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Canada Second Most Transparent Real Estate Market in the World According to Jones Lang LaSalle Index

TORONTO, 21 June, 2010 – Jones Lang LaSalle today released its 2010 Transparency Index, which shows that out of 81 markets surveyed, Canada placed second to Australia as one of the world’s most transparent real estate markets in 2010.  However, Canada takes the lead position in the Americas region followed by the U.S. and Chile.

The bi-annual Global Real Estate Transparency Index quantifies real estate market transparency across 81 markets worldwide.  Since the Index began in 1999, Canada has consistently ranked as a top performer and was number one in the last survey in 2008.

“Canada is undoubtedly one of the world’s most transparent real estate markets,” said Jim Becker who leads Jones Lang LaSalle’s Canada business. “Canada differentiates itself by having a combination of a sound banking system, well-developed commercial real estate lending standards and stable property markets with relatively low vacancy and rental volatility. This makes it an extremely stable and fruitful market for all real estate players.”

Historically, lending in Canada has been dominated by large, domestic financial institutions with conservative underwriting standards. Cashflows and collateral values of commercial real estate loans are monitored regularly. Unlike many other advanced economies, Canada’s major chartered banks are regulated depository institutions which had strong deposit bases and high capital reserve ratios going into the global recession.

The largest investment banking operations in Canada are housed within the major chartered banks, making the banking system inherently less prone to bank runs, since chartered banks have access to cash in the form of deposits. In liquidity constrained environments, access to cash via deposits is crucial to the health of banks. Indeed, the World Economic Forum’s annual 2009–2010 Global Competitiveness Report identifies Canada as having a competitive advantage in ‘soundness of banks’ and ‘strength of investor protection’.

The bi-annual Global Real Estate Transparency Index measures market fundamentals, listed vehicles, performance measurement, legal and regulatory environment and transaction process; for the first time the 2010 Index measures two elements of real estate debt transparency: the breadth and depth of data available on commercial real estate (CRE) debt and how well commercial real estate lending risks are monitored by regulators of financial institutions.

The Americas View

“The Americas markets have shown more modest changes in transparency than in the Europe, Middle East and North Africa (MENA) and Asia Pacific regions. Improvements have been static in the region’s two most transparent markets, Canada and the U.S. with only modest improvement in most of the Latin American markets,” said Becker. “Canada and the U.S. have remained the region’s only two Highly-Transparent (Tier 1) countries, and rank among the world’s most transparent markets.”

A large gulf continues to exist between Canada and the U.S. and the other countries in the region, as no country in the Americas falls within the Transparent (Tier 2) level. Following the United States (ranked 6th globally), Chile ranks 34th globally and falls within the Semi-Transparent (Tier 3) level – where Brazil (the only major economy to register notable progress), Mexico, Argentina and Costa Rica can also be found. Panama, Uruguay, Colombia, Peru, Venezuela and the Dominican Republic are characterised by Low-Transparency (Tier 4). Venezuela has registered the greatest decline in transparency since 2008 as regulatory and legal changes, including weakened enforceability of contracts, negatively impacted on its overall transparency profile. 

The Global Picture

While one third of markets globally registered no change or a deterioration, there are a number of bright spots, and transparency continues to improve, albeit moderately, in the majority of markets.  Of the top 15 improvers, nine are in Europe and six are in Asia Pacific. Turkey tops the league table of transparency improvers, and progress has been made in China, India, Poland, Portugal, Romania, Greece and Hungary. 

Declines in transparency were registered in countries such as Pakistan, Kuwait, Venezuela, Dubai and Bahrain; although the level of decline was modest in these countries, the reversal of past gains is notable. Over the past two years, the average improvement in real estate transparency across the 81 markets covered by the Index has halved, when compared to both the 2006–2008 and 2004–2006 periods.

Jacques Gordon, Global Head of Strategy for LaSalle Investment Management, the independent fund management arm of Jones Lang LaSalle said: “The 2010 Global [Real Estate] Transparency Index reveals a notable slowdown in the progress of real estate transparency over the past two years. It suggests that the recent turmoil in global financial, economic and real estate markets has impacted on market behavior, with real estate players focusing on survival rather than market advancement.  It is interesting to note that the most highly transparent countries experienced illiquidity and volatility over last two years, despite their positions at the top of the transparency rankings.  That said transparency does appear to speed up the restructuring process.

He continued: “Transparent real estate caused problems for investors during the credit crisis because it had been put into opaque vehicles.  The 2010 report found that debt transparency is generally lagging behind overall real estate transparency in many countries.  We expect that a new focus on regulatory and private market-led transparency in the real estate debt markets will be one of the main reforms to come out of the credit crisis.”

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specialising in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2009 global revenue of $2.5 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.6 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with approximately $40 billion of assets under management.

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