Commercial real estate markets in Central and Eastern Europe (CEE) and Russia have become increasingly transparent over the past two years, according to Jones Lang LaSalle's 2006 Real Estate Transparency Index, a ranking of real estate market transparency in 56 countries and territories.
Poland and the Czech Republic have experienced a moderate improvement in transparency, and Hungary witnessed a slight improvement, when compared to Jones Lang LaSalle's 2004 Index. Whilst Russia registered a slight improvement as well, it has actually moved up from tier four (low transparency) to tier three (semi transparent).
Russia, and in particular the Moscow investment market, is considered semi-transparent, which is an improvement over previous surveys. Despite the well-publicized and controversial nationalization of Yukos' assets in 2004, foreign investment in Russia and its real estate sector has reached record levels. Improvements in transparency relate principally to transaction process improvements.
Alastair Hughes, European CEO of Jones Lang LaSalle commented: "The past several years have seen a rise in cross-border investment opportunities and multinational occupiers entering Central and Eastern Europe; now we are seeing the same trend in Russia. This has proven to be a powerful force for change, as a new generation of cross-border investors and occupiers demand more information, consistent regulatory treatment and higher ethical standards. As more capital has targeted markets in CEE, and transparency has improved, yields are edging towards Western European levels and investors are seeking higher yields in markets further east, such as Russia, Kazakhstan and Ukraine."
Paul Richards, Head of European Capital Markets Research added: "A direct correlation may be drawn between EU/EFTA membership and real estate transparency. Pre-2004, EU/EFTA members (with the exception of Greece) were considered highly transparent or transparent real estate markets. Greece and the 2004 accession countries (Czech Republic, Hungary, Poland, Slovakia and Slovenia) have seen marked improvements in transparency and are considered semi-transparent."
Romania and Turkey, which are both negotiating accession to the EU, are still characterized by low transparency in their real estate markets. While improvements have been noted in the availability of data on market fundamentals, regulatory and legal regimes, these aspects are still weak, and the markets lack performance indices. As these countries progress in their negotiations for EU membership, we would expect significant improvements in their regulatory and legal arenas with corresponding improvements in market transparency.
Source: Jones Lang LaSalle