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THE CHANGING REAL ESTATE MARKET TRANSPARENCY IN
THE EUROPEAN REAL ESTATE MARKETS
PROFESSOR GRAEME NEWELL
University of Western Sydney([email protected])
June 2015
• Significance of real estate transparency
• Focus: Europe
• JLL Real Estate Transparency Index
• Transparency analysis- JLL - WEF - TI
• Are European real estate markets becoming more transparent ???
• Real estate investment implications
PURPOSE OF PAPER
GLOBAL INVESTABLE UNIVERSE OF REAL ESTATE
Source: CBRE (2011)
PLAYERS IN THE GLOBAL REAL ESTATE INVESTMENT LANDSCAPE
Local International
REITs/PCs Unlisted RE funds
Private equity funds Pension funds
Sovereign wealth funds
Insurance companies
High wealth individuals
• Brookfield : #1
• CBRE Global Investors : #2
• Blackstone : #3
• TIAA Henderson : #4
• AXA : #5
• UBS : #6
• LaSalle : #10
• Credit Suisse : #12
• Deutsche : #14
• M & G : #16
• APG : #17
MAJOR REAL ESTATE INVESTMENT MANAGERS
CONTEXT: EUROPEAN REAL ESTATE MARKET TRANSPARENCY
• Increased REITs
• Increased regulations
• Increased players @ RE
• Increased RE information, data
• Increased RE services
• Increased RE market sophistication
• Impact on European RE transparency???
PREVIOUS TRANSPARENCY RESEARCH : MARKETS
• Newell : PRPRJ : 2008
• Chin et. al : JREPM : 2006
• Brounen et. al : JREPM : 2007
• Lieser and Groh : JREPM : 2011
• Various market “maturity” papers;e.g: Keogh and D’Arcy; Ke and Sieracki
PREVIOUS TRANSPARENCY
RESEARCH : LISTED• Eichholtz et. al: JREFE: 2011
• Newell and Lee: JPIF: 2012
• An et. al: REE: 2011
• Lecomte and Ooi: JREFE: 2013
• Issues: Corporate governance, disclosure
• Established 1999
• 2014 = 8th edition; each 2 years
• 102 markets assessed; tiers; growth
• Levels of transparency (5)- Highly transparent (9) -Transparent (19)
- Semi-transparent (33) - Low transparency (21)
- Opaque (20)
• Real estate transparency index: scored 1.0 – 5.0- 1.0 = high transparency
- 5.0 = low transparency
JLL REAL ESTATE TRANSPARENCY INDEX
• 5 transparency sub-indices: contributions- Performance measurement : 25%
- Market fundamentals : 20%
- Governance of listed vehicles : 10%
- Regulatory and legal : 30%
- Transaction process : 15%
• 13 transparency topics
• 115 transparency measures- Quantitative (56) - Qualitative (59)
- Market data, survey information
JLL REAL ESTATE TRANSPARENCY INDEX
• Developed (21) ; Emerging (81)
• Americas (20) ; Europe (33) ; Asia-Pacific (21) ;
Middle East/ North Africa (16) ; Sub-Sahara Africa (12)
JLL REAL ESTATE TRANSPARENCY INDEX
TRANSPARENCY SUB-INDICES
REAL ESTATE TRANSPARENCY MAP
GLOBAL REAL ESTATE TRANSPARENCY INDEX: 2014
TRANSPARENCY LEVELS : 2014
Level # %
High transparency
9 8.8%
Transparent 19 18.6%
Semi-transparent
33 32.4%
Low transparency
21 20.6%
Opaque 20 19.6%
Total 102
#1 : UK : 1.25
#2 : US : 1.34
#3 : Australia : 1.36
#4 : New Zealand : 1.44
#5 : France : 1.52
#6 : Canada : 1.52
#7 : Netherlands : 1.57
#8 : Ireland : 1.62
#9 : Finland : 1.69
