Let us build uniformly

Cross-border transactions urge for global benchmarks in property measurements. By M. A. Siraj

June 04, 2016 12:00 am | Updated September 16, 2016 10:27 am IST

A variety of yardsticks prevailing across nations have always been the bane of international investors in commercial real estate sector. The realty business has been following differing national and local building measurements. Even within nation-states, various regions apply a variety of measurements. If bigha, gunta, guz, ground and kunal are several such yardsticks across India for land, the buildings have a bewildering range of definitions for similar sounding terms. While there had always been a need to differentiate developers’ definitions from user/occupier definitions, valuators have tended to apply same definitions for both categories.

With globalisation having caught on, realty business is moving across borders. Need has therefore arisen for aligning measurements along common units as well as standardisation of definitions. This is required not merely to work out the cost of purchase or rents, but also to prepare estimates for per unit utility consumption and cost of maintenance. Research findings indicate buildings measurements can be as much as 24% in terms of classification and reporting.

For transparency sake

Some useful groundwork in recent years has led to the formulation of some basic standards for measurement of office space, especially when global operators are looking for bringing market efficiency in cross-border transactions.

The Standard Setting Committee (SSC) of the International Property Management Coalition (IPMSC), under the aegis of the World Bank, formulated a standard for measurement of buildings. The coalition comprised 56 organisations representing various countries. The aim of the coalition was to enable the buildings to be measured in internationally acknowledged and acceptable units and calculated areas to be provided on a transparent basis. The resulting standards agreed upon by the 56 organisations have been named “International Property Management Standards-Office Buildings” (IPMS for Buildings).

The SSC gathered technical experts from 11 countries and combined expertise from 47 different markets and met at Brussels, Dubai and Orlando (Florida-U.S.) while working upon the task.

The first draft was prepared in January 2014 and launched in November 2014. The SSC is still working upon other buildings classes such as residential, industrial and retail and is in the process of global consultation.

It also recognises that standard-setting is a continuous and dynamic process and will be open to evolving expertise in the matter.

Explanatory drawing for IPMS were prepared by Marc Grief and Johannes Helm of Mainz University of Applied Science and Robert Ash and Tom Pugh of Plowman Craven Limited. Two of the SSC members, V. Suresh and Piyush Tiwari, were from India.

Three categories

The SSC has so far formulated three categories — IPMS-1, IPMS-2 and IPMS-3. The IPMS 1-Office is used for planning or the summary cost of development proposals. IPMS 2-Office is measurement of the internal, actually usable space for property managers, asset-valuers, owners, occupiers etc. IPMS 3-Office is the floor area available on an exclusive basis to an occupier but excluding standard facilities and shared circulation area and calculated on occupier-by-occupier or floor-by-floor basis for each building.

There seems to be unanimity that until the facility industry employs distinct and defining terms, benchmarking will not reach its potential as a tool.

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