Global differences in how buildings are measured, such as whether to include parking spaces or leisure facilities, are to be ironed out by this week by real estate regulators, promising significant cost savings for portfolio managers.
An International Property Measurement Standard is expected to be established by trade associations representing millions of landlords and property investors at a meeting on Wednesday, under the auspices of the World Bank in Washington.
The accord, which is being also supported by the International Monetary Fund, is intended end the huge discrepancies that occur in measuring building sizes under the existing system where each country has its own method. In Spain, for example, swimming pools are included when measuring a building’s floor area. In the Caribbean, buildings’ measurements include the car park – even if it is a mile away.
Julian Lyon, manager of European real estate for General Motors, said businesses had long suffered the “inadequacies 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.”
Steve Williams, executive managing director of Real Capital Analytics, the data provider, said: “With the exception of language, it would not be an exaggeration to characterise global measurement protocols as the most urgent outstanding issue [in improving market transparency].”
The effort to simplify the global property market is part of a trend across the financial services industry to improve international regulatory coherence. The new standard will be adopted by 27 property trade organisations, including the UK’s Royal Institute of Chartered Surveyors, the Counsellors of Real Estate in the US and China’s Institute of Real Estate Appraisers and Agents.
The World Bank estimates that land and real estate assets comprise more than 50 per cent of the national wealth of the world’s economies. The property industry has shifted during the past decade from being a fragmented, localised market to one increasingly dominated by globetrotting asset managers and sovereign wealth funds.
“What might count as 1,000 square metres of property in one country will be only 700 square metres in another,” said Kenneth Creighton, director of professional standards for the Royal Institution of Chartered Surveyors. He added that it was impossible to quantify exactly how much the changes would reduce property management costs for companies, but said: “For an industry of this scale, the financial leakage from these inconsistencies represents a serious issue that needs addressing.”
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