In JLL’s 2016 Global Real Estate Transparency Index, Japan moved up seven spots in the global ranking table to 19th. Robust investor interest, both domestic and foreign, led to increased demand for real estate information and encouraged more extensive tracking of property sectors. The expansion of the J-REIT industry was a vital source of new information, in particular the move into real estate asset classes outside of the office sector (e.g. healthcare).
Although Japan made positive strides, many hurdles remain that need to be addressed for it to move into the elite ‘Highly Transparent’ group. The chart below shows how Japan fairs against the most transparent countries in the thirteen topic areas, with the right side highlighting areas where more headway needs to be made. ‘Occupier Services’ and ‘Market Fundamentals’ show the biggest disparity as there is often a lack of transparency or detailed information related to services charges and property-level data.
Chart 1: Real estate transparency by topic area, 2016
Source: JLL, LaSalle Investment Management
If we look at a comparison with Asia Pacific’s largest economy, China, we can see that there is a considerable gap in the overall ranking between the two countries (19th vs. 33rd), as most would expect, with Japan scoring higher in four of the five major sub-indexes. However, ‘Market Fundamentals’ shows up again as an area in which Japan falls behind. The availability of information on individual leases and property-level transactions is often quite limited or difficult to come across, even in a large modern city like Tokyo.
Chart 2: Shanghai & Tokyo real estate transparency by sub-index
Source: JLL, LaSalle Investment Management
Japan has made notable progress but cannot rest on its past performance as the ‘Highly Transparent’ markets continue to push the envelope on transparency and set new benchmarks. Both public and private sector support is essential for continued progress, but the development of the ‘PropTech’ sector could provide an avenue for Japan’s real estate industry to quickly improve access to, and availability of, real estate data. In many markets around the world, companies have been quick to adopt the use of technology – from drones being used to collect building information (e.g. floor area) to utilising ‘Big Data’ to compile information into central databases. With Japan long regarded as a technological leader, ‘PropTech’ could be one way to improving real estate transparency.
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