HIGHLY TRANSPARENT REAL ESTATE MARKETS
#93 : Pakistan : 4.25
#94 : Belarus : 4.29
#95 : Angola : 4.36
#96 : Honduras : 4.41
#97 : Iraq : 4.45
#98 : Ethiopia : 4.46
#99 : Mongolia : 4.47
#100 : Myanmar : 4.48
#101 : Senegal : 4.52
#102 : Libya : 4.63
OPAQUE REAL ESTATE MARKETS
• High transparency (5/9): UK (1), France (5), Netherlands (7), Ireland (8), Finland (9)
• Transparent (13/19): Switzerland (10), Sweden (11), Germany (12), Belgium (15), Denmark (16), Poland (17), Spain (18), Norway (19), Austria (21), Italy (22), Portugal (23), Czech Republic (24), Hungary (25)
• Semi-transparent (8/33): Romania (30), Israel (31), Slovakia (32), Greece (33), Turkey (34), Russia – Tier 1 (37), Croatia (46), Russia – Tier 2 (59)
• Low transparency (5/21): Slovenia (62), Serbia (65), Bulgaria (66), Russia – Tier 3 (70), Ukraine (74)
• Opaque (2/20): Kazakhstan (84), Belarus (94)
EUROPEAN REAL ESTATE MARKET TRANSPARENCY: 2014
• High transparency : UK (1.25), France (1.52), Netherlands (1.57), Ireland (1.62), Finland (1.69)
• Transparent : Switzerland (1.73), Sweden (1.79), Germany (1.79), Belgium (1.92), Denmark (1.96), Poland (2.02), Spain (2.05), Norway (2.07), Austria (2.10), Italy (2.10), Portugal (2.18), Czech Republic (2.20), Hungary (2.21)
• Semi-transparent : Romania (2.56), Israel (2.63), Slovakia (2.66), Greece (2.71), Turkey (2.72), Russia – Tier 1 (2.82), Croatia (3.00), Russia – Tier 2 (3.37)
• Low transparency : Slovenia (3.47), Serbia (3.55), Bulgaria (3.55), Russia – Tier 3 (3.63), Ukraine (3.71)
• Opaque : Kazakhstan (3.98), Belarus (4.29)
EUROPEAN REAL ESTATE MARKET TRANSPARENCY: 2014
TRANSPARENCY LEVELS: 2014
Category Average transparency
Transparency levels
High transparency(1.00 - 1.70)
1.48 1.25 – 1.69
Transparent(1.71 – 2.45)
2.04 1.73 – 2.44
Semi-transparent(2.46 – 3.46)
3.00 2.55 – 3.44
Low transparency(3.47 – 3.97)
3.69 3.47 – 3.97
Opaque(3.98 – 5.00)
4.27 3.98 – 4.63
TRANSPARENCY ANALYSIS: 2014Category Average transparency
All 3.08
Developed 1.75
Emerging 3.42
Americas 3.35
Asia-Pacific 2.81
Europe 2.50
MENA 3.81
Sub-Sahara Africa 3.72
TRANSPARENCY ANALYSIS: 2014
CategoryAverage
transparencySpread
(Dev. vs Emerg.)
Asia-Pacific:DevelopedEmerging
1.743.14
1.40
Europe:DevelopedEmerging
1.803.01 1.21
AmericasDevelopedEmerging
1.433.56 2.13
#1 : Romania : 2.96 2.56
#2 : Portugal : 2.54 2.18
#3 : Ireland* : 1.96 1.62
#4 : Hungary : 2.53 2.21
#5 : Slovakia : 2.90 2.66
#6 : Serbia : 3.78 3.55
#6 : Belarus : 4.52 4.29
#8 : Israel : 2.85 2.63
#9 : Croatia : 3.16 3.00
#10: Belgium : 2.07 1.92
EUROPE TRANSPARENCY: TOP IMPROVERS: 2012 - 2014
* : improved real estate transparency level
#1 : Nigeria
#2 : Peru*
#2 : Colombia
#4 : Qatar*
#5 : Zambia
#6 : Ghana
#7 : Romania
#8 : Portugal
#9 : Jordan
#10 : Ireland*
* : improved real estate transparency level
GLOBAL TRANSPARENCY : TOP IMPROVERS: 2012 - 2014
#1 : Turkey*: 3.75 2.72
#2 : Croatia: 3.42 3.00
#3 : Romania: 2.92 2.56
#4 : Poland: 2.37 2.02
#5 : Hungary*: 2.50 2.21
#6 : Belarus: 4.53 4.29
