Eastern Europe | April 2014

Building Measurement
Standards: The Drive
Toward Consistency
and Transparency
DAMIAN HARRINGTON Director of Research | EE

In the modern world of acronyms and abbreviations, one might first wonder
what ‘RICS IPMS’ stands for. It’s not a random text message. It is in fact a
very important initiative being driven by the Royal Institution of Chartered
Surveyors (RICS). The RICS have established a coalition to introduce
‘International Property Measurement Standards (IPMS) to, in their own
words:
‘enable properties to be measured on a transparent basis that promotes
market efficiency through greater confidence between investors,
occupiers and funds. The growth of cross-border property investment
and expansion by global corporate occupiers underpins the demand for
transparency against the background of many differing national and
local measurement conventions.’
This short paper reviews the potential impact of this initiative as it has far
reaching consequences for our business.

Mixed Measurement Standards

Given the current surge in fresh capital looking at commercial real estate,
some of it new to the sector, there is a risk that investment decisions may get
rushed. Mistakes can happen, especially for those without prior knowledge
of the lack of uniformity with which properties are measured and valued.
Making sure you understand what you are paying for is a critical part of
the offer and due diligence process, so understanding the differences in
measurement standards between countries and markets is critical. The RICS
has pointed out that current global measurement inconsistencies can create
a 24% difference in valuations between markets.

In the Central and Eastern European (CEE) region, there are clear differences
in measurement standards adopted, as highlighted by Table 1 on the
following page.
 Table 1 - CEE Measurement Standards Adoption
COUNTRY OFFICE MEASUREMENT INDUSTRIAL/LOGISTICS MEASUREMENTS RETAIL MEASUREMENTS

Bulgarian State Standard (BDS) + Bulgarian State Standard (BDS) +

Bulgaria Add-on factor Add-on factor No generally accepted practice
(BDS corresponds almost to NIA) (BDS corresponds almost to NIA)

Croatia GIA GIA GIA

Czech
GIA GIA GIA
Republic

NIA or GIA, depending on asset type

Estonia NIA GIA
(shopping-centre, hypermarket)

Hungary GIA NIA/GEA GIA

Latvia NIA NIA NIA

Lithuania GEA / GIA GEA / GIA GEA / GIA

Poland GLA GLA GLA

Romania GLA (BOMA standards) GLA (BOMA standards) GLA (BOMA standards)

Russia & GLA based on the local (BTI) measuring GLA based on the local (BTI) measuring GLA based on the local (BTI) measuring
Ukraine system or BOMA standards system or BOMA standards system or BOMA standards

Serbia NIA/NUA + add-on factor GEA GIA

Slovakia GIA (varies by developer) NLA GLA

Table 1 highlights that there are several different forms of space measurement including:
NIA – Net Internal Area; NUA – Net Usable Area; NLA – Net Lettable Area; GIA – Gross Internal Area; GLA - Gross Lettable Area; GEA - Gross External Area.

Source: Colliers International “EMEA Property Guide”, 2014

Additionally, Bulgaria has ‘no generally accepted measurement
practice’ in place for retail, Slovakian ‘GIA’ measurements are
known to vary by developer. Russia and Ukraine use either their
own BTI measurement practice to calculate lettable areas or
default to BOMA standards depending on the property.
The different acronyms used by different markets reflect that
there are several measurement standards in place across the
region and each of these has a different method of measuring
space. As pointed out in our upcoming BPO Facilities guide,
landlords in the CEE region typically measure the lettable space
within their buildings using the TEGOVA or BOMA standards.
However, ISO 9836 is adopted in certain countries and in
Poland the norm is PN-ISO 9836/1997. We estimate that these
standards are deployed to measure around 90% of institutional
commercial space in CEE.
Space Comparisons between Systems
As we know, in order to generate a capital value for a building
the total annualised rent m² is required. Lease agreements
generally refer to Gross Lettable Area (GLA) to which the
quoted rent is applied. The GLA is typically calculated by
taking the Net Lettable Area (NLA) - defined with reference to
a standard - and applying an ‘add-on factor’ which reflects the
need to share the cost of common space provision within the
building. However:
• NLA does not exist as a defined term in any of the
measurement standards used across CEE. Each of the main
systems in place have a ‘method’ (see Table 2) to calculate
what is effectively the NLA based on the height at which the
area is measured, the minimum height of qualifying space,
the line of the wall enclosing the space, inclusion/exclusion
of columns, load-bearing walls, penetrations and so on.
• The ‘add-on factor’ which is applied is calculated differently
by each system. Depending upon the system chosen, the
application of the add-on factor used to calculate the ‘GLA’
is often discretionary. It can vary significantly from building
to building and the interpretation of the methods used
may also vary from one measuring practitioner to another.
For instance, BOMA 2010 standards allow for two different
methods (A & B) to be used upon the discretion of the
practitioner. It is worth noting that add-on factors often range
from 5% - 25%, markedly increasing the GLA to which a rent
is applied.
Table 2 gives an example of how the GLA calculation for the
same office unit, covering a single floor, can differ according
to the measurement system which is applied and how it is
interpreted. In order to demonstrate the extent to which the
GLA can change, we have a applied a discretionary 10% add-on
factor to the PN/ ISO measurement. This has a corresponding
impact on the total rental cost to an occupier and thus
the capital value of the building from an owner/investor
perspective.

