transparency metrics for real estate investors

COVID-19 expected to drive transparency metrics

Canada retains high global ranking for insight available to real estate investors
Tuesday, July 21, 2020

Canada’s expanding breadth of transparency metrics provides real estate investors with some of the best available insight into the financial performance, environmental, social and governance (ESG) factors, digital adeptness, market oversight and regulatory compliance of their holdings. Ranked fifth out of 99 countries, Canada once again places in the top tier of “highly transparent” nations in the newly released 2020 edition of the JLL/LaSalle Global Real Estate Transparency Index, plotting the comprehensiveness, consistency and accuracy of reporting requirements and options.

“The 2020 Index is launched at a time of massive economic and societal disruption. During times of such uncertainty, the need for transparent processes and accurate, timely data becomes more important than ever,” says Christian Ulbricht, JLL’s chief executive officer. “The current disruption may well force the pace of change. We fully expect the mass adoption of technology, together with advancement in data availability and sensor technology, to accelerate the integration of proptech, helping to boost real estate transparency. The real estate industry is now harnessing huge amounts of data, but we will need to ensure that privacy and security are protected by ethical behaviour.”

The United Kingdom, United States, Australia and France comprise the top four of the highly transparent category. New Zealand, the Netherlands, Ireland, Sweden and Germany also join Canada on the list of top-tier countries defined as the “world’s leading investment destinations.” That’s based on a 210 distinct measures, grouped into six variously weighted categories to derive a score on a scale of 1 to 5, with 1 representing total transparency.

With a composite score of 1.51, Canada’s rate of improvement since 2018 is noted for outpacing the global average. Scores within the highly transparent group of nations range from the U.K.’s 1.31 to Germany’s 1.93.

“These 10 markets are pushing the boundaries of transparency through technology, a focus on sustainability, anti-money laundering regulations and enhanced tracking of alternatives sectors,” the accompanying report submits.

The next “transparent” tier of 22, with composite scores from 1.96 to 2.64, is largely made up of European and Asian nations, along with South Africa. After the United States and Canada, Mexico is next highest ranked country from the Americas, with a composite score of 2.83 translating into “semi-transparent” status. However, Costa Rica is given special commendation for the most improved score among participating countries from the Americas, with a 2020 composite score of 3.64 placing it “on the cusp of entering the semi-transparent tier”.

Sustainability factors, which account for 10 per cent of the total score, contribute to improved results in this biennial index update, with one third of countries registering better scores than in 2018. Nevertheless, the report’s authors express disappointment that scores for sustainability transparency are generally lower than the other five categories — performance measures; market fundamentals; governance of listed vehicles; regulatory and legal; and transaction process.

Canada is among the top six for sustainability transparency. It earns special mention for energy-use benchmarking, ESG guidelines, proptech uptake and as one of just four countries with financial performance metrics for green buildings (along with France, Australia and South Africa).

Across all global participants, average transparency scores have improved by 1.1 per cent since 2018. That’s progress, but a more moderate degree of progress than the past four editions of the index — in 2012, 2014, 2016 and 2018 — when scores improved by an average of at least 2 per cent.

In contrast, the 2010 index, following the global financial crisis, recorded the most muted improvement in the average score, at 0.7 per cent, of the past 14 years. With 2020 surveys having been completed in March, just before COVID-19-related shutdowns and associated stresses, analysts are already contemplating what the 2022 index may reveal.

“The COVID-19 crisis is shining a bright light on the transparency of real estate’s legal and regulatory systems. New rules to establish how social distancing, virus testing and contact tracing all intersect with existing property and privacy laws are being created in a compressed time frame. Sorting out these challenges still lies ahead in the second half of 2020 and in 2021,” the report notes.

“The COVID-19 pandemic could help to fast-track digitization and stimulate innovation in the use of technology due to the need for accurate and just-in-time data to keep track of activity, especially relating to health, mobility and space usage,” it projects. “The pandemic is leading to an acceleration in new types of non-standard and high-frequency data being collected and disseminated, which is taking transparency to new levels due to its near-real-time nature.”

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