Measuring performance

Citation

Warren, C.M.J. (2014), "Measuring performance", Property Management, Vol. 32 No. 3. https://doi.org/10.1108/PM-03-2014-0014

Measuring performance

Article Type: Editorial From: Property Management, Volume 32, Issue 3.

Just about every edition of Property Management contains one or more papers that seek in some way to evaluate the performance of a building and to compare it with other buildings within a portfolio or industry standard benchmark. This issue is no exception as it includes research papers which evaluate building performance in a number of ways. While in most regions benchmarking and comparison of properties is a worthwhile exercise, it has been recognised for many years that when benchmarking between regions we are not always comparing “apples with apples”. There are significant disparities in the way in which occupied space is defined (Warren, 2002). Most property performance is measured on a rate per metre square or per square foot. Indeed all income-producing properties have their rental determined by reference to the measured net lettable area or useable internal area. Unfortunately the issue for a property manager seeking to compare between different countries is the lack of any standard approach to defining the space to benchmark. This lack of any standard method of measurement can lead to very significant variations between regions of as much as 24 per cent (RICS, 2014) and result in considerable frustration when managing a large, multi-national portfolio.

This situation is set to change with the establishment of the International Property Measurement Standards Coalition (IPMSC), a group comprising 31 members representing property professional bodies from around the world (IPMSC, 2014). The objective of the coalition is to draft a single international measurement standard that can then be adopted globally in much the same way that we use international accounting standards to report on financial performance. At the time of writing the first consultation draft for office measurement has been issued for comment and by the time you are reading this issue of Property Management the consultation period will have closed and progress made on refining the standard. This is an important development for the property industry and will have far reaching implications for property managers as we transition from the long established standard of measurement to the new international standard. In cases where there are significant differences this will have implications for lease agreements, rental and capitalisation rates and operating cost recovery to name but a few. As the managers of buildings it is the property manager who will be at the forefront of any changes to the standard and, as such, it is imperative that we monitor the progress of the international standards and, where appropriate, have input into the establishment of the standard. Duly then will we get what we need and want!

Let us now turn to the exciting range of papers included in this edition of Property Management. Once again papers are drawn from a wide range of property management subjects including both commercial and residential management issues and from across Europe, Asia and Africa.

The first paper in this issue comes from Malaysia and is a good example of collaborative research with each of the four authors of the paper coming from different universities in Malaysia. The paper examines the role of information and communication technology (ICT) in managing retail property within the region. This is a very relevant research project given the rise of internet retail in many regions of the world. Perhaps surprisingly this research concludes that the demand for physical retail property will continue to grow with limited impact on demand from online retail competition.

The second paper is again a collaborative research paper, this time between Jinhuan Li from the Hong Kong Airport Authority and Paavo Monkkonen from the University of California, Los Angeles. Their paper focuses on the residential property market in Hong Kong and presents an analysis of the value property managers bring to the property market. Specifically the research seeks to attribute a value to the brand that one property management company brings compared to its competitors based on the quality and experience of the organisation. This paper has obvious implications for organisations promoting their property management services, not just in Hong Kong, but in many parts of the world where competition between service providers is strong.

Paper three in this issue is another residential property management paper. It is authored by Oluseyi Joshua Adeqoke from the University of Ile-Ile, Nigeria, and examines the critical factors determining the rental value of residential property in Nigeria. The paper presents an interesting insight into the property rental market in Ibadan, identifying factors such as room, the provision of burglar alarms and the number of toilets provided in multi-unit dwellings as critical factors in establishing rental levels. It is always interesting to compare the factors which influence the property market in developing regions with those in the more developed regions of the world, reminding us how factors some considered important in one region may be taken for granted in others.

Moving away from the direct consideration of property performance, the fourth paper by David Higgins from the Royal Melbourne Institute of Technology in Australia explores the effect that Black Swan Events have on the wider community and the property market. It considers those extreme and unpredictable natural and man-made disasters for which we are usually ill prepared. The paper highlights how the frequency of these events has increased over recent years and proffers some advice as to how property managers could prepare themselves for the extraordinary. These events can bring complete economic disaster from which organisations never recover. By implementing some strategic planning, however, perhaps the worst effects of these events might be mitigated and allow organisations to recover at a faster rate.

The last paper in this issue is from Michael McCord, David McIlhatton and Martin Haran from the University of Ulster, together with Terry V. Grissom from the Ely Research Institute, Atlanta, USA. This is the first part of what is a two-part paper. The second part will be published in the next edition of the Property Management (Volume 32, Issue 4). The paper, the use of strong and weak form sustainability to assist in rate development for the valuation of exhaustible resources, builds upon the established research on environmental economics and sustainability theory developed by Ramsey (1928), Weitzmann (2007) and Gollier (2010). The Ramsey-Weitzman-Gollier model focuses on discount rate development for environmental and long-term assets, linking discounted utility analysis embedded in the CCAPM model of Lucas (1978) to the policy concerns associated with the valuation of public and sustainable resources.

I know you find the range of research papers presented in this issue of Property Management interesting and hope they help to inform ongoing research and practice in property management. It is always pleasing to receive a diverse range of papers from around the world and papers from both developed and developing regions are always welcome.

Clive M.J. Warren

References

Gollier, C. (2010), “Expected net present value, expected net future value, and the Ramsey rule”, Journal of Environmental Economics and Management, Vol. 59 No. 1, pp. 142-148
IPMSC (2014), “About IPMS and IPMSC”, available at: http://ipmsc.org/ (accessed 1 February 2014)
Lucas, R. (1978), “Asset prices in and exchange economy”, Econometrica, Vol. 46 No. 6, pp. 1429-1445
Ramsey, F.P. (1928), “A mathematical theory of saving”, Economic Journal, Vol. 38 No. 132, pp. 543-559
RICS (2014), “Variation in property measurement globally”, available at: www.rics.org/Global/ipms_explained_infographic_240214_asn.pdf (accessed 1 February 2014)
Warren, C.M.J. (2002), “Benchmarking corporate real estate; fundamentals of measurement”, Pacific Rim Property Research Journal, Vol. 8 No. 4, pp. 277-285
Weitzman, M. (2007), “Subjective expectations and asset-return puzzle”, American Economic Review, Vol. 97 No. 4, pp. 1102-1130