how to determine quality in real estate

3
lOCATION ANALYSIS _______________________ _ In what may be the first attempt at a quality measurement in the property sector, a consultant describes the Real Estate Norm as a means of com- paring locations. When you buy a diamond, you know exactly what you are getting because there's a certificate with it. But in the case of real estate, there is no guarantee. My company, in con- cert with J ones Lang W ootten and Debenham Jean Thouard Zadelhoff, looked into developing a system that would give crystal clear insight into the quality aspects of a real estate project. A good real estate manager knows that quality and money go together. They should be in balance. Once you have a better insight into the quality of real estate, it's much bet- ter and easier to negotiate. It's much easier to think about where to save costs, and it's much easier to com- municate with people about a pro- ject. In our strategic alliance with Jones Lang W ootten, the leading real estate agent in the world, we agreed on a system that enables easier Frans Diekstra is executive director of Starke Diekstra, project managers and construction cost consultants, based on Nieuwegein, The Netherlands. Hei s aI so a ,----- -- ---- --, lecturer in real estate at the University of Amsterdam. This article is based on his presentation to the Fall Seminar of IDRC Europe. 20 SITE SELECTION EUROPE 12/92 How to Determine Quality in Real Estate by Frans Diekstra communication in standard terms about real estate. Each company put up about 300,000 guilders to devel- op the system. We called this new tooI for appraising quality in office loc a- tions and buildings the Real Estate Norm (REN). It can be applied to both developed and undeveloped properties. Our first step was to create a sin- gle real estate language with stan- dard definitions that would be understood by architects, real estate agents, contractors and consultants. We had to define real estate terms as completely and unambiguously as possible. We agreed tha t the real esta te terms shouldn't be technical but functional. We came up with five primary aspects: functionality, com- fort and well-being, experience and design, safety, and continuity and exploitation. Figs. 1 and 2 are examples of how the REN system can be used to com- pare office locations and office Fig. 1 REAL ESTATE NORM FOR OFFICES I LIDCATION Primary aspects Aspects Sub aspects 1 Recognition/ldentity 1 Recognition/identity 1 shops 2 Facilities/amenities 2 catering/restaurants 3 banks 4 post office 3 Accessibility by motorway I 1 accessibility by motorway 1 distance to train station 2 train Irequency 1 Functionality 4 Accessibilitiy by public transportation 3 distance to ungerground/tram station 4 underground/tram Irequency 5 distance to bus station 6 bus Irequency 5 Airport 1 airport 6 Government parking standards 1 government parking standards lor development lor development 7 Parking 1 public parking 2 executive available parking lots 8 Expansion possibilities on the premises 1 expansion possibilities on the premises 9 Accessibility ol site by road 1 accessibility ol site by road 2 Comlort! 1 Obstruction ol view 1 obstruction ol view Weil being 2 Relaxation/recreational lacilities during lunch time 1 relaxation/recreational lacilities during lunch 1 Status/Image ol the neighborhood 1 status/image ol the neighborhood 2 Reputation ol the other companies in the 1 price ol offices in immediate vicinity vicinity 2 background ol other users 3 Compatibility with development town 1 compatibility with development town 3 EJl;periencel . plan/surroundings plan/surroundings Design 4 Representativeness 1 representativeness 5 Presence ol other office buildings 1 presence ol other office buildings 6 Layout ol premises/landscaping 1 layout ol other office buildings 7 Social environment/salety 1 social environment/salety 1 Public Salety 1 public salety 4 Safety 1 Public nature ol premises 1 parking 2 public right ol way over site 5 0ontinuity/ 1 Educational establishments in area 1 educational establishments in area Exploitatlon 2 Housing possibilities lor employees and its 1 housing possibilities lor employees and its availablity availability

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Page 1: How to determine quality in real estate

lOCATION ANALYSIS _______________________ _

In what may be the first attempt at a quality measurement in the property sector, a consultant describes the Real Estate Norm as a means of com­paring locations.

