New global office measurement standards

New global office measurement standards

A massive property industry initiative to mobilise the implementation of global office measurement standards has come to fruition.

Inconsistent property measurement

For more years than the property sector would care to remember, there has been a fundamental problem, says Ken Creighton, chair of the International Property Measurement Standards Coalition (IPMSC) Board of Trustees and RICS Director of Professional Standards.

Properties across the board have been measured inconsistently around the world. “Of course, the units of measurement differ, including feet, metres and, in the case of Japan, the shakkanh, but there is also a huge difference in exactly ‘what’ is included in the quoted size of a property.”

In some parts of the Middle East, hypothetical floors are included in a measurement. In India, property measurement can include off-site parking spaces and in some parts of the United States air-conditioned space is used as the basis of a measurement and not floor area. Research by global property specialists Jones Lang LaSalle suggests that depending on the measurement methodology used, a property’s size can deviate by as much as 24%.

The resultant problems are multiple, says Creighton. Increasingly, international investors, owners and occupiers have to spend large sums of money converting local measurements into a consistent international format in order to benchmark their property portfolios. “Businesses are also suffering from sorely lacking information when setting up offices in new markets, often where new acquisitions are inadequate for the intended use.”

Setting new office measurement standards

All this changed in June this year upon publication of the new International Property Measurement Standard (IPMS for Offices). Created by a coalition of more than 40 standards bodies from around the world, including the RICS and SAPOA, and supported by global organisations such as JLL, CBRE and Vodafone, the new standard will offer a common language for measuring property from one  market to the next. Whilst it will not affect property valuations, which are set by the market, it will also offer transparent and reliable space information to underpin International Valuation Standards (IVSs).

IPMS for Offices has been in development for a year, conceived during a meeting at the World Bank in Washington in May 2013. The office measurement standards will be implemented by all members of the coalition.

SAPOA: a Standards Setting Committee member

The South African Property Owners Association (SAPOA) participated in this initiative as a Standards Setting Committee (SSC) member, among many global professional and non-profit real estate organisations. The Standards Setting Committee is an independent body of property experts with first-hand knowledge to complete its mandate in defining a global standard for measuring property and the use of reliable data across worldwide markets,” says SSC chairperson Max Crofts.

SAPOA CEO Neil Gobal says: “Increased asset ownership between countries as well as to local property owners and members of SAPOA will be the most important benefit, and will enable uniform reporting procedures from the earliest building stages to leasing and management of properties, as well as long-term protection of assets.”

Tony Gebhardt, principal at Hamlyn Gebhardt and a member of SAPOA’s Method of Measuring Floor Areas Committee, represents local property owners on the IPMSC Standards Setting Committee to make recommendations to its constituent bodies, including SAPOA. “As a measuring document, and not a valuation tool, the recent agreements in Dubai now facilitate the bridging of standards, which will facilitate the process of global property bodies bridging between various international frameworks,” says Gebhardt.

Residential and industrial measurement standards

Upcoming standardisation of the residential and industrial sectors will see a considerable impact on global markets. Examples of inconsistency are seen globally where varying measurement methodologies in some countries may include outdoor swimming pool areas or hypothetical maximum number of floors to be built on existing foundations of a building. This is set to eliminate major issues such as outdoor parking spaces not adjoining properties.

Creighton says the shortly to be introduced IPMS for residential, retail and industrial property types is currently undergoing consultation processes and will be published before August, with the final standard scheduled for January 2015.

Property investor confidence

Creighton says correct implementation will reduce distortion of property values and eliminate confusion as to what constitutes ‘space’ in the real estate business. He says erroneous financial reporting impacts investor confidence in specific geographic areas. As Chairman of the Commonwealth Association of Surveying and Land Economy, Croft says that its membership stretches outside the UK across most developed countries. He says members with a focus on pension and insurance funds require the confidence that global standards apply to all investments across the globe.

International office measurement standards will not only complement international financial reporting and valuation standards, but will also enable effective collection of property taxes, says Croft.

Global property industry opinion

This collective of diverse industry intelligence and expertise will be most beneficial when considering the sharp rise in transnational and international property transactions over the past 15 years.

This initiative continues to attract high levels of confidence from global business and industry leaders, as was demonstrated during running comment at the final acceptance conference in Dubai.

Vodafone Global Property Director Billy Davidson said the new universal language now allows for different codes to be introduced into global investment portfolios. “This will impact positively on how a property deal looks when pulling it into a common currency.”

Commenting from the construction sector was Ken Gibson, on behalf of Building Owners Management Association (BOMA) International, who said: “The initiative will reduce collision and inconsistencies which have been tracked globally, especially within emerging markets.’

The upholding of professional ethical standards was reiterated by Dr Francis Plimmer of the International Financial Institutions Group. “The recent proliferation of varying global standards has resulted in the principles of ethics increasingly becoming critical to the profession’s credibility”, said Plimmer.

Comparative measures will be simplified by this universal business principle, said International Monetary Fund director of International Real Estate Scott McMillan. “Especially when considering specific and far-reaching real estate concerns, such as the working space for employees, when it would be unfair to apply inconsistent measurement standards.”

This initiative has been described by BOMA International as the collaborative efforts, dedication and passion of all coalition partners, who through a collective of global intellectual and industry expertise, will be practising at global levels of understanding.

News of International Construction Measurement Standards (ICMS) being next on the cards was welcomed in May. This followed the Council of European Construction Economists’ appointment of RICS’s Ken Creighton and associate director Built Environment Matthew Saunders’ to form a new coalition for ICMS.

“Correct implementation will reduce distortion of property values and eliminate confusion as to what constitutes ‘space’ in the real estate business.”

Words: Anna-Marie Smith

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