Standard Practices

If there is one positive trend to take away from the current credit crunch, it is that the real estate industry has truly become globalized. The U.S. housing market’s poor performance has impacted markets around the world, demonstrating the interconnected nature of real estate markets everywhere and driving home the value of international standards.Today’s global marketplace has also drastically altered the real estate landscape, requiring professionals to have a greater understanding of international economies and practices. Technology has made it possible to move capital around the globe instantaneously and to transport people and materials rapidly and inexpensively. Crossborder dealings have become not just common but the norm for both large and small real estate and construction companies worldwide. Conducting truly “local” business is now impossible. Development in any city around the world involves some degree of foreign capital, trade of materials and intercontinental expertise. In addition, many tenants—whether in shopping malls, office buildings or warehouses— are connected to overseas headquarters offices.As the real estate market shrinks, establishing international standards is rising in importance. On a materials level, the challenge lies in the variance of units of measure across countries and regions. On the accounting side, differences in valuation of land and buildings can cause inefficiencies in the global market. It is incumbent on real estate associations to mitigate these differences.These organizations have a unique opportunity to take a leadership role in setting international standards of measurement and valuation. Their diverse membership pools provide wide expertise that the associations can tap to become positive agents for change on issues crucial to the industry, which considers them impartial, trusted sources of information.Associations can also apply standards in more specific circumstances. The Royal Institution of Chartered Surveyors, or RICS, introduced defined-quantity construction-bidding practices around the world. It used those standards to create a system for the New York City Department of Design and Construction, for example, that obligates any project owner to provide measured material quantities to bidders. That ensures that all contractors have access to the same information and therefore a fair chance to win the job. More important, the system also yields a stronger project team in which the department shares risk with bidders.RICS also applied the concept when it worked with the Canadian Institute of Quantity Surveyors to develop a document of standards and measurements by which bidders price quantities, taking into consideration project drawings and specifications and contracting costs. Each contractor submits a lump-sum bid and construction schedule, including a defined mechanism for change management and quantity correction that can address unexpected conditions and reduce the risk of claims that would alter the final building cost, such as change orders or additional payments.Organizations can also create global standards by offering opportunities to earn internationally recognized certifications, and top real estate associations are joining forces in this effort, as well. The Society for the Environment, for instance, created the Chartered Environmentalist certification, but associations like RICS, The Institution of Environmental Sciences and the Institution of Civil Engineers support the program by offering certification to their qualifying members. All participating organizations agree to follow the requirements of the Society for the Environment, setting one of the first internationally recognized green-practice certifications.Many real estate professionals choose to belong to associations for networking purposes, but they should choose organizations that are in tune with global sentiment. As professionals outgrow their backyard in real estate and as capital flows continue to overlap, expanding globally is the only approach that makes sense. Globalization has connected the people and economies of the world in ways we once never dreamed possible. As we learn to embrace our global community, we have the exceptional opportunity to learn from each other and improve our business practices accordingly, thereby improving the industries of the world.