Covid-19 shines light on real estate transparency

Transparency becoming an important barometer of a property market's performance and attractiveness.

July 22, 2020

REAL estate markets across the Asia-Pacific are evolving rapidly in their functionality for people and as a core asset class for global investors.

Increasingly, in geographies like South-east Asia and more established markets like Singapore, transparency is becoming a more important barometer of a real estate's market performance and attractiveness.

As things stand, pressure exists from investors, businesses and consumers to further improve real estate transparency to compete with other asset classes.

While investment into commercial real estate has inevitably paused to some extent during the pandemic - dropping 32 per cent in the first half of 2020 year-on-year - the overarching trend towards rising allocations to this asset class will continue.

As investors look to allocate more capital into Asia-Pacific's real estate, transparency will become fundamentally more critical, as will the enforcement of robust regulatory frameworks.

The good news is that across South-east Asia, transparency is improving at among the fastest pace globally.

JLL's biennale Global Real Estate Transparency Index illustrates that while transparency has made sizable gains regionally, there are new parameters at work in this sector. More work needs to be done to meet the changing expectations of investors and occupiers.

Singapore, Hong Kong and Japan all sit near the cusp of the "highly transparent" tier as they jockey for the title of Asia's most transparent market.

Singapore has made the most progress over the past two years due to its strengths in government leadership on sustainability issues and its position as a regional hub for property technology (proptech) companies.

This development is especially encouraging in our view. Increasingly, heightened transparency will align with meeting higher expectations about the industry's role in providing a sustainable and resilient built environment in the age of Covid-19.

A more in-depth focus on corporate social responsibility and a growing acknowledgment of the need to create a sustainable built environment bring environmental, social and governance (ESG) considerations into the sector's mainstream. Singapore's real estate market ticks these boxes.

Further afield, the adoption of voluntary sustainability measures has driven much of the improvement across South-east Asia, with green building certification systems now in use in most markets.

Equally important, energy efficiency standards for new or retrofitted buildings and energy benchmarking are common tools in higher-performing countries like Singapore.

Transparency, as we see it, is also fused more with data and the use of innovative proptech platforms, digital tools and Big Data analytics in real estate.

Proptech is changing how real estate data is gathered and analysed, and influencing industry transparency at a regulatory level.

Globally, real estate markets have historically faced various impediments when implementing new technology.

In the past few months, the Covid-19 pandemic has led to an acceleration in new types of non-standard and high-frequency data - especially relating to health, mobility and space usage - being collected and disseminated in near-real-time.

Still, there is considerable room for progress. The fast-tracking of sustainability initiatives and wider-spread adoption of proptech underlines that transparency gains will be driven by both an evolving regulatory landscape and the collective actions for national real estate industries.

Spurred by the impact of the pandemic, it will become crucial for the real estate industry to work more collaboratively with governments and civil society to achieve greater transparency and meet investors' changing expectations.

In South-east Asia's emerging markets, collaboration is raising transparency standards, with Thailand, Vietnam, the Philippines and Indonesia, all among the top global improvers.

Thailand's progress pushes it into the "transparent" tier, with greater regulatory enforcement of lending standards and requirements for more frequent valuations, improved accounting standards and significant public consultation around Bangkok's new land-use plan to be implemented in 2020.

The Covid-19 crisis is shining a bright light on the transparency of real estate's legal and regulatory systems.

Across this region, 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 2021. Still, the considerable gains already made provide optimism that real estate transparency will only head in one direction.

This article was first published in the Business Times