This article first appeared in City & Country, The Edge Malaysia Weekly on October 28, 2024 - November 3, 2024

Real estate transparency is more critical than ever during periods of uncertainty. According to global real estate consulting firm JLL and its subsidiary LaSalle in the 2024 edition of the Global Real Estate Transparency Index report, the pace of structural changes impacting real estate markets — from demographic shifts to sustainability targets and technological advances — is accelerating.

“These long-term changes are intersecting with cyclical challenges as companies and markets process rapid adjustments to pricing and growth prospects,” the report said, adding that 2024, being the record year for general elections and the ongoing geopolitical tensions, are introducing additional elements of policy uncertainty worldwide.

These factors mean that transparency is more important than ever as real estate investors, occupiers and governments navigate the transition to a new real estate cycle and the next stage of urban growth.

Of the 89 countries and territories assessed in the report, the UK scored the highest for transparency. This is followed by France, the US, Australia and Canada, rounding up the top five.

The US, Canada, France and Australia are among the top global improvers. At the same time, Singapore has entered the “Highly Transparent” group for the first time and is ranked 13th, boosted by its focus on sustainability and digital services. Over the last two years, this group has attracted over US$1.2 trillion in direct commercial real estate investment, over 80% of the global total.

Malaysia is ranked 33rd and is placed in the “Transparent” group, just a rung below neighbouring Thailand (32nd). These two countries are the only Southeast Asian nations in this group. Indonesia (40th), the Philippines (45th) and Vietnam (49th) are in the “Semi-Transparent” group.

“It positions Malaysia as a hotspot for growing segments such as logistics and industrial sectors. Malaysia plays a vital role in the implementation of the China Plus One initiative,” said JLL Malaysia head of research and consultancy Yulia Nikulicheva in a statement accompanying the report.

“Additionally, it is recognised as a strategic location for data centres, making it a preferred destination for many players in the industry. This reputation is reflected in the high provision of data centres in the country.”

Overall, Asian countries have recorded the strongest average transparency improvements since 2022. Globally, India is the top improver in transparency, with greater data coverage and quality across property sectors ranging from industrial to data centres. Japan, Australia, cities in Mainland China, South Korea, the UAE and Saudi Arabia also saw progress in 2024. By contrast, the sub-Saharan Africa region saw the least progress in transparency, though some signs of improvement are observed in Kenya, Nigeria and Ghana.

Furthermore, the report stated that the most transparent markets are advancing further based on investments in technology integration, artificial intelligence (AI), data availability, and sustainability.

Sustainability transparency is becoming increasingly critical as the deadline to halve emissions by 2030, in accordance with the Paris Agreement, looms. Thus, a growing number of countries and cities have set out mandatory long-term decarbonisation pathways.

Coupled with new building energy performance standards, sustainability reporting requirements and corporate commitments that are ramping up, sustainability has been the largest driver of transparency improvements in the 2024 Index.

Despite the progress made so far, the report said sustainability metrics remain among the least transparent globally. “Many companies are still at an early stage in tracking their actual portfolio emissions, building level performance or climate risk, with a lack of standardised information and processes contributing to concerns about data quality and greenwashing.”

It pointed out that markets with the clearest long-term pathway to sustainable real estate, such as France, Japan and leading cities in the US and the UK, will offer the most transparent and predictable environments. “This will help to address the significant shortfall in low-carbon buildings and allow occupiers to make location and space decisions with confidence, governments to meet decarbonisation targets and investors to future-proof their portfolios.”

Artificial intelligence (AI) enhances transparency and creates a competitive advantage in the real estate industry. Widespread generative AI capabilities have supercharged expectations for technology’s impact on real estate.

“Investment into AI is growing exponentially, and although many applications are at an exploratory stage, it is already boosting transparency across the industry — helping to sift through and summarise huge volumes of legal documents, automating building management, powering interactive urban and architectural design and enabling unprecedented levels of speed and granularity in valuations and analytics,” the report said, adding that as these capabilities are expanded further, AI will offer the potential for significant advances in productivity and transparency.

Furthermore, AI regulations are hitting a milestone in 2024, with new legislation or guidance being enacted or introduced in major markets, including the US, the EU, China, Canada and Australia. The EU, for instance, approved the AI Act which came into force in August 2024 and it is the world’s first sweeping law on AI.

It added that extracting full value from AI will require considerable effort and investment in creating the right architecture and governance to capture standardised data that can be fed into models, which most companies and governments still lack.

However, the report noted that the push towards digitisation and AI has risks, especially concerning regulations and compliance. There is a growing awareness of the potential risks of AI tools inadvertently leading to price-fixing or other anti-competitive behaviour, such as via pricing optimisation algorithms.

Hence, consistent data collection and model training standards are promising steps in reducing these risks. “However, tracking this evolving regulatory background and building a comprehensive understanding of how AI tools function and their security and compliance risks will be key for companies to navigate the risks and realise the transparency gains that AI offers.”

In addition to the focus on sustainability and AI, the real estate markets are witnessing the reallocation of capital and broadening debt markets.

“The markets are still in the early stages of a significant reallocation of capital as investors target property types benefitting from structural growth in demand. Demographic and technological changes, combined with shifting government and occupier priorities, are requiring investors to understand dynamics across an increasingly broad investable universe — from the growth of living investment strategies in Europe and the Asia-Pacific to the rapid scale-up in data centre requirements globally,” the report said.

It added that the transparency of infrastructure planning, trade policy, and operating models will be increasingly important factors in decision-making and the primary drivers of prospects for sectors such as data centres or advanced manufacturing facilities.

Meanwhile, real estate debt markets have broadened as non-bank lenders expand and complement traditional sources of credit. “With an estimated US$2.1 trillion of real estate debt that will need refinancing between 2024 and 2025 — approximately 30% of which has been completed over the first half of 2024 — monetary authorities have raised concerns about potential risks emanating from the relative lack of transparency around private credit lending volumes and financing conditions in many markets. With still-high interest rates pushing the refinancing gap higher, debt market transparency will remain on the agenda as investors continue to diversify into credit strategies and distress rises in certain parts of the market.”

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