When you buy a diamond, you know exactly what you are getting because there's a certificate with it. But in the case of real estate, there is no guarantee. My company, in con­cert with J ones Lang W ootten and Debenham Jean Thouard Zadelhoff, looked into developing a system that would give crystal clear insight into the quality aspects of a real estate project.

A good real estate manager knows that quality and money go together. They should be in balance. Once you have a better insight into the quality of real estate, it's much bet­ter and easier to negotiate. It's much easier to think about where to save costs, and it's much easier to com­municate with people about a pro­ject.

In our strategic alliance with J ones Lang W ootten, the leading real estate agent in the world, we agreed on a system that enables easier

Frans Diekstra is executive director of Starke Diekstra, project managers and construction cost consultants, based on Nieuwegein, The Netherlands. Hei s a I so a ,-------------, lecturer in real estate at the University of Amsterdam. This article is based on his presentation to the Fall Seminar of IDRC Europe.

20 SITE SELECTION EUROPE 12/92

How to Determine Quality in Real Estate by Frans Diekstra

communication in standard terms about real estate. Each company put up about 300,000 guilders to devel­op the system.

We called this new tooI for appraising quality in office loc a­tions and buildings the Real Estate Norm (REN). It can be applied to both developed and undeveloped properties.

Our first step was to create a sin­gle real estate language with stan­dard definitions that would be understood by architects, real estate

agents, contractors and consultants. We had to define real estate terms as completely and unambiguously as possible.

We agreed tha t the real esta te terms shouldn't be technical but functional. We came up with five primary aspects: functionality, com­fort and well-being, experience and design, safety, and continuity and exploitation.

Figs. 1 and 2 are examples of how the REN system can be used to com­pare office locations and office

Fig. 1 REAL ESTATE NORM FOR OFFICES

ILIDCATION

Primary aspects Aspects Sub aspects

1 Recognition/ldentity 1 Recognition/identity

1 shops

2 Facilities/amenities 2 catering/restaurants 3 banks 4 post office

3 Accessibility by motorway I 1 accessibility by motorway

1 distance to train station 2 train Irequency

1 Functionality 4 Accessibilitiy by public transportation 3 distance to ungerground/tram station 4 underground/tram Irequency 5 distance to bus station 6 bus Irequency

5 Airport 1 airport 6 Government parking standards 1 government parking standards

lor development lor development

7 Parking 1 public parking 2 executive available parking lots

8 Expansion possibilities on the premises 1 expansion possibilities on the premises

9 Accessibility ol site by road 1 accessibility ol site by road

2 Comlort! 1 Obstruction ol view 1 obstruction ol view Weil being 2 Relaxation/recreational lacilities during lunch time 1 relaxation/recreational lacilities during lunch

1 Status/Image ol the neighborhood 1 status/image ol the neighborhood 2 Reputation ol the other companies in the 1 price ol offices in immediate vicinity

vicinity 2 background ol other users 3 Compatibility with development town 1 compatibility with development town

3 EJl;periencel . plan/surroundings plan/surroundings Design 4 Representativeness 1 representativeness

5 Presence ol other office buildings 1 presence ol other office buildings

6 Layout ol premises/landscaping 1 layout ol other office buildings

7 Social environment/salety 1 social environment/salety

1 Public Salety 1 public salety

4 Safety 1 Public nature ol premises

1 parking 2 public right ol way over site

5 0ontinuity/ 1 Educational establishments in area 1 educational establishments in area

Exploitatlon 2 Housing possibilities lor employees and its 1 housing possibilities lor employees and its availablity availability

Page 2: How to determine quality in real estate

buildings. We defined 130 points related to quality. For example, office workers find the view from their windows very important for their comfort and well-being. The REN form allows one to indicate on a scale of one to five how weIl the property does in regard to this qual­ity, or how far you can look out of the window without seeing another building.

