There is a big, but not much talked about, problem for the investors – the difference in the way of measuring real estates in different countries. In consequence, there are problems in such matters as comparing the worth of the projects, assessment of one’s own real estate portfolio and estimating potential profit from the investment.
The topic was noticed by the representatives of the most important institutions from the real estate sector, including Royal Institution of Chartered Surveyors (RICS). They decided to meet and to discuss and compile universal standards of measuring real estates. The meeting took place on the 1st of May in the seat of World Bank in Washington and resulted in forming International Property Measurement Standards Coalition (IPMSC).
Why is this problem so crucial? Mainly due to the fact, that differences in measurement are large and they concern all of the countries. For example, in Spain the investment’s area includes outdoor swimming pools. In some parts of the Middle East, it is possible to include hypothetical maximum number of the storeys which can be constructed on existing foundations. In Australia, the measurements include open parking spaces, even if they are not places directly by the real estate. These examples show how large can the discrepancies be.
The companies that suffer are mainly international ones, which, during the choosing of the place, cannot only limit themselves to the city – they must also consider the country or even the continent. Shared standards, which are being prepared by IPMSC, could be accepted in all parts of the world, making the company’s decisions easier.
Ken Creighton, RICS Director of Professional Standards, notes – This is a groundbreaking initiative which has the potential to deliver huge benefits, both to real estate markets and to the economies and the populations they support around the world, by creating a level playing field for the way property is measured, valued and ultimately reported in financial statements.
What profits are there when shared standards will be introduced? One positive consequence will be greater clarity of data and more precise and coherent financial reporting. The risk of the fraud will be less, which will mean greater trust of the investors. Globally, it will allow for the bigger financial stability.
Working with international portfolios inevitably brings real difficulties of comparison when every market has at least one different way of measuring space. It is bad enough that we do not all use the same conversion factor between square feet and square meters! I, and my peers from other major global businesses, either have to convert all space into our own individual basis of common measurement or suffer the inadequacy of comparing apples and pears - which negatively impacts on a company's ability to make sound business decisions. I welcome an initiative that will bring portfolio-wide, global consistency to space measurement and which, for the first time, will allow the industry to benchmark good space-use practice from wherever in the world it may be. – says Julian Lyon FRICS, Manager, European Real Estate, General Motors.