How poor spatial data raises financial and legal worries
Homes face huge price discrepancies – in some cases as high as six figures – due to the industry’s historically shaky spatial data. In the absence of policy to fix that, real estate has to turn to tech.
That’s the view of Harry Turner, UK managing director at Pupil, a company that, unsurprisingly, measures and maps spaces. With its two products, Spec (for residential) and Stak (for commercial), Pupil has been quantifying the scale of mismeasurement in the industry thanks to tens of thousands of building scans.
This summer, Pupil also partnered with Cushman & Wakefield to improve the speed and accuracy of digital measurements.
PlaceTech spoke to Turner about his work calculating just how badly mismeasured spaces have historically been, what the consequences are and how we can fix it.
Is inaccurate spatial data a big problem?
The average mismeasurement is 54 sq ft in London for all residential property types, according to Pupil’s research. With an average property size of 860 sq ft in the UK capital, and an average price of £543,500 (as of July 2022), that comes to a potential discrepancy of £34,100. While this is a back-of-the-envelope calculation based on just one of several factors that go into valuations, it does suggest a widespread problem.
Pupil found that the reported size of one in eight properties was off by at least 100 sq ft – the size of a bedroom. The potential discrepancy in one home was close to £350,000.
How might this affect real estate?
“With valuations being as crazy as they are, you need to know they’re underpinned on accurate data,” Turner says. Overstating the size of a building could put a seller at risk of legal action, in extreme cases, while understating it means missing out on possible valuation gains.
“If you buy it now and try and hold on to it for 10 years, you can guarantee, with the technology the way it’s going, you’re going to know exactly what size it is in 10 years,” he says. “And that’s going to be pretty scary if it has dropped off.”
More immediately, having accurate spatial data is vital for buildings that take sustainability and wellbeing seriously. Whether in calculating emissions per sq ft or monitoring carbon dioxide levels in the air, spatial accuracy matters.
What about commercial real estate?
Pupil estimates that commercial space is closer to 95% accurate, but risks arise from the fact that the sector deals with valuations in the tens or hundreds of millions, rather than thousands.
The company points to a 2007 case in Ireland where a buyer was awarded €350,000 because the 21,000 sq ft commercial building they bought was about 1,800 sq ft smaller than advertised.
Is this a global issue?
While Pupil’s research concentrated on the UK, Turner says that established markets like New York – where Pupil has an office – are similarly “massively inconsistent”. Cities like Dubai, with a higher concentration of new builds in a digital era, are more precise in their measurements.
“Where a high proportion of property is new builds, [tech] is very important for them, because there’s almost that ability to start up more afresh than, for example, London, where there’s a huge degree of older stock and it’s more of a resale market,” Turner says.
What should the industry do about the problem?
Turner wants to see stronger industry standards around data accuracy. The Royal Institute of Chartered Surveyors has set out standards for measurements, defining what should and should not be included floor plans, for example. But Turner argues that not enough attention is paid by industry bodies to the accuracy of the methods used for measuring spaces.
“Being able to say the measurement must be guaranteeable or verifiable to x degree or x percent should also be part of that consideration,” he says. “The majority of providers, particularly in the residential property market, cannot guarantee the level of accuracy of their measurements, and instead use disclaimers such as ‘for illustrative purposes’, etc.”
The RICS’s code of measuring practice discusses accuracy in its introduction, saying that a “required degree of accuracy” will vary depending on circumstances. “[T]he Group considers that the matter of accuracy in measurement exercises be left to practitioners, the professional measurers,” it says.
An RICS spokesperson said that the International Property Measurement Standards Coalition, of which RICS is a member, will launch its ‘All Buildings’ standard in November. RICS will update its own measurement standards after the launch. However, it did not say whether data accuracy would be on its agenda.
Meanwhile, Turner has little hope for legislation to tackle the issue given that the government’s concerns are elsewhere. As a result, it falls on the industry to effectively self-regulate and adopt technologies that produce accurate spatial data – even if that means finding out the size of your asset might be overstated in your favour.
Turner says: “We want to try to get to a point where those numbers don’t appear in the first place, [and] we’re not pushing water uphill against massively bloated numbers that people should never have seen in the first place.”