The location of the building can also be appraisecl according to the same five primary aspects. For example, you can define safety of the area and nearby education opporhmities. You can define acces­sibility by public transport.

When we go through the building we have all sorts of aspects that are important for the future value of the building, for the flexibility of a company' in this building and for the comfort of the people working in this building. For example, how are the staircases built? Are they very narrow so that you can't carry computers down the stairs. Can two people pass each other on the stairs? Or is it a straight flight with a mini­mum width of 1.25 metres? You can do the same evaluation with entrance halls and lighting fixtures.

The analysis might uncover a problem with regard to flexibility. There may be no expansion possi­bility, which would be a warning for companies that are growing fast.

Wh en you have evaluated all aspects, then you can make a profile of the quality of your location.

The REN form allows easy com­parison of location. It is useful from both an investor' s and a user' spoint of view. For the investor it can be a check that the project will not decline in value as much as other buildings if there is arecession.

The appraisal form allows you to tailor the response to your compa­ny's needs. For example, you can add columns that allow you to determine how important a particu­lar factor is to your company and enables you to produce weighted values.

If you add a cost component to the form you can measure cost

Fig. 2

BI!JILIDING

Primary aspects

1 Functionality

2 Comfort! Weil being

3 Experiencel Design

4 Safety

5 Continuityl Exploitation

l OCATION ANAl YSIS

REAL ESTATE NORM FOR OFFICES

Aspects Sub aspects 1 Layout 11ayout 2 access

2 Skeleton 1 structure 3 vertical dimensioning 2 static loads 4 horizontaI dimensioning

3 Flexibility 1 movable partitions 3 exchangeability 2 unit size 4 reserves 1 iIIuminated signage

4 Communication 2 routing 3 sign posting 1 passenger lifts 2 stairway

5 Transport 3 secondary (emergency) stairway 4 internal transport of goods 5 external transport of goods 6 PTT Idata/electricity 1 main entrance 4 reception desk

6 Entrance/hall 2 access for disabled 5 facilities 3 hospitality 6climate 1 number of units 2 facilities

7 Sanitary equipment 3 finishing 41ayout 5 toilet for disabled

8 Working areas 1 privacy 2 free height 1 catering facilities

9 Specific rooms 2 technical/mechanical room 3 remaining space 1 parking 2 capacity

10 Parking facilities 3 exclusiveness 4size

- 5 maneuvering area 6 bicycles/motarcycles 1 temparature (in summer)

1 Physical comfort 2 temperature (in winter) 3 air movement 4 humidity

2 Light 1 level of daylight 2 artificiallight 1 Lt value

3 Insulation 2 Ha value 3 sun protection 1 individual control

4 Psychological factors 2 view 1 purity of air

5 Hygiene 2 germs 3 statie electricity 1 outside sound proofing

6 Acoustics 2 interior sound proofing 3 noise generation by Ihe mechanicaI equipment 1 gross building area 2 rentable area

1 Design factors 3 elevation 4 glass 5 daylight 1 wall

2 Finishing of working area 2 floor 3 ceiling 1 accentuating ent rance

3 Entrance/hall 2 spatiality 31inishing 4 reception desk

1 Individual Iloar hall 1 linishing

1 Entry 1 admission control (building) 2 admission control (parking)

2 Trespassing 1 looking capacity 2 alarm 1 prevention

3 Fire 2 alarm

4 Inconveniences 1 lightning 2 vandalism 1 rooIing

1 Choice ol material 2 elevation openings 3 elevation panels 1 interior 2 elevation

2 Maintenance 3 premisies 4 sanitary equipment

3 Spare material 1 replacement material 4 Waste disposal 1 room

12/92 SITE SELECTION EUROPE 21

Page 3: How to determine quality in real estate

T

CONFERENCE PROGRAM

MONDAY, MARCH 8

MORNING Plenary Session Speaker:: McKinley Conway Topic: The Significance of Global

Super Projects

LUNCHEON Speaker:: Rupert Pennant-Rea Topic: Global Economic Trends:

