Many FMs participate in benchmarking programs to see where they stand in comparison to their peers. To obtain good benchmarking results you need to normalize the data in a consistent manner, so you can compare your costs with the other participants. The common normalization method is to divide the costs by the area (e.g., maintenance dollars per square foot), but what type of area measurement should you use?
I recently attended a benchmarking conference and we checked how many different standards were used in the benchmarking exercise standards to calculate area. It turned out that four different standards were used by this group, and their facilities were all of the same facilities type corporate headquarters. Office buildings use rentable area as the primary measure of their square footage, but retail buildings generally use gross leasable area, which is measured very differently than rentable area.
Let’s take a look at the standards, but first, a general comment. Professional organizations, for many very valid reasons, will update their space measurement standards. BOMA published its first Floor Area Measurement Standard in 1915 and IFMA published its first Area Measurement Standard in 1995. They both have continued to evolve. However, owners and tenants will rarely re-measure the space to comply with the new standard since that would involve changes to the lease or other terms.
Here are just a few of the more frequently used measurement standards:
- 2010 BOMA Office Standard Office Buildings: Standard Methods of Measurement is the latest version of the BOMA method for measuring and calculating the usable and rentable areas of office buildings in the United States that were built after 2010.
- The 1996 BOMA Standard Method of Measuring Floor Area in Office Buildings has been superceded by the 2010 BOMA Office Standard but is still in widespread use for buildings built between 1996 and 2010.
- The Real estate Board of New York (REBNY) standard is used in leasing space in office buildings located in the New York metropolitan area.
- The Greater Washington Commercial Association of Realtors GWCAR Standard is used in leasing space in office buildings located in the Washington, D.C. metropolitan area.
- The IFMA Standard published by the International Facility Management Association is used mostly for owner occupied facilities, mostly in North America.
- The Unified Approach for Measuring floor Area in Office Space is published jointly by IFMA and BOMA. Since this isn’t a standard, we don’t see many clients using it but it will probably be a starting point to provide more consistency between the IFMA and BOMA standards.
The last standard listed shows a new direction that is encouraging to the entire facilities industry. It is much more likely that future standards will speak a common language and communicate the area measurement process more consistently—but right now they don’t.
Even as standards improve and more accurately reflect what they are trying to measure, they work best for the building that is using them. When one tries to compare one buildings performance to that of another (as one does in the benchmarking process), if one is using one standard and others may or may not, the results will become much less meaningful. With new standards emerging at a frequent pace, and given that most FMs don’t have the time to re-measure their buildings, we are left with a cornucopia of benchmarks using square area as an “uncommon” common denominator.
We have seen enough buildings that have been re-measured to realize that for certain types of buildings, their old and new numbers could be as much as 15% apart. When translated to benchmarking, that would mean that the benchmark metric (e.g., utility consumption per sq. ft.) may be as much off as 15%, which is a very significant difference.
Let’s look at just one example of a corporate HQ measurement using the IFMA and BOMA standards. Under the IFMA Standard, “facility rentable area” is measured by calculating the “interior gross area”. IFMA calculates the interior gross area by subtracting the depth of the exterior walls. Then to determine IFMA rentable area, major vertical penetrations such as columns and elevator shafts are subtracted. But the most important definition relates to the floor boundary at the exterior wall. Under the IFMA Standard you measure from where the plane of the floor intersects the exterior wall. The BOMA Standard uses the concept of “Dominant Portion”. If the wall is 50% of more glass then you measure from the inside surface of the window and if the wall is less than 50% glass you measure from the inside finished surface of the exterior wall.
Our corporate HQ has two foot deep windowsills and chilled beams around the perimeter but less than 50% to reduce energy consumption. The table below shows the differences:
However, this isn’t the biggest difference between these standards. Let’s look at how they vary when you consider common areas. The IFMA Standard does not address building common areas as part of the rentable area. BOMA requires the pro rata allocation of building common areas to all of the tenants of the building. Floor common areas are the areas on a particular floor which are available primarily for the use of the tenants on that floor, as for example, restrooms and equipment closets. Other common areas such as the lobby, conference rooms, exercise centers, daycare, and building support areas are distributed to all. The table below shows the differences for our corporate HQ building:
One of the most important reasons for recent standards collaboration is benchmarking within the industry. For benchmarking to be effective it must be designed to show data in a consistent manner to identify industry best-practices. Until the facilities industry is consistently measuring space, using distinct and defining terms, benchmarking will not reach its potential as a tool. This is an issue affecting facilities anywhere in the world.
So how do you develop good comparisons between buildings? Most of the time, the best comparison metric is cost per gross square foot which works fairly well if you occupy the whole building (there is less variation with gross measurements than with rentable and other forms of net area). But if you lease half of the building the only value you may have is the rentable area. You’ll need to ratio the net or rentable value up to an equivalent gross area.
Another good way to make sure your comparisons are appropriate is to the use filters to compare your costs only with others using the same measurement standard. The example below is courtesy of FM BENCHMARKING, and shows that you can turn on a filter to select the common area measurement standards.
In conclusion, you can see how the correct measurement standard will impact your relative ranking with other buildings in a very significant way. Using the correct measurements, and comparing with others using the same standard will a produce more similar peer group—a much more effective way of using benchmarking tools.