#7 : Switzerland: 1.87 1.73
#8 : Czech Republic: 2.32 2.20
#9 : Greece: 2.79 2.71
#10 : Kazakhstan: 4.04 3.98
* : improved real estate transparency level
EUROPE TRANSPARENCY: TOP IMPROVERS: 2008 - 2014
#1 : Turkey*
#2 : China – Tier 3*
#3 : Vietnam
#4 : Indonesia*
#5 : China – Tier 2 *
#6 : China – Tier 1
#7 : Algeria
#8 : Taiwan
#9 : India – Tier 3*
#10 : Brazil*, India – Tier 2, India – Tier 1
* : improved real estate transparency level
GLOBAL TRANSPARENCY: TOP IMPROVERS: 2008 - 2014
#1 : Romania**: 4.71 2.56
#2 : Turkey**: 4.50 2.72
#3 : Poland*: 3.12 2.02
#4 : Russia – Tier 1* : 3.64 2.82
#5 : Czech Republic*: 2.88 2.20
#6 : Portugal*: 2.85 2.18
#6 : Hungary*: 2.88 2.21
#8 : Italy*: 2.73 2.10
#9 : Greece: 3.31 2.71
#10 : Israel: 3.21 2.63
*,** : improved real estate transparency level
EUROPE TRANSPARENCY: TOP IMPROVERS: 2004 - 2014
#1 : Romania**
#2 : Turkey**
#3 : Indonesia*
#4 : Brazil**
#5 : Abu Dhabi*
#6 : Poland*
#6 : Saudi Arabia*
#8 : India*
#9 : Vietnam*
#10 : Egypt*
#11 : China*
*,** : improved real estate transparency level
GLOBAL TRANSPARENCY: TOP IMPROVERS: 2004 - 2014
• 2012 vs 2014 : 96 markets
• Improved RE transparency- All (96) : 72%
- Asia-Pacific (19) : 79%
- Europe (33) : 73%
- Americas (20) : 55%
- MENA (15) : 73%
- Sub-Sahara Africa (9) : 89%
IS REAL ESTATE TRANSPARENCY IMPROVING ?
• 2004 vs 2014
• USE ALL JLL MARKETS EACH YEAR ? ………. NO
• “ALL YEARS” MARKETS ONLY : 49 markets- Asia-Pacific* : 14 - Europe* : 23
- Americas* : 8 - MENA : 3
- Sub-Sahara Africa : 1
IS REAL ESTATE TRANSPARENCY IMPROVING ?
IS REAL ESTATE TRANSPARENCY IMPROVING ?
Region 2004 2006 2008 2010 2012 2014
All 2.81 2.58 2.40 2.32 2.45 2.37
Asia-Pacific 2.89 2.69 2.66 2.61 2.51 2.43
Europe 2.34 2.26 2.00 1.85 2.14 2.05
Americas 3.06 2.83 2.75 2.73 2.83 2.76
Europe improving
• WEF Global Competitiveness Index- 148 countries
- Rated 1 to 7
• Transparency International Corruption Perception Index- 175 countries
- Rated 1 to 100
RELATED MEASURES
REAL ESTATE TRANSPARENCY AND CORRUPTION
Category R2
All 59.3%
Americas 44.9%
Asia-Pacific 68.9%
Europe 72.3%
MENA 74.0%
Sub-Sahara Africa 72.3%
• Significance of “over – achievers” and “under – achievers”
REAL ESTATE TRANSPARENCY AND GLOBAL COMPETITIVENESS
Category R2
All 64.0%
Americas 77.4%
Asia-Pacific 70.6%
Europe 54.8%
MENA 59.3%
Sub-Sahara Africa 22.1%
• Increased real estate transparency
• Europe
• Investor landscape
• Importance of real estate transparency for RE investors’ decision-making
• Future improvements in real estate transparency : 2016 (?)
- Switzerland ? - Sweden ? - Germany ?
- Romania? - Israel? - Slovakia ?
- Slovenia ? - Serbia ? - Bulgaria ?
REAL ESTATE INVESTMENT IMPLICATIONS
• Regional analyses : Asia – Pacific , Americas
• Transparency drivers : panel analysis
• JLL real estate environmental sustainability transparency index : analysis
- 2014 - 33 countries
FUTURE TRANSPARENCY RESEARCH
REAL ESTATE ENVIRONMENTAL SUSTAINABILITY TRANSPARENCY
INDEX 2014
Source: JLL (2014)
ACKNOWLEDGEMENT
• JLL