Transparency key to capital flows

July 7, 2016 / By  

JLL has just released an update of our global transparency index which looks at real estate markets all over the world.  It covers 109 markets and in its 17th year is the industry benchmark for real estate transparency globally.  My research colleague Lee Fong reviewed the AP results in his blog.

While the top results of this 9th edition of the global transparency survey may not be surprising the number of markets that the study covers and what that means for real estate investors remains as important as ever.  The number of countries in Africa and Latin America the index covers has expanded and this year we have even included Iran due to investor and corporate demand keen to understand this new opportunity.

As the amount of capital entering real estate continues to expand the ability to understand a greater number of markets becomes paramount.  This is not just to look at emerging economies or geographies, but to also look for new opportunities in well understood and almost fully transparent markets.  The needs of the capital are varied, however the need for accurate and timely information will never change and that is why the index remains so important for all types of real estate investors.

The extent to which real estate markets remain attractive to capital, both new and old, was highlighted in some further analysis JLL undertook last month on the Japanese institutional investment market.  While they were major international players in the 1980’s, Japanese capital has been eclipsed in this cycle by other Asian investors such as the Korean pension funds, Chinese insurance companies and private equity.  Japanese conglomerates and developers have remained active in global investment and development markets but the institutional investors have remained on the sidelines and only recently announced their intentions to look at real estate both domestically and internationally.

Using fairly conservative metrics JLL estimated that the largest institutional investors in Japan could allocate over US$500 billion to direct real estate over the next decade or so.  Japanese institutions are some of the biggest money managers in the world, but have maintained a home bias for stocks and bonds for many years.  While we don’t expect the flood gates to open immediately there are definite signs of progress and much of their decision making will be based on which markets they consider to be the most transparent.

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