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JLL’s latest transparency index shows China’s Alpha Cities have undergone substantial improvements in transparency, with Shanghai on the cusp of the Index’s ‘Transparent’ Category
SHANGHAI, Jul 5, 2016 – JLL (NYSE:JLL) has launched their Global Real Estate Transparency Index (GRETI) for 2016, measuring the transparency of 109 real estate markets around the world. According to their findings this year, China’s Alpha Cities (i.e. Shanghai and Beijing) have shown the greatest improvements in transparency in the country, led by ‘Market Fundamentals’ and broader moves to improve the legal environment as part of the nation’s anti-corruption campaign. Additionally, strong occupier and investor interest in China’s Alpha Cities has underpinned a rise in demand for real estate data in recent years; Consequently, Shanghai is now on the cusp of joining the ‘Transparent’ category, having progressed steadily from the ‘Low Transparency’ category in 2004 and 2006. However, many areas for future improvement remain across all Tiers, from areas such as corporate governance to compulsory purchase.
One of the main takeaways from this year’s index is the solid improvement registered by China’s Alpha Cities. In particular, Shanghai’s global rank has improved from 35th in 2014 to 33rd in 2016. Over the past decade, direct investment into commercial real estate in Shanghai has increased tenfold, and office net-absorption has grown five-fold.
“Shanghai is a city with a real estate market on the fast track to maturity,” said KK Fung, Managing Director of JLL Greater China. “These past couple of years, the city has seen a structural uplift in real estate investment, development, and corporate activity. Investor interest is also extremely strong, with the city having received a threefold increase in real estate investment since 2010.”
In parallel with increasing investor interest, broader anti-corruption efforts have helped to improve the legal environment for companies in cities across China. The Chinese government’s stepping up of both tax collection efforts and contract enforceability across the country have been key areas of improvement over the past two years. Cities all over the country are making such changes in order to maintain good relationships with large domestic firms – for example, Hangzhou (Alibaba), Qingdao (Haier) and Dalian (Wanda).
Despite these improvements, China’s Tier 1.5 and Tier 2 cities remain in the lower half of the ‘Semi-Transparent’ category, having all seen slightly slower improvements to their scores than the Alpha cities. Since these markets sit in the most dynamic part of the Transparency spectrum, their global rankings have also seen marginal decreases.
“While the government has noticeably strengthened the regulatory measures, which has contributed to greater transparency in Tier 1.5 and Tier 2 real estate markets across China over the past 10 years, there still remain areas for future improvement,” said Joe Zhou, Head of Research for JLL China. “The nation’s Alpha cities – particularly Shanghai – rank in the Top 20 of both for ‘Investment Performance Measurement’ and ‘Market Fundamentals’ sub-indices. The next step is for the government to further increase transparency in the areas of financial disclosure, corporate governance, eminent domain, sales transactions and occupier services.” Once this is achieved, Zhou believes, China’s real estate markets could be on a clear path to the index’s ‘Highly Transparent’ category.
In summary, KK Fung believes that the results of the index include more cause for optimism than scepticism in regards to the future of transparency in China’s urban real estate markets: “The Chinese government has made it clear that they prioritize increased transparency for their cities’ real estate markets. Despite the fact that there is still much room for improvement, we cannot ignore the substantial gains that have been made over the past 5-10 years,” he said. “That enough gives me hope that Shanghai will soon pass over into the ‘Transparent’ category, with other mainland cities soon to follow.”
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JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $58.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, www.jll.com.
JLL has over 50 years of experience in Asia Pacific, with over 33,000 employees operating in 92 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016 and was named number one real estate advisor in Asia at the 2015 Euromoney Real Estate Awards. www.jll.com/asiapacific
In Greater China, the firm was named ‘Best Property Consultancy in China’ at the International Property Awards Asia Pacific 2016, and has more than 2,200 professionals and 14,000 on-site staff providing quality real estate advice and services in over 80 cities across the country. www.joneslanglasalle.com.cn
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