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News - 10/02/2016

An LSH guide to International Property Measurement Standards (IPMS 3)

The measurement and reporting of offices across the UK changed on 1st January 2016, replacing ‘net internal area’ measurement with a new international method - IPMS 3. Caroline Waldron of Lambert Smith Hampton's Thames Valley team explains what this means for landlords and occupiers...

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What is IPMS 3?
IPMS 3 is a basis of measurement for valuation, market analysis and the marketing of offices (for rental and capital valuation). It is relevant for agents, occupiers, asset managers, facilities managers, property managers, researchers and valuers. It replaces the net internal area (NIA) basis of measurement.

What are the major differences between NIA and IPMS 3?
The term ‘net internal area’ is now obsolete and should no longer be adopted as an industry standard term. It is now replaced with the term IPMS 3 known as ‘useable floor area’ - space only for the exclusive use of an occupier. 

Measurements should now be taken to what is known as the ‘internal dominant face’ (the area within each vertical section [wall] that makes up the perimeter of the building/unit). This can include inside the window recess (to include inside glazing), as long as the glazing is 50% or more of the floor to ceiling height.

In a multi-let scenario, the area occupied by the dividing wall between two tenants’ accommodation is included within the floor area and apportioned equally between the two as a limited use area.

Will the rentalised area increase with IPMS 3?
Essentially no, the useable floor area calculations are representative of the former net internal area. 

When should IPMS 3 be adopted?
To a member of RICS, IPMS is mandatory, however, as a landlord, you can ‘opt out’ as long as a valid reason is provided to your instructing agent in writing. Without your instruction to use an alternative standard, such as the previous ‘net internal area (NIA)’, a chartered surveyor may face disciplinary action if they do not use IPMS 3. RICS appreciates the need for a transition period, and therefore supports a ‘dual reporting basis’ (IPMS 3 and NIA) initially. Any properties marketed prior to 1st January 2016 may continue to quote NIA, however, thereafter, if there is physical change to a historic building, or a building presents itself as a new instruction, IPMS 3 should be adopted as the primary basis for measurement, unless the client specifically instructs otherwise.

Why IPMS 3?
The reason for the change is simple - standardisation. RICS believes that ‘one shared international standard for property measurement’ is key to transparency in the industry. The introduction of ‘one standard for all’ underpins the need to eradicate the inconsistent practices of the past and continue growth and improvement in the UK as a key global market. In doing so, RICS hopes to regain trust, boost investor confidence and increase market stability, as well as provide more comprehensive surveys.

Why is there so much industry confusion about IPMS 3?

There has been much confusion over inclusions and exclusions from floor area calculations. The key point to take away is that the way in which chartered surveyors report has changed. Furthermore, there are a number of other areas that must now be measured; these include balconies/rooftop terraces, shared circulation areas, internal structural walls, columns, common walls, walkways and areas less than 1.5m in height, to name but a few. However, these are measured and reported separately as ‘limited use areas’ for information and do not make up the useable floor area used for rent calculation. (NB: balconies and rooftop terraces may incur a market rental premium in the normal manner).

To conclude, there are now three parts to measurements that need reporting…
·         Useable floor area (previously NIA)
·         Limited floor area  (additional areas that need measuring, yet do not make up any of the useable floor area)
·         Office total (total of limited use area plus useable floor area) 


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