon, Global Strategist, LaSalle Investment Management, concluded.