Investors like our transparency, JLL survey shows

JLL’s Global Real Estate Transparency Index for 2018 says the global real estate market is gradually becoming more transparent, with 85 per cent of countries surveyed showing an improvement since 2016.

New Zealand ranked seventh on the index in the Highly Transparent’ category, alongside the likes of the Netherlands, Canada, France, the US, Australia and the UK.

Real estate transparency assists investors and corporate occupiers in making informed real estate decisions and aids local government and public bodies in essential planning.

JLL managing director Todd Lauchlan says New Zealand, though ranking extremely well on the Transparency Index, could make headway on sustainability. Our ranking is 19th our lowest ranking section measured in the index.

“Sustainable practices here are voluntary, in contrast to France and Australia where sustainability is being driven through legislation,” says Lauchlan. “If New Zealand was to

Offshore investors account for a large number of New Zealand’s commercial property sales with one of the key drivers being that our commercial property market is transparent and easy to navigate.

head down this track we would see an increase in our ranking, drive a stronger sustainability agenda, and save money.”

Why does transparency matter?

“Highly transparent property markets achieve greater transaction volumes,” explains Lauchlan.

“Offshore investors account for a large number of New Zealand’s commercial property sales with one of the key drivers being that our commercial property market is transparent and easy to navigate.

“Along with increased investment, a transparent market will also experience improved employee wellbeing and business efficiencies. New Zealand has advantages in terms of transaction costs with no capital gains tax or stamp duty that makes net returns to the investor higher than in comparable markets like Australia.”

Lauchlan believes New Zealand is making good headway in transparency, being open to some of the key factors that influence it. “We have systems in place for anti-money laundering; embrace sustainable practices and are starting to explore the benefits of ‘proptech’, the utilisation of technology as a solution to challenges in the real estate sector. Although we aren’t at the top of the game in all these areas, we’re certainly on our way, something recognised by the volume of offshore investors seeking New Zealand commercial property assets.”

Myanmar up

“Asia Pacific as a whole has made the strongest transparency improvements since 2016,” says Dr Megan Walters, head of research, Asia Pacific at JLL.

“This is supported by developments in Myanmar, Macau, Thailand, India and South Korea.”

Myanmar has registered the most significant improvement globally, moving up 15 places to join the “Low Transparency” group. According to the report, the country continues to open up its economy as increasing investor demand translates into greater market intelligence.

South Korea has nudged into the “Transparent” tier, with heightened investor activity pushing improvements in data coverage and a new carbon emissions trading scheme.

India’s reform-driven government has made significant progress in its agenda to improve transparency and reduce corruption. The Real Estate Regulatory Act, implemented in 2017, is a regional highlight. India joins China, Indonesia and Thailand at the top of the ‘Semi-Transparent’ tier.”

“Thailand and Vietnam are both moving towards the cusp of the next tier of transparency. Thailand’s improvement is underpinned by greater regulatory enforcement, the planned introduction of a new property tax system and steps to digitise its land registry. Macau has advanced with a focus on anti-money laundering, resulting in increased monitoring by financial regulators,” says Walters.

Improvements in transparency in some Asian countries have been accompanied by record-breaking commercial real estate investment volumes. In 2017, real estate transactions in the Asia Pacific region reached a record US$149 billion.

Unreported vacancy

One of the biggest threats to transparency is the rapid rise of flexible space. Although this is a positive move for New Zealand’s office market, it can lead to what has been dubbed “hidden vacancy”, which means vacancy, demand and tenant mix along with rental rates can go largely unreported.

“Some of the world’s largest office markets can have unreported vacancy in flexible space that could effectively add 70-90 basis points to vacancy rates. In Auckland, flexible space is a growing at a rapid pace. Although this may influence how our biggest city is seen on the transparency scale, flexible space is one of the key drivers for small to medium sized businesses seeking space in central city areas.

“It also can assist new sectors in entering the market, so has the potential to help grow our transparency in other areas,” says Lauchlan.

Todd Lauchlan