Doha / QATAR: The Middle East region ought to have a unified measurement system for the real estate sector as markets become increasingly global, according to Jones Lang LaSalle, a professional and services management firm.
The need for a unified measurement arises as more investors and occupiers are looking to make cross border comparisons of their investment returns or real estate occupancy costs, according to Alan Robertson, CEO, Jones Lang LaSalle, Middle East and North Africa (Mena).
His suggestion came after a recent announcement that 19 leading property professionals across the world have been appointed to create the first global standard for measuring property.
“We don’t believe there is a requirement to establish separate national codes in the Middle East, but we do encourage government authorities and local developers to implement any new international measurement standards that emerge from this important global initiative,” he said.
If the international property measurement standards coalition is successful in creating a unified measurement standard, investors and tenants in the Mena real estate market will benefit, he added.
As real estate markets become increasingly global in nature, more investors and
occupiers are looking to make cross border comparisons of their investment returns or real estate occupancy costs, Robertson said. Highlighting that the lack of something as basic as agreement on how buildings should be measured is an “unnecessary obstacle” to facilitating greater flows of both capital and occupiers between realty markets around the world, he said this problem remains particularly acute in less mature markets such as those in the Middle East, which “traditionally score relatively poorly in terms of their openness and
Finding that there is currently no agreement on either the method of calculating areas or the basis on which rental values or sale prices should be charged in the Middle East, Robertson said, in practice, this has led some developers seeking to maximise the measured area (through inclusion of balconies, parking spaces and external building features such as window boxes and ledges which the tenant cannot access).
In contrast, investors and occupiers have sought to minimise the area of their unit to only include the net usable or carpet area, according to him.
An additional complication in some markets in the region is the use of both square feet and square metres to express building areas on plans and in advertising material. Recognising this problem, the Dubai government had suggested more than two years ago that all buildings in the emirate should be measured in square metres.
However, in ractice, this advice has not been widely accepted and many developers continue to use square feet as their preferred unit of measurement, he said.
Research in Europe by Jones Lang LaSalle reveals the difference in building area can vary as much as 25% between the different codes of measurement currently in use. The current average sale price of residential units in Dubai is in the order of 1,000 UAE dirhams per sq ft. On this basis, a unit measured at 1,600 sq ft would cost Dh1.6mn.
Using a more ‘generous’ measurement standard for the same unit would result in a 25% greater area of 2,000 sq ft. At the same average price per sq ft would increase the price to Dh2mn , which is quite a difference, he observed.
The same clearly applies in respect of office rents, where different measurement standards will have a major impact on a tenants total occupancy costs, according to Robertson.
Sources: Gulf Times, Reuters, The Peninsula, Caye Global News