Shanghai and Beijing real estate markets achieve “Transparent” status globally

Beijing, 7 July 2020 - Mainland China’s real estate sector has entered in the transparent category, says JLL, supported by an active property technology (Proptech) sector, increased disclosure requirements for a growing number of listed companies, and more coordinated land-use planning. According to the latest edition of JLL’s (NYSE: JLL) biennial Global Real Estate Transparency Index, Mainland China’s leading cities, Shanghai and Beijing, have moved into the “Transparent” tier for the first time, driven by their status as amongst the most improved markets globally.
The Global Real Estate Transparency Index (GRETI), produced jointly by JLL and LaSalle Investment Management, has been tracking real estate transparency across the globe since 1999. Updated every two years, GRETI is based on a comprehensive survey of the availability and quality of performance benchmarks and market data, governance structures, regulatory and legal environments, transaction processes and sustainability metrics covering 163 cities in 99 countries and territories. All the markets have been classified into five different transparency tiers, with the UK, the U.S. and Australia topping the ranks in the 2020 edition.
Mainland China ranks 32nd in this year’s overall Index, seeing further improvement comparing to its 2018 rank. “Shanghai and Beijing’s elevation to the transparent tier of global real estate mirrors Mainland China’s diversifying economic development and its status as one of the fastest evolving commercial property sectors internationally. As the industry embraces innovative technology and sustainable practices, Mainland China’s real estate is poised to further enhance its standing as one of the most dynamic and attractive markets globally,” says Daniel Yao, Head of Research, China, JLL.
In addition to covering Shanghai and Beijing, the Transparency Survey also extends to several other Mainland China cities – Guangzhou, Shenzhen, Chengdu, Hangzhou, Zhengzhou and Kunming. All Mainland China cities surveyed have seen an improvement on their 2018 ranks, with Hangzhou newly added in 2020. While there remains a disparity in transparency levels, other cities have recorded similar rates of improvement to Shanghai and Beijing.
The transparency improvement in Mainland China has been driven by below key sectors:

• A burgeoning proptech sector: Proptech can improve real estate market transparency by making access to market data more convenient. Meanwhile, the proptech ecosystem has also accelerated several other trends towards greater transparency. Its power has been further reaffirmed during the COVID-19 pandemic. Market participants responded to the outbreak by actively leveraging many of the technologies to ensure safe, health and continuity in their workforces and buildings.
  
  
• Growing engagement with sustainability and wellness: Mainland China is seeing more widespread adoption of sustainability certification and wellness certification. In addition, Mainland China’s exchanges are expected to put in place new measures that require listed firms to include Environmental, Social and Governance (ESG) summaries in their financial reports.
  
  
• Rise in disclosures for listed entities: Mainland China has been further integrated into global capital markets in recent years and attracted higher levels of foreign investment. Firms have been incentivized to list by the prospect of access to liquidity, but at the same time disclosure requirements on exchanges help to shed light on company financials.
  
  
• Greater professionalism in property management: Recent years have seen a rise in the number and influence of professional associations in the property management sector across Mainland China. Associations have proved invaluable channels for sharing best practices, and experts from associations have also been consulted by local governments as part of the process of updating management-related rules.
  
  
• Greater coordination in land-use planning: Zoning maps have become more easily accessible in major Mainland China cities, with greater detail and more frequent updates. Primary land sales are updated frequently in a government database that is available for market participants. In the past year we have witnessed a substantial increase in professional organizations and market players being invited to contribute to meetings of government urban planning bureaus, lessening the distance between official planning and market forces.
  
  
• Increased activity in alternatives sectors: Mainland China has seen significant institutional investment activity in alternative property types, with investors embracing cold chain, co-living and data centers. Data availability in the country’s alternatives sectors can sometimes be limited, but increased investor activity is expected to contribute to a self-reinforcing cycle.

Despite the improvements, market participants are still faced with formidable, often persistent challenges regarding the transparency in Mainland China. In particular, they are looking to see improved transparency in the following areas:

• While less of an issue today than 10 years ago, capital controls remain a hurdle for investors. But we believe this situation will improve as broader financial opening policies pick up pace.
  
  
• Expanding the REIT codes to include a wider spectrum of income-generating commercial real estate will improve liquidity and enhance price discovery of real estate assets.
  
  
• There is scope for improvement within sustainability transparency– relating to adoption of net zero carbon, building resilience, etc. – as well as moving from voluntary sustainability tools or regulations to mandatory measures.
  
  
• Despite improvements in data availability concerning the residential and office leasing sectors, there remains room for improvement in the retail, logistics and alternatives sectors.
  “As we look ahead to the next edition of GRETI in 2022, Mainland China’s real estate transparency can be expected to improve further if the key drivers can be further enhanced and the challenges can be better addressed. Its leading cities, Shanghai and Beijing, will also make further gains and consolidate their ‘Transparent’ status,” Yao concluded. 

To download the 2020 Global Real Estate Transparency Index and A Perspective on Mainland China, please click here.