IN THIS ISSUE Asia’s future cities 16 / The real value of ideas 30 / How resilient is your city? 38

BEWARE,ALL WHO ENTER

Balancing risk with reward in real estate investment / 20

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ASK THE BIG QUESTIONS Q1 2016

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Q1 2016_MODUS ASIA 03

16 GROWING PAINSPlanning for Asia’s cities of the future

20 COVER STORYGreater returns or stable income – managing risk in real estate investment

26 TAKING IT TO THE NEXT LEVELMeet the first RICS-certified BIM Managers

30 WEALTH OF IDEASPutting a value on intellectual property

34 TIME TO MIX THINGS UPHow can we sustain our insatiable appetite for the hard stuff?

38 COME HELL OR HIGH WATERWhat constitutes a resilient city?

42 NO GREAT SHAKESChristchurch making slow progress five years on from devastating earthquakes

06 DIFFERENCE OF OPINIONIs Hong Kong’s housing market now overinflated and ready to burst? We hear two points of view

07-15 NEWS IN BRIEFEssential industry news, advice and information for RICS members

08 THINKING: RAEFER WALLISThe co-founder of AOO Architecture urges us all to join the rammed-earth revolution

13 PRESIDENT’S COLUMNMartin J Brühl FRICS ponders the true meaning of acting in the public interest

“The quality of the urban fabric is one of the biggest subjects for the next generation. It goes from the grand scale, with

connectivity and infrastructure, right down to the building”BEN CHA, GROSVENOR ASIA PACIFIC

SMART CITIES, P16

Views expressed in Modus are those of the named author and are not necessarily those of RICS or the publisher. The contents of this magazine are fully protected by copyright and may not be reproduced in any form without the prior permission of the publisher. All information correct at time of going to press. All rights reserved. The publisher cannot accept liability for errors or omissions. RICS does not accept responsibility for loss, injury or damage or costs that result from, or are connected in any way to, the use of products or services advertised. All editions of Modus are printed on paper sourced from sustainable, properly managed forests. This magazine can be recycled for use in newspapers and packaging. Please dispose of it at your local collection point. The polywrap is made from biodegradable material and can be recycled.

MODUS ASIA Q1 2016RICS.ORG/MODUS

Contents

44-45 CAREERSNegotiating the right pay package; Arcadis’ Phil Moss FRICS

46 BUSINESSAre your systems at risk from hackers?

47 LEGAL 101Learning to swim in the flood of water-related services companies

48 BRAIN GAINEffective risk management strategies

50 MIND MAPAnshuman Magazine FRICS, Chairman of RICS South Asia, on India’s smart cities

PLUS48 Events

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A world of value in every square.

To deliver exceptional value, we look at your real estate needs from every angle. Combining in-depth local knowledge with far-reaching globalinsights, our teams find the real estate opportunity that’s right for you.Down to the last square metre.

jll.com.hk

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Q1 2016_MODUS ASIA 05

@WeatherupSJ Interesting Article on @LinkedIn in this months Modus Excellent Tips and Ideas to make the most out of your Profile. #RICSmodus

@Rachael_Hogg2 Reading through the latest issue of #RICSmodus over a nice leisurely Saturday morning coffee. Some really interesting topics to think over!

@Oxford_Urban Congratulations on 50th issue of #RICSmodus magazine!

@Mone_87 The only post I like to see through my door. @RICSnews #RICSmodus #RICSconstructionJournal #GeekMode

@jakesoden Bit of reading in the garden while the suns out. @RICSnews @RICSCPD @RICSNorth #modus #buildingsurveying

@CalcoQS Interesting to see how the #power sources have changed in recent years via @RICSnews

@RICSnews // #RICSmodus

FOR SUNDAY Editor Oliver Parsons / Art Director Christie Ferdinando / Deputy Editor Andy Plowman / Contributing Editor Alex Frew McMillan / Senior Designer Jess Campe / Creative Director Matt Beaven / Account Director Karen Jenner / Advertisement Sales Director Emma Kennedy / Head of Display Advertising Marlene Stewart / Asia Advertising ROF Media, Bryan Chan, +852 3150 8912, byan@rofmedia.com / Production Manager Michael Wood / Managing Director Toby Smeeton / Repro F1 Colour / Printers ROF Media / Cover Image Robert Frank Hunter / Published by Sunday, 207 Union Street, London SE1 0LN wearesunday.com / For RICS James Murphy and Kate Symons [UK] / Jeanie Chan [Asia]

Join the

debateIf you have any comments on any of the

stories on Modus Asia, the editorial board welcomes you to send them in – in Chinese

or English. We will publish them in their original format with an English translation.

