Property measurement

On common ground

22 February 2016

Tom Pugh explains why the International Property Measurement Standards will bring confidence to the market


Over time, the International Property Measurement Standards (IPMS) will become a suite of documents covering all the main asset classes in an attempt to bring uniformity to the way that property is measured and reported on the global platform. The first standard, released in November 2014, was for office buildings, with the residential standard due for release in 2016. Standards for industrial, retail and mixed use will follow.

Following the release of IPMS: Office buildings, RICS has redrafted the Code of Measuring Practice (CoMP) and republished this as the professional statement RICS Property Measurement, 1st edition. The document became mandatory for all RICS members on 1 January.

In the first instance, it applies to offices only, with the existing code still used for other property asset classes. As the other sections of the professional statement are published they will take over from the relevant sections of the CoMP.

Why is it needed?

Recent research undertaken by JLL, comparing five different measurement standards from leading property markets, showed a 24% variance in the same building.

The real estate industry is becoming more global in nature and it is estimated that 70% of global wealth is in property. Property transactions for the period September 2014 to June 2015 reached £24.6bn in London alone, of which nearly 15% were by foreign investors.

So there is a clear need for a single property measurement standard to reduce the confusion and uncertainty.

Benefits

IPMS will bring greater confidence in the global property market and allow greater transparency

IPMS will bring greater confidence in the global property market and allow greater transparency. Stakeholders will be able to benchmark their property portfolios to a recognised standard rather than spending unnecessary time and effort creating bespoke standards or calibrating and translating reports that have been produced to current standards. IPMS will operate alongside existing recognised International Financial Reporting Standards and International Valuation Standards.

The information produced for the IPMS measurement can be used by any number of stakeholders in a property and should not be seen as the domain of the valuation surveyors.

The reported area of buildings will change but only because the basis on which this is measured has changed.

Diagrams in the professional statement demonstrate the differences between the RICS CoMP and IPMS: Office buildings.

Gross external area v IPMS 1:

  • the only difference is the reporting of covered galleries and balconies.

Gross internal area v IPMS 2 — Offices:

  • perimeter measurements are taken to the internal dominant face
  • covered galleries and balconies are included in the measurement and reported
  • areas can also be detailed on a component-by-component basis.

Net internal area v IPMS 3 — Offices (occupancy):

  • perimeter measurements are taken to the internal dominant face
  • columns are included within the measurement
  • on floors with multiple occupants the area is taken to the midpoint of the partition wall between tenancies
  • covered galleries and balconies for exclusive use of one tenant are included
  • standard building facilities (i.e. corridors, toilets, lifts, stairs) are excluded
  • no inclusions or exclusions, such as those contained in the CoMP. Limited use areas are to be employed to detail areas that cannot be occupied (for example, as a result of height restriction, areas occupied by heaters, columns and internal structural walls).

If the contract or lease refers to a particular measurement standard, a chartered surveyor must then advise their client to adopt the professional statement and therefore the IPMS. In instances where the contract or lease stipulates the particular measurement standard to be followed, this must be noted because specific clauses may be affected.

It is also acknowledged that existing leases are based on measurement figures which are derived from an existing standard and there is no requirement to review these in the light of the release of the IPMS. However, IPMS should be adopted for new leases.

Tom Pugh MRICS is an area referencing specialist at Malcolm Hollis

Further information