Ken Creighton, Chair of the Board of Trustees of the IPMS Coalition, talks to Property Week’s Adam Branson about publishing an international guide to measurements.
If you buy a 40,000 sq ft office block, logic dictates it should be the same size no matter where in the world it happens to be located. That, however, is not how the international commercial property market operates.
Unfortunately, the standards for how a building should be measured vary enormously from jurisdiction to jurisdiction, with some standards including only functional office space, but others including swimming pools (Spain) or common areas such as corridors and even car parks (India).
Now, however, all that could be set to change with the publication last week of the International Property Measurement Standards (IPMS) for offices. Created by a coalition of 57 trade bodies and associations around the world, as well as the International Monetary Fund and International Consortium of Real Estate Associations, the IPMS aims to provide a uniform method for measuring property.
The UK’s contribution to the IPMS was led by the Royal Institution of Chartered Surveyors (RICS), whose director of professional standards, Ken Creighton, chaired the coalition. Creighton explains to Property Week why the IPMS are so important and the impact he expects them to have around the world.
Why are the new standards being introduced?
Currently, property – in this case specifically office buildings – is measured inconsistently around the world. People use different standards, so the customers of that information, whether it’s the developer, investor, tenant, corporate occupier or valuer – are receiving inconsistent information. They’re told that a building is 10,000 sq metres, but what exactly does that mean? Is it in terms of the RICS code, the Australian code? JLL estimates that there is a variation of up to 24% in office building measurements – it’s totally unacceptable.
Manhattan: Creighton says a building in New York ‘grew’ on paper by 41% in 21 years.
What accounts for those differences?
So for example, currently, if there is a column in the middle of a room, the RICS standard does not include its footprint because it’s not usable space. But the Building Owners and Managers Association’s standard would include the space. In different parts of the world, you include lifts, hallways, parking…there are huge variations. There is a building on Avenue of the Americas in Manhattan, New York, which was traded in 1990 and again in 2011 when, on paper, it grew by 41%. During that time there was no construction, no earthquake, the laws of physics and gravity remained consistent, yet on paper it grew by 41%. In Dubai, they have these very tall buildings where every floor is exactly the same, but on paper the building has a beer belly. Every time floors are traded they manage to get a bit bigger.
What role did RICS have in the project?
We have absolutely bent over backwards to make this a true collaboration with our coalition partners. The intellectual property we’re creating is shared 100% among the 57 members of the coalition. It was our idea and we asked people to work with us, but these are not RICS standards. They are international, and we are just one of 57 partners.
Are the members of the coalition largely RICS equivalents in other jurisdictions?
It’s a mix. They’re similar bodies, but we’re all diverse. But they’re all not for-profit; they’re all associations or professional bodies. So you have appraisal organisations, residential organisations, umbrella organisations. If you go through the list, you see that every major market in the world is covered. We have organisations in Japan, South East Asia, Brazil, Canada, Africa… on and on.
What was your starting point for pulling together IPMS?
I joined the RICS three years ago and my previous job was to work on the International Financial Reporting Standards. It was a similar problem and a similar solution. We created the standards that have now been adopted in most of the world – more than 120 countries require or permit IFRS. So when I joined RICS, this was the model, and the challenge was to get the whole profession to unite under the same standards. It’s good for everyone – it’s in the public interest and it’s in the market’s interest. It’s also in RICS’ interest. We don’t want to compete on standards – we want to implement consistently and this allows us to do that.
Given the diversity of standards out there, how did you go about deciding what was included in the final version of the IPMS?
We set up an independent standard-setting committee. The reason the project has worked is that we separated the politics from the technical merit. So, instead of having these 57 organisations debate what to include, we put together a committee of true technical experts based in 11 countries and with a combined experience in 47 markets to write the standards. There were two consultation periods and we had thousands of bits of feedback. The experts didn’t represent any organisations, countries or sectors – they were truly independent.
Did the 57 member organisations accept the committee’s work? Or was there horse trading involved?
There was no horse trading at all. To be a member of the coalition you had to sign a declaration committing to this. So now we have 57 organisations that have committed and the technical committee has finished its work, so it’s everybody’s standard. Also, well over 100 companies have committed to using IPMS too. There are corporate occupiers, investors, consultants, developers, universities – it’s a big mix. They don’t own the intellectual property, but they’re companies that have committed to using the standards. The standards are up on the website and they’re free for the whole world.
Have the partners all now officially adopted the standards?
The 57 organisations have a copy and have committed to adopting it, and we’re all now going through our internal processes. So at RICS we have a formal process where we will officially adopt the standard and the current code of practice will be converted into IPMS guidance. We will have that done very soon – we’re aiming for March 2015. All the other organisations are doing the same.
Presumably other organisations will take longer than that?
Keep in mind that each organisation is different. Some of these organisations didn’t have standards before – they just used other people’s standards. So they can adopt them very quickly. At RICS we’re very big compared to a lot of our partners, so the amount of work we’re doing to change our very established standards is a very big deal for us. Everybody is doing this as quickly as they can.
What sort of reaction have you had from governments?
Last September, I met with the sultan who leads the Dubai land department and he declared at the end of the meeting that IPMS would be law in Dubai (above) – and now it is. We expect other governments to follow. We also have a situation where in most countries, measurement standards for property are not a matter of law. It’s not statutory. In the UK, it’s not a law – everyone just uses RICS guidance. The fact that we’re adopting it makes it de facto law. It’s slightly different to accountant standards, which are almost universally based in law. But we are talking to governments about this and we are getting positive feedback.
What impact do you think the IPMS could have?
Keep in mind that the world has been reeling from a financial crisis for the past six years – and that the crisis largely came from property. We are bringing absolute transparency, consistency and clarity to property in a way the world has never seen before. Chartered surveyors didn’t cause the crisis, but we are part of the solution, and that’s something we’re very proud of.
This article was first published in Property Week, 5 December 2014 and is reproduced with their kind permission.