To drive meaningful transformation in real estate, we need to tackle some of the industry’s largest pain points around data. For anyone working on real estate portfolios that covers multiple jurisdictions or whether they are covering markets such as Hong Kong, where practices can vary between submarkets and even individual buildings, you would have experienced the pain points around property measurements.
As a RICS Tech-Affiliated company, Realinflo is working towards raising standards in real estate markets across Asia. In this guest post, we caught up with valuation expert Tom Parker MRICS of Colliers International Hong Kong, to ask him his views on global property measurement standards, why they are critical to boosting market transparency and how they impact on property decision-making.
Why are globally consistent property measurement standards important?
In real estate, size really does matter. It affects every element of the property decision making process, from assessing workspace layout and suitability to planning and predicting likely running costs, fit out expenses and reinstatement values. It is also a crucial element in determining the total amount of rent an occupier will be paying.
Why do we need global measuring standards?
As the world has become more connected, the real estate industry has generally been very successful at adapting to the changing requirements of clients to ensure that as professionals, we are able to meet all our clients’ needs. However, whilst we have been successful at providing consistent valuation and brokerage standards across borders, there is still one area of our industry that remains very local – measurement.
Every country has its own basis of measurement and approach to measuring buildings and this is absolutely fine when comparing properties locally, but it can be much more problematic when looking at buildings in different jurisdictions. A study looked at applying four different measuring standards to the same office floorplate and found that the area could range from 7,600 to 10,000 sq. ft. depending on which approach was used. This represents a difference of almost 25% which can have huge implications for landlords, occupiers and real estate professionals.
Can this help save costs or assist in benchmarking across a portfolio?
To give some practical examples, if a company was looking at opening a new office in Singapore and based their size requirement on how much space per person they have in an existing office elsewhere, they could potentially end up with either 25% more space than they need, or with an office 25% smaller than required! Another example is with cost comparison – multinational owners of real estate are likely to look at total occupancy costs per sq. ft. when comparing their global property costs in which case they need to know that they can make a base assumption that all the properties being compared have been measured the same way so as to ensure an accurate comparison.
With real estate being looked at and compared globally these days, it is vital that we have a consistent and straightforward measuring standard which can be universally adopted.
What is IPMS and how does it help?
The International Property Measurement Standards or IPMS for short were created by the Royal Institution of Chartered Surveyors (RICS) to try and address this requirement. The standards were devised following several years of consultations and discussions led by a focus group made up of property professionals from across the world.
IPMS were initially introduced in January 2016 for office properties but in the years since, they have also been rolled out for retail, industrial, residential and mixed-use properties. Generally, the use of these measuring standards is compulsory for all RICS members, but departures are allowed in certain circumstances if there is clear justification.
IPMS embody global practices without directly following any one country’s measurement approach. The standards are also couched in clear and direct language which makes them easy to follow and apply, removing some of the ambiguity and grey areas that you often get in other codes of measuring practice.
A unified and global set of measurement standards, that can be adopted around the world ensuring consistent and accurate measuring practices, and enabling decision makers to accurately compare properties in different cities across the world will undoubtedly promote confidence in and transparency of the real estate industry.
How well has it been adopted so far?
Whilst IPMS were met with fairly broad support initially, outside of the United Kingdom there has been limited take up so far, particularly amongst developers and landlords. I believe that this is partly due to a general perception that they are more complicated and challenging to use than other measuring standards. There are indeed some challenging applications, but in general, they are actually a lot more straightforward and easier to apply than many of the existing standards of measurement.
While the adoption may be slower than originally hoped, we are seeing a lot of encouraging signs and I believe occupiers in particular see the benefit of having consistent global standards of measurement. We, at Colliers, have recently worked with a large client to help them measure their global portfolio using IPMS and I am aware of several other multinational occupiers who have either undertaken or are planning similar exercises.
In terms of future wider adoption, I believe that as property professionals, we can play an important role in educating our clients on the benefits of IPMS and why they are beneficial for them. I think much of it comes down to education and perception.
Going forward, I also think a post COVID-19 landscape may re-focus some attention on IPMS as landlords face a more competitive leasing environment and occupiers focus on savings.
Guest Post By:
Tom Parker MRICS is Manager, Valuation and Advisory Services at Colliers International in Hong Kong. Colliers International is a leading real estate professional services and investment management company, with over 18,000 professionals operating in 68 countries.
Realinflo provides real-time, granular data on buildings and leasing and sales transactions for Asia Pacific markets. With our free data exchange for agents, valuers and researchers, our users can access data not found elsewhere. In line with boosting transparency, we are now collecting building and transaction data measured to IPMS standards – create an account here and save 90% time researching Asia real estate.