IPMS: effect on professional practice

Getting to grips

14 April 2016

As International Property Measurement Standards become mandatory, Tom Pugh gives a ground-level view of how they will affect professional practice

On 1 January, the way we approach reporting the size of office buildings saw a step-change. It follows the incorporation of the International Property Measurement Standards (IPMS) into a new professional statement RICS Property Measurement, 1st edition – itself a redrafting of the RICS Code of measuring practice (CoMP).

Why is it needed?

Differing measurement standards across the world can lead to a variance of up to 24% in the reported area of the same building. Considering that property accounts for 70% of global wealth, the magnitude of this discrepancy is vast.

The need to formulate a uniform approach to measuring buildings was clear, and a coalition was formed to agree on a set of global standards. So far, the IPMS coalition has released the standards for offices: residential, industrial and retail will follow. As the new sections are released, the RICS professional statement will also be updated.

Differences: RICS CoMP vs IPMS

Unlike its predecessor, the professional statement is mandatory for all RICS members. Reporting under RICS CoMP and the IPMS is different, although not hugely so. Most obviously, naming conventions have changed: gross external area (GEA), gross internal area (GIA) and net internal area (NIA) are now known as IPMS 1, IPMS 2 – Office and IPMS 3 – Office, respectively.

The differences are fully set out in the professional statement, but the most important are as follows:

  • balconies, covered galleries and rooftop terraces are now included in IPMS 1 and IPMS 2 – Office
  • in IPMS 3 – Office, columns are included while standard building facilities (e.g. corridors, toilets, lifts, stairs) are excluded
  • IPMS 3 – Office also introduces the concept of “limited-use areas” such as those with restricted ceiling height – these can be highlighted separately, enabling comparison/translation between IPMS and preceding standards
  • internal measurements are now taken to the internal dominant face for both IPMS 2 – Office and IPMS 3 – Office.

There is no requirement to review leases in light of the release of IPMS where the existing lease or contract is based on measurement figures derived from an existing standard or stipulates a particular measurement standard to follow. Deviation from the professional statement is also acceptable where a client has stated, in writing, that they would prefer an alternative, specified standard to be used.

Differing measurement standards across the world can lead to a variance of up to 24% in the reported area of the same building

Buildings must, however, be measured under IPMS “in the event of a physical change to a building” or for “any new event requiring the use of building measurements” such as new agreements, rent reviews, sale or purchase or revaluations.

Adopting a long-term view on when IPMS measurements are taken may well be the shrewdest approach. For example, it will be much more cost-effective if the landlord of a multi-let office measures the whole building, rather than measuring each space as the individual leases expire. It would also eliminate the potential confusion in having the newly let unit’s rent calculated using IPMS, while service charges are still CoMP-based until the remaining units’ leases expire.

It is also worth pointing out that IPMS measurements can be used by all property stakeholders for a range of purposes, not just agreeing rent and valuations, but also in costing refurbishment, space planning and service charges, to name but a few, so the benefits of IPMS are wide-reaching.

Market value

Although building areas will change on paper, the market value of a building remains exactly as it always has been – that is, what a purchaser is willing to pay. The data that sits alongside a valuation will be consistent across property markets, which will lead to a clearer comparison of the relationship between valuation and space in the different markets.

There is no standard ratio between CoMP and IPMS, but with that in mind, RICS has developed a free online tool that converts IPMS office measurements in local standards.

It is envisaged that there will be a period of dual reporting, in which areas will be presented in both formats, while the new system becomes embedded into market practices.

It may well be that measured survey instruction levels will rise as a result of IPMS, at least in the first instance. But this is not just an opportunity for geomatics and land surveyors: it is very much a positive way to promote greater transparency, comparability and consistency, and to boost confidence in the property industry as a whole. And that is no bad thing for us all.

Tom Pugh MRICS is an area referencing specialist at Malcolm Hollis

Further information