The shopping center area measurement norm and its owner’s approach
When I analyzed my portfolio and the way of measuring lease area in Polish shopping centers, I found that there are two approaches – “net worth” and “gross worth”. These terms were defined individually by the owners of retail properties. Every net and gross measurement was different, because they weren’t supported by any area measuring norm, depending on the contract the investors interpreted these terms differently each time.
Let’s talk about the two basic terms that are not defined by law, but are commonly used in the retail area lease field. The first one is the gross lease area of a single premise. It’s the area measured outside the perimeter of the walls of the dominating plane in a vertical cross-section (excluding underpinnings, socles). A wall between two tenants is included fifty-fifty in their areas. Empty spaces and mezzanines are included in the lease area. We also include walls adjacent with a common part of the building and exterior walls. The second term is the net area of a single premise. The methods of measuring and calculating are the same as in the PN-ISO 9836:1997 norm.
Surface measurement standard BOMA Retail
The only standard for retail facilities
The last 5 years of commissions, or even inquiries about retail area measurements, have definitely been the development of the BOMA Retail norm.
BOMA Retail is without a doubt the best norm of shopping center area measuring and the only one with the purpose of measuring retail areas. This norm results in the largest lease areas. BOMA Retail is without a doubt the best norm of shopping center area measuring and the only one with the purpose of measuring retail areas.This norm results in the largest lease areas. It describes the rules: from measuring and calculating both the lease (shop) and the common areas, to the method of calculating the factor that is taken into account in the net lease area.
What are shopping center managers doing?
Practice shows that the add-on factor in shopping centers is commissioned by very few, and only in a small percentage. Generally only a lease area measuring is commissioned, and it’s the only thing the owner gives an account of. It’s common practice to commission a measuring of single premises that are one of many shops in the center. When we have to measure the area of a shop, it’s necessary to walk in and measure the exterior walls of the shop from the other side. Walls coordinates from both sides are necessary to calculate the position of the wall axis – it’s not possible in any other way. What can you do when there’s no access to the neighboring shops? You only measure the commissioned shop, and then add a half of the wall’s width to the outer side on the measurements. The margin of error of such a measurement is between a few mm to a few cm. It depends on whether the wall width on the construction or final project corresponds to the real wall width of the building.
The differences can range from 0,5m2 to about 10m2 for one shop of an area of 50 to 1000m.The situation can get more difficult because of the fact that some shop walls are often covered in very elaborated drywall constructions. Defining (calculating is impossible in this case) the wall axis, or the lease area boundaries are next to impossible. If we add to it an outdated project, the differences can range from 0,5m2 to about 10m2 for one shop of an area of 50 to 1000m2. What’s strange is I get quite a lot of such commissions every year, from various Polish cities. Geodesists for unknown reasons often keep quiet about these issues, and the investors blindly believe them. If we measure such single shops throughout the years (often with different guidelines) and then want to combine it all together (make a floor plan), as many investors have themselves experienced, we’ll have to throw it all away. Then we have to measure the whole area of the shopping center from the beginning, basing on one area measurement norm.
The second issue is rent-roll, which is often not updated in cases of measuring a single shop, and as a result my total lease area doesn’t agree with the rent-roll. In my opinion the rent-roll should be in one Excel file together with the areas calculated by a geodesist – they can be different worksheets, but in the same file. I think it’s better to acquaint yourself with the table received from the geodesist, or to ask him to add his calculations to the rent-roll Excel file – otherwise large differences may occur.
The sacred rule – 1 Excel file for lease purposes!
However, at the beginning stage of commissioning a shopping center area measurement nobody speaks about measuring the whole area of such a large building. I’d like to point out the crucial mistake that is making more Excel sheets for commercial purposes! It happens very often and comes from the fact that those people don’t want to take a moment to acquaint themselves with the Excel sheets provided by BOMA. There are many formulas, references that are often deleted by people working in leasing, who then insert data without the use of formulas. It results in large differences, which are made even bigger by the next people working on those files. The effect doesn’t need to be explained – such situations occur very commonly, and I’ve dealt with them together with the investors for years.
The line of deciding people
The next issue of the investors’ approach – during talks about measuring shopping centers they accept the BOMA Retail norm, I send offers based on this norm, the offer is accepted by the management and after a while a person I’ve never talked to about the norm choice before contacts me and asks me to measure an area leased by one tenant, but according to a norm different than BOMA. Usually the measurement needs to be made using some guidelines – probably old records from the lease agreement. I often don’t even know and am unable to find out if the measurement is commissioned by the building owner or the commercialization department. I realize that in corporations decision making regarding such subjects takes a long time and a lot of people on many levels, but the lack of communication between departments in a real estate company is only bad for the owner and manager of the property.
Why does it happen?
In my opinion, not enough people take part in the important even that is the change of property portfolio. That’s probably why certain things are omitted, not taken care of, not thought about or even ignored when they’re wrong. That’s what I think after 10 years of work experience, observation and collaboration with thousands of people working in property management. It comes from the fact that area measurement is not given proper attention to. The popular belief is that on the property portfolio scale it’s not very important. However, when we take a 3% difference in the lease area measurement of a 500000m2 property portfolio, it gives us 15000m2 of lease area. What does it mean in money terms? Those who are reading this article know how much they’re wasting themselves. During my trainings we’ve often heard people talking about how they were discouraged from attending such trainings. To quote those advisors: “What are you going there for, they’ll tell you how to increase the office area by 0,5m2. What will we get out if it?”. After the training people said they hadn’t realized how large the areas they lost every month were!
If such an occasion occurs when buying/selling a property or a property portfolio, it has to be approached in a complex way! The best moment for measuring both the lease area and the common area is the moment of changing the shopping center’s owner, or after a general renovation. Besides the lease area measurement a measuring of area for property tax purposes and architectural inventory should be commissioned. I wish you successful transactions of many property portfolios.
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Author: Adrian Hołub
Translation: Julia Pająk
Measure it soon!