International Property Measurement Standards
What do commercial real estate pros need to know?
you’re considering a purchase, such as a tablet, and decide to comparison-shop
among several different manufacturers. However, when you do a little research,
you find the specs for an item, such as storage capacity, are measured
differently from one manufacturer to another. As a result, you’re comparing
apples to oranges instead of apples to apples. You really don’t know how one
tablet stacks up against another, even though they’re all the same type of
the situation commercial real estate investors, brokers, leasing agents — and,
in fact, anyone dealing with property — currently face and have faced
throughout history. The way property assets, such as homes, offices, and
shopping centers, are measured varies dramatically. For example, in some parts
of the world, it is an established practice to include common space, such as
elevator shafts and communal hallways, in floor area measurements; in other
markets, off-site parking or even swimming pools might be included.
different methods of measurement in use makes it difficult for tenants,
landlords, investors, and developers to accurately compare space. Research
shows that a property’s floor area can deviate by as much as 24 percent
depending on the method used, according to global property firm JLL.
from the obvious confusion this can bring for tenants and buyers, there are
some very significant and damaging implications for business and for wider
economies that rely on consistent property data for financial reporting purposes.
For example, the lack of consistency in property measurement data helps
undermine achieving greater transparency through existing international
standards such as International Valuation Standards and International Financial
Reporting Standards. And for businesses and financial markets, the existing
inconsistencies negatively affect financial reporting, which requires
businesses to document their total assets, including property.
International Property Measurement Standards Coalition is an international
group of more than 60 professional and not-for-profit organizations, including
the Building Owners and Managers Association International, CoreNet Global, the
Real Property Association of Canada, and the Institute of Real Estate Management,
working together to develop and embed a single property measurement standard in
the industry. The Royal Institution of Chartered Surveyors — an international
organization that promotes and enforces the highest professional qualifications
and standards in the development and management of land, real estate, property,
and construction — was among the founding members of this coalition.
International Property Measurement Standard will ensure that property assets
are measured in a consistent way, creating a more transparent marketplace,
greater public trust, stronger investor confidence, and increased market
a new, principles-based, international standard that sets out how to measure
property assets. It means that for the first time, property will be measured in
a consistent way around the world. IPMS does not define the units of
measurement such as feet and meters, but instead it defines what is included in
the measurement of property floor space. The first phase of IPMS, announced
last November, applies only to office space. Future standards on measurement of
other asset types are planned over the next few years.
will become established over time throughout the global marketplace as property
users come to understand the benefits of using a common method for measuring
property assets. In some markets, it is probable that existing standards will
remain in place and may at first be complemented by IPMS; however, IPMS will
always be secondary to any legally mandated requirements. Where possible, the
coalition will undertake to work with governments to review and update laws to
reflect IPMS. In addition, the new standard will operate alongside and enhance
existing international standards such as IVS and IFRS. An international
standard for measuring property was virtually inevitable in an increasingly
global real estate sector.
will not directly affect transactions in the United States or elsewhere,
because the sale or transacted price is not determined by measurement but
rather by market forces such as demand and scarcity. The fact that a
measurement of an office building may change when measured in accordance with
IPMS does not change the price that an asset or liability should exchange on
the valuation date between a willing buyer and a willing seller.
the new standard could indirectly affect transactions. For example, if IPMS
doubles the quoted size of a property then the price per square foot would be
cut in half as a result. And if IPMS halved the size of a property, then the
price psf would double to reflect this change.
industry largely understands the case for an international standard and is
prepared to be involved in this process. Most measurements have already been
taken, and a free web conversion tool will be provided later this year to
convert IPMS into other major standards, to allow for dual reporting in the
near term. The market sees the potential in IPMS, and participants will be
asking their clients to adopt it. RICS and other members of the IPMSC are
helping the real estate industry get ready to deliver IPMS as the market
will benefit international real estate investors in a number of ways,
- providing a mechanism for benchmarking
property measurement information across international markets;
- offering a common and transportable
method for property practitioners to use;
- enabling international tenants,
investors, and owners to benchmark their property assets without needing to
spend significant sums of money and resources calibrating space measurements;
- providing greater transparency and
consistency to all property users, wherever they are located; and
- offering consistency in the data that
accompanies valuations and financial reporting, thereby assisting property and
facilities managers in comparing and utilizing space.
summary, IPMS will provide greater confidence and consistency in property
measurement for investors.
communities will play an enormous role in the success of IPMS, as will other
stakeholders such as banks, property advisers, and other external stakeholders.
More than 120 organizations so far have registered to support the IPMS
initiative as partners, and have signed declarations to help the implementation
of IPMS in their businesses and markets. Specifically, partners agree in
principle to adopt IPMS measurements by either using them or requesting them
within their work. Among the early partners are major corporate tenants such as
Vodafone and the International Monetary Fund, as well as leading property
consultancies including JLL Middle East and CBRE Middle East. The Dubai
government has become the first national government to formally endorse IPMS
and Jamaica’s National Land Agency recently also endorsed the initiative, with
other governments beginning to follow their lead.
next steps, the IPMS Standards Setting Committee is now working on subsequent
international property measurement standards and is hoping to publish IPMS for
residential buildings later this year. In due course, the committee will also
publish IPMS for industrial, retail, and mixed use. This should bring greater
confidence and uniformity to property measurements in these markets as well.
Shah is managing director of RICS Americas, covering the U.S., Canada, Latin
America, and the Caribbean. Contact him at firstname.lastname@example.org.
International Property Measurements Standard for Office Buildings was published
in November 2014. Download your copy at ipmsc.org.