Challenges and Opportunit­ies for Global Super Projects

AFTERNOON Concurrent Programs • Section A . Planning and Manag­

ing Super Projects The immensity and complexity of

super projects creates unique project management challenges. This work­shop wil! provide guidelines and case studies of the planning and development of these massive pro­jects. • Section B: Singapore -

A Case Study This session will examine Singapore super projects and identify their roles in defining Singapore as one of the world's best examples of success­ful economic development. • Section C: Global Transportation

Links - Air and Surface Systems New approaches to creating truly

global transportation systems that integrate air and surface transporta­tion are the topic of th is workshop.

TUESDAY, MARCH 9

MORNING Concurrent Programs • Section A Project Finance and

Risk Management A panel of experts will provide

practical adviee on two critical ele­ments of super projects: financing and risk management. • Section B: Kansai - A Case Study

The Kansai reg ion of Japan is a world leader in the concept ion and implementation of super projects. This session wil! explain how the more than 50 Kansai area super pro­jects have been developed and how they relate to the area's economic development goals. The discussion wil! consider the importance of pub­!ic and private-sector partnerships as keys to success.

• Section C: Global Super Projects and Environmental Restoration This session wil! be devoted to

issues surrounding the dis pos al of nuclear waste and weapons, taxic waste and the restoration of the environment.

LUNCHEON Topic: "Creating the Future"

AFTERNOON Concurrent Programs

• Section A Achieving Effective Environmental Protection Leading environmental and eco­

nomie development experts wil! dis­cuss how to protect and possibly enhance the environment during the development of super projects. • Section B: Eastem Germany and

former East Bloc countries -A Case Study This session wil! consider current

and proposed super projects designed to meet the massive infra­structure needs of the former East Bloc areas. • Section C: Water and Energy

Super Projects This session wil! discuss innova­

tive projects and proposals to meet the growing global demands for water and energy.

WEDNESDAY, MARCH 10

MORNING Global Super Projects Forum (Plenary Session)

A distinguished panel of global strategists and super project sponsors and implementers wil! discuss the role of mass ive projecrs in global economie development. The panel will address the need for a process to identify and promo te the most criti­cal super projects for improving the quality of life around the world.

LUNCHEON • Presentation of the 1993 Conway

Safe Skies Award • 1993-94 Plans for the World

Development Council

AFTERNOON Tours of Super Projects in Singapore

The Singapore Ministry of N ational Development endorses the 1993 Global Super Projects Conference.

--- LOCATION ANALYSIS

against quality. The comparative analysis wil! enable you to see if you are overpaying for quality.

The form can be used to match supply and demand. For example, we are now working on a system aimed at a special market for specu­lative office buildings on behalf of accountants and lawyers. By know­ing the special needs and wishes of particular groups of people devel­op ers can better design speculative office space.

The REN system can be used for strategie analysis, deciding which buildings you should leave, or for which buildings you should renego­tiate rental values.

While the above describes a sys­tem for offices, we are now working to develop an REN system for ware­houses.

The system was developed initial­ly for use in Holland, but it can be adapted for use in other countries. For instanee, in Holland every employee needs to have a wind ow, which isn't applicable in other countries. 50, there are some changes per country, but the system can work.

We have asked people in the real estate market to comment on the system. About 100 consultants and investment companies in Holland have given their comments. The Dutch government has subsidised the system, and the EC has reviewed it and has indicated it might be a good system for defining quality in European projects.

It wil! take at least three years before it is European accepted. But af ter it has been accepted by the EC we will be able to certify a build­ing's quality. There will be a signed certificate stating the quality of the building. This will be a good guar­antee for both us ers and investors.

Note: The REN manual is avail­ab Ie in both Dutch and English, from Starke Diekstra Holding NV, Antwoordnummer (Freepost) 2858, 3430 WB Nieuwegein, The Netherlands or call313402 58758.

12/92 SITE SELECTION EUROPE 23