The measurement of a building is central to its valuation and for multi-let buildings the rent and service charge calculations. This makes it important for property industry stakeholders that the underlying measured areas of buildings are correct.
From January 2016 the ‘RICS Property Measurement Professional Statement (1st edition)’ became mandatory for property measurements undertaken by RICS professionals. The Statement advises how to measure all types of buildings, however there is a new standard for the measurement of office buildings, ‘International Property Measurement Standards: Office Buildings’. The existing ‘Code of Measuring Practice (6th edition)’ continues to apply for other classes of building. Unlike previous measuring standards the Statement is mandatory for RICS professionals to ensure that it is used in practice.
Why are the International Property Measurement Standards (IPMS) needed?
Commercial property is increasingly becoming a global market place. This has led to demand for a uniform measurement system enabling property measurement information to be compared and benchmarked on the same basis around the world.
Research by JLL shows that depending on the current measurement method used, there can be a difference of up to 24% in the floor space of a property. Different countries and markets have varying interpretations of the meaning of established measurement terms such as gross external area, gross internal area, net internal area and net lettable area. This has created uncertainty and confusion for global property investors and occupiers who face inconsistencies resulting from the varying measurement methods used across their property portfolios.
Office buildings were prioritised by the IPMS as the first class of buildings to be given a new standardised measurement procedure because of their international nature and concerns raised by those operating in the global office market place.
What is IPMS?
IPMS stems from a coalition of experts from around the world who have worked together to establish a consistent methodology for measuring office buildings across the globe. A ‘Standards Setting Committee’ was created to develop a new measurement standard which would enable buildings to be measured, and the resulting calculated areas to be provided on a transparent basis no matter where in the world the building is situated.
What are the new IPMS standards?
IPMS decided to establish new measurement standards to eliminate inconsistencies and any hangovers from existing measuring regimes. IPMS has created three new standards:
- IPMS 1 – this standard will be applied to all classes of building and is used to measure the external area of a building. A need was identified for an external measurement standard to enable costing of development proposals and for planning purposes.
- IPMS 2 – there will be separate standards for categorising internal areas for different classes of building. In the new IPMS: Office Buildings, this standard is referred to as IPMS 2 – Office.
- IPMS 3 – areas in exclusive occupation will vary for different classes of building and so separate standards will be used for each class of building. IPMS 3 – Office applies to measurement of office space.
The Committee considered it unrealistic to create a single standard for all classes of buildings as each type of building has distinctive characteristics. Residential, industrial and retail will all be similar, but not identical and a mixed use class would incorporate elements of each.
Will there be an impact on existing agreements and buildings?
If an existing agreement prescribes that an office building should be measured, or a rent review or service charge carried out using measurement standards prescribed by the Code, the parties should continue on this basis.
In a multi-let office building, if the existing leases and service charge have been established using measurements carried out pursuant to the Code, unless the whole building is re-measured and changed to the new standards it may not be wise to use the IPMS for new leases at the building. The building areas calculated using IPMS will be different than if measured using the Code, potentially creating confusion and uncertainty.
Where existing legal agreements provide for measurement using the Code or an updated measurement standard, measurement using IPMS will be permitted without the need to renegotiate documents.
It is anticipated that for a number of years the new IPMS will run alongside the existing Code, whilst office buildings transition over to the new standards. In the future, the same will apply for different classes of building. There is no requirement for existing buildings to be re-measured using the new IPMS standards.
What will be the future impact of the new measurement standards on buildings and legal agreements?
Going forward IPMS should be adopted for all new office buildings and used in agreements in cases where there is no conflict with the Code. Where documents are being negotiated for other classes of building, such as retail or industrial, they should include wording to provide for measurement using the Statement (1st edition) or any updated measurement standard recommended by RICS.
It will soon become usual practice for office buildings to be measured using IPMS. There will be a transitionary period where both the existing standards under the Code and new IPMS standards for office buildings will operate side by side. As the new IPMS standards are issued for other classes of building, they will become common place across the UK property industry and around the world.
Measurements using IPMS will potentially increase the measured area of buildings. As long as the new standards are applied consistently there should be little impact on the resulting valuations, rent calculations or service charges.
A consultation by IPMS on its proposed standards for residential buildings concluded in September 2015. A draft of the new IPMS standards for residential buildings is expected shortly for further consultation. Consultations on IPMS for industrial buildings and thereafter retail buildings and land will follow. Further changes to the new RICS Property Measurement Professional Statement are therefore close on the horizon.