2 Building Measurement Standards | Q2 2014 | Colliers International

 Figure 1: 5-Year Rent Cost [€] Estimates
Table 2 - Impact of the Different Measurement Rules
MEASUREMENT TEGOVA BOMA PN/ ISO 1,000,000
980,000 PN/ ISO
(Net Floor Area) (Usable/Occupant (Usable Area) (incl. add-on)
NLA Equivalent m² 960,000
Area)
(per unit)
1,018.56 m² 1,081.56 m² 1,111.48 m² 940,000
BOMA
Add-on factor 9.45% 10.97% Discretionary 10% 920,000 Tegova
(per unit) 96.25 m² 111.74 m² 111.15 m² 900,000
PN/ ISO
GLA m² 880,000 (exc. add-on)
1,114.81 m² 1,130.30 m² 1,222.73 m²
(per unit i.e. floor) 860,000

Building GLA m² 840,000

4,459 m² 4,521 m² 4,891 m²
(4 Identical Units/floors)
Source: Colliers International
Source: Colliers International

Floor Plan Comparison Figure 2: Capital Value [€ Million] Estimates

TEGOVA 14.0

13.5
PN/ ISO
(incl. add-on)
‘Vertical Penetrations’ 13.0
excluded from calculation
of GLA
BOMA
(all systems). 12.5 Tegova
BOMA
PN/ ISO
‘Common lobby’ area
(exc. add-on)
included in the calculation 12.0
of the ‘add-on factor’
(all systems). Source: Colliers International

‘Specific smaller rooms’

included in the calculation
of the ‘add-on factor’ The Moral of the Story?
(BOMA only).
PN/ISO Whilst it is not standard practice to undertake a measurement
PN/ISO: survey when valuing properties in the region, this RICS
Common access toilets are
included in the ‘Usable initiative to unify measurement standards has major
area’ implications and challenges. Existing landlords are unlikely to
BOMA & TEGOVA: be content with the application of new standards which result
Common access toilets are in an immediate loss in the value of their asset. Conversely,
included in the ‘add-on
factor’. occupiers are unlikely to be happy with the prospect of paying
Source: Colliers International more rent and service charges for exactly the same space
on renewal. Equally, existing lease agreements stating the
Variations in Value floor areas used or standards adopted will challenge an early
adoption of the system. This gives some idea of the enforcement
Let’s look at the cost/value impact for both occupiers and challenges ahead, which may require legislation to enable the
landlords/owners: adoption of the system.
OCCUPIER POSITION (in reference to Table 2 and Fig. 1): Let’s The IPMS initiative will clearly take time to be developed as a
assume an occupier is quoted a passing rent of €15 m²/month, ‘fair’ means of measuring space, but momentum is building.
for a 5 year-lease with 6 month’s rent free. Depending upon The consultation draft of the RICS IPMS guidelines, focussed
which measurement system is used, and the ‘discretionary’ on offices, closes for comment on April 4th 2014 with 31 global
application of ‘add-on factors’, the total capital outlay could IPMS coalition members in place. The feedback provided
differ by around 10%. In € terms this equates to a difference of is to be incorporated into a final draft of the standards to be
€90,030 for a ‘1,000 m²’ unit/floor over the five year period. launched in June 2014.
INVESTOR POSITION (in reference to Table 2 and Fig. 2):
As a property professional it is important to be aware of this
Applying a simple cap rate/yield of 6.5% to the building -
initiative as it has far reaching consequences for our business.
comprising four identical units/floors let on the same lease
In the meantime, clients should ensure they get good advice
terms and conditions as above - could result in a value
when examining how space is measured, and thus values
difference of 10%, depending upon the measurement system
calculated, whether entering into a lease agreement or
used. In capital value terms this would equate to a difference of
considering a property or portfolio for acquisition.
over €1.23 million.

3 Building Measurement Standards | Q2 2014 | Colliers International

482 offices in Damian Harrington
Regional Director Research EE
+358 400 907 972
62 countries on damian.harrington@colliers.com

Jonathan Cohen
6 continents Director | Building Consultancy EE
+48 223 339 124
jonathan.cohen@colliers.com
United States: 140
Canada: 42
Latin America: 20
Asia Pacific: 195 Colliers International | EE
EMEA: 85

$2
billion in
annual revenue

1.12
billion square feet
under management

13,500
professionals
and staff

About Colliers International

Colliers International is a global leader in commercial real estate services, with over 13,500
professionals operating out of more than 482 offices in 62 countries. A subsidiary of FirstService
Corporation, Colliers International delivers a full range of services to real estate users, owners
and investors worldwide, including global corporate solutions, brokerage, property and asset
management, hotel investment sales and consulting, valuation, consulting and appraisal services,
mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked
Colliers International as the second-most recognized commercial real estate firm in the world.

colliers.com

Copyright © 2014 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to
ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult
their professional advisors prior to acting on any of the material contained in this report.