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The essential premise underlying apartment building profitability

By Michael Laurie

Owners ensure that properties are measured and surveyed before they purchase them, while overlooking the fundamental importance of precise building measurements. But measurements and unit configurations fuel the financial engine of the apartment industry.

Whether the property portfolio includes hundreds of properties and millions of square feet—or a single apartment building or complex—critical financial decision-making is significantly influenced by measurements. Actual square footage, the fundamentals of floor plans, and various architectural unit configurations all contribute to apartment building value.

Taxes, insurance premiums, heating and cooling system capacities, maintenance contracts, leasing revenues, and flooring or general unit upgrades are all directly correlated to finance but are based on building measurements. In terms of insurance coverage, for instance, if the size of an apartment building is overestimated it can result in higher premiums. Conversely, if measurements are underestimated it can mean that the building has in inadequate insurance to pay for repairs or replacement in the event of a catastrophic event.

But while painstaking due diligence occurs before the purchase of property, the same effort is seldom applied to measuring buildings to record and chart physically measurable assets.

Lost in Translation from Blueprints to “As-Builts”
Frequently building owners will, for example, join two units to create a larger one. Or they will divide an apartment or other space into smaller units. In the process, assumptions are routinely made regarding configurations and sizes, without reliable visual references that clearly and accurately show how the units fit into the floor plate. The fact that various other building conditions also exist—such as venting, ductwork, mechanical rooms, or stairways—is often overlooked. But those components can substantially alter the size of a unit and its practical, functional potential. So apartment owners may later discover that the actual configuration is not what they had planned on paper.

Most baseline measurements are taken from builder blueprints, but actual “as-builts” often differ from the original plans. Practical changes and adjustments are an integral part of day-to-day construction practices. People on the ground doing the actual nuts and bolts work encounter unforeseen conditions, and they have to improvise solutions that may not be reflected in the architectural blueprints. Owners, designers, potential tenants, and other interested parties also contribute their creative or practical input after construction is underway, and those changes may become a reality that is not necessarily represented on the blueprints. That kind of leeway goes with the territory in the apartment building industry.

Measurements can even be altered through the simple act of copying or otherwise reproducing a blueprint or floor plan. Make a photocopy of plans, scan them into a computer, or fax them to another department or office and the scale of the original may shift as much as two percent each time it is copied. Over time measurements can be skewed substantially—along with the financial data that is based on those all-important measurements. Eventually those lost inches and square feet become misplaced dollars and cents, so financial oversight begins and ends with precise measurement of apartment building assets.

But the biggest culprit and the weakest link in the chain of measurement data transference arises during unavoidable transfers that are prone to human error. When plans or drawing board sketches are moved from pencil and paper representations in the field to computers or CAD software in the office, measurement accuracy suffers. No matter how careful architects, builders, and engineers are, it is virtually impossible to get a flawless transfer.

Most of the industry still depends upon measuring with handheld tapes and lasers, and upon the skillful transfer of critical field measurements to a more sophisticated environment such as computer software. But just as blueprints and “as-builts” lose important meaning in translation, major measurement shifts can and do occur between the construction site or apartment building drawings and calculations and the laptop or desktop computer.

Technological Advancements and Solutions
Reliance on apartment building measurements for financial decisions can be compared to the perception of value in relationship to printed currency. Cash value is generally perceived as what the money is actually worth in terms of buying power. But the face value approach does not take into account important fluctuations due to monetary forces like inflation and deflation. Make too many financial projections and investments without taking those powerful influences into account and it can lead to serious problems down the road. Similarly, minor measurement tolerances in apartment buildings may pose no great problems at first, but over time they can actually cut into profits.

Those who have a realistic understanding of this principal also have a keen appreciation for fresh data in the form of revised measurements. By perennially upgrading their benchmark data they avoid pitfalls that arise from inaccurate or obsolete measurements.

Technological progress is also being made to help bulletproof the process of measuring with greater flexibility and integrity. There are systems already in use, for example, that are a hybrid between the most advanced laser measurement technologies and sophisticated CAD software programs. These can be used with a portable laptop or smaller format PC device, so they can be taken into the field where measurements are first made. That means that they work without the inherent risks that occur when measurements undergo transfers from one form or format to another.

Because of their digital versatility and CAD capability, they can also serve as a platform for a variety of other tools and resources. The most recent innovations in measurement technology, for example, can generate three-dimensional digital format floor plans—both efficiently and affordably. These can, in turn, be used to produce comprehensive fire plans, Green Building energy use studies, and even convenient and engaging virtual tours deployed over the Internet for marketing purposes.

In the wake of a global economic crisis, government regulators are demanding greater transparency and visibility of financial assets. But those who invest in apartment buildings also need greater insight into their investments through clear and accurate reports and precise measures. Fortunately, as innovations emerge, the world of apartment building finance will no longer have to rely upon the accounting department equivalent of the abacus to do financial calculations. Apartment owners now have access to cutting edge state-of-the-art resources that are appropriately designed for the new millennium.

Michael Laurie, P.Eng. is President of PLANiT Measuring which provides onsite building measuring and BIM services. He can be reached at mike@planitmeasuring.com or 1-800-933-5136.