IPMS: gaining acceptance in Hong Kong

Area of interest

10 April 2015

Nigel Smith examines the challenges in winning acceptance for IPMS in Hong Kong

The art of measuring has never been easy in Hong Kong. Different developers use different ways to calculate floor areas, which has led to much confusion and frustration. With no less than 5 definitions for measuring – Gross, Lettable, Net, Carpeted and Useable – it is no wonder that commercial and residential consumers alike would like more consistency, especially in a city dubbed one of the most open economies in the world.

The confusion manifests in the fact that the Net floor area calculation includes everything between the outside window pane to half way through the brick wall of the tenanted area, including columns. In super tall buildings, which are prevalent in the high-rise city, columns can be up to 2m in diameter and when combined with an irregular floor shape the two together can have a huge effect on the Carpeted area. In some cases this can add up to a 10%-15% reduction in actual useable floor area and is one of the single greatest causes for negotiation failure or even worse, occupants being left with too little space.

The art of measuring has never been easy in Hong Kong. Different developers use different ways to calculate floor areas, which has led to much confusion and frustration

The complications increase in the Lettable area calculation, which includes common areas on the occupied floor, or the Gross area calculation, which includes common areas in the whole building. The Gross to Useable area differential can be as much as 30%-35%, although still not as extreme as other countries in Asia, where the percentage can be 40%-50%. To the uninitiated this is a minefield and even to the experienced it calls for a constant discussion with clients.

In the residential sales arena, there is one more definition – the Saleable area, which although defined for many years by various bodies still engenders some disgruntled purchasers when they find their per square foot rate is even higher than expected when they take possession. This is especially the case when developers have used window bay construction as a way to increase Saleable floor areas as the measurement.

Impact of change

For surveyors in Hong Kong, therefore, the International Property Measurement Standards (IPMS) were a welcome development when they were announced by the RICS President over 12 months ago. There have since been many discussions among the professional groups and their members on how to introduce these codes of measuring into business and everyday lives.

The first to appreciate the change were those with real estate portfolios, who would like a single definition for the region to harmonise the various measurement approaches. Commercial investors are keen to review their portfolios on a like-for-like basis and occupiers want certainty that they actually have enough space to operate.

But not everyone has immediately embraced the clarity IPMS offers. In a market dominated by residential and office property developers, there seems to be less interest in incorporating the IPMS methodology because it will have the perception of making the per square foot rates look higher.

This is possibly understandable in a city that for many years has been one of the most expensive for commercial and residential property in the world. With a potential stalemate between developers and consumers, we need to consider other ways to increase transparency in the multitude of measurement methods in Hong Kong.

A dual system?

One suggestion getting good airtime is a dual system, which places the IPMS alongside the preferred local system. Of course, in doing so it will alert consumers to the difference between the two numbers, who may in turn calculate the percentage loss. But without government support or a decision to incorporate IPMS as the market standard, some stakeholders will be hard to persuade. Therefore, more lobbying needs to be done.

So how can the surveying community in Hong Kong and Asia help? I believe the answer lies in recognition. We need to promote the benefits of using IPMS, be it as a dual or single format and encourage owners and occupiers to implement a standard that aligns itself to other international bodies, such as the IVS and International Financial Reporting Standards. And not just with office premises. With the advent next year of residential IPMS standards, we should encourage luxury residential developers to adopt a clearer policy on the way apartments are measured, particularly to the younger members of the community.

As the Chairman of both the Hong Kong and Asia Commercial Property professional groups I am encouraging my members to embrace the principles of IPMS and reach out to the wider membership to do the same. It will not be an easy or fast change, but we will eventually be able to take a paper to the government encouraging acknowledgment of the IPMS standards.

Nigel Smith is RICS Hong Kong and Asia Commercial Property Chairman

Further information

Related competencies include: Measurement of land and property

This feature is taken from the RICS Property journal (March/April 2015)