Get in touch at editor@ricsmodus.com

BEARING IN MINDSir, With the distressing statistic that men in Britain aged 20 to 49 are now more likely to die from suicide than any other cause of death, I wonder if there is room in the pages of Modus to bring attention to the issue of mental health and our profession. Mental health is something we hardly discuss – in public or private – which is a significant part of the problem itself.

I live with a mental health condition that was aggravated in 2015 by the stress of my APC final assessment. Deciding whether or not to tell your colleagues about your problems can be difficult, but the support of my employer, the Portman Estate, has been vital to my recovery.

Undoubtedly more needs to be done to raise awareness of mental wellbeing. LionHeart offers services including trained counsellors and legal advice, while Modus provides a way to reach RICS members and encourage them to talk about the issue. As a profession we should be standing together to end the stigma of mental health-related problems.Greg Walsh MRICS, London

Feedback

USEFUL RICS NUMBERS CONTACT CENTRE +852 2537 7117 Enquiries / APC guidance / Subscriptions / Events / Training / Bookshop REGULATION HELPLINE +852 2116 9713 CONFIDENTIAL HELPLINE +44 (0)20 7334 3867 DISPUTE RESOLUTION SERVICES +44 (0)20 7334 3806 UK SWITCHBOARD +44 (0)20 7222 7000

MODUS ONLINERead the latest and all previous issues of Modus Asia at rics.org/modus. To unsubscribe your hard copy and receive a digital edition only, email your name and/or membership number to ricsasia@rics.org with the subject line “Unsubscribe Modus Asia”.

TAKE GOOD CARESir, As a surveyor who worked for 37 years in a local authority, devising adaptations with social services, I have, even in retirement, a passionate interest in the subject of later-life housing (Search for a silver lining, p34, Q4 2015).

In particular, having also cared for my late mother, it became clear that a large problem in keeping the elderly in their own home is giving authorised access to carers. Based on my experience, I have devised a control-centre-based access control system that is subject to a patent (pending).

I would be most interested in any suggestions on how this project could be taken forward, perhaps to the benefit of LionHeart members?CR Newton AssocRICS, Cheltenham, UK

MEMBERSHIP BARDSir, Readers may be interested to know that in November 2012, the RICS awarded the title of Honorary Chartered Surveyor to the Scottish poet, Robert Burns, the only posthumous membership granted by the Institution so far.

As 2016 is the 400th anniversary of the death of the much greater English bard, William Shakespeare, it would be more than fitting for the RICS to grant him membership, too.Anthony H Ratcliffe FRICS, London

Thank you for your letter. Although Modus has no official position on the relative merits of both these great British bards, we can at least argue that Burns’ training as a land surveyor probably better qualifies him for honourary membership than dear old Bill.

如对亚洲版 Modus 的内容有任何回应， 欢迎以中文或英文电邮至编辑委员会。

阁下之意见将以原文（辅以英译本）刊登。 电邮地址为 editor@ricsmodus.com。

06 RICS.ORG/MODUS

Bubble trouble or just hot air? What’s your view? Join the discussion on LinkedIn at rics.org/linkedin, or email editor@ricsmodus.com

DIFFERENCE OF OPINION

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Intelligence News / Reviews / Opinions / Reactions

RICKY WONG FRICS MANAGING DIRECTOR, WHEELOCK PROPERTIES

According to pAst experience, A bubble mArket includes high levels of gearing, multiple outstanding property mortgages, overheated speculative investment and a shortage of housing supply. Despite the recent rise in

interest rates, the mortgage rate is still relatively low in Hong Kong, and is likely to only increase gradually. In addition, banks are running stress tests on the ability of mortgage applicants to pay, in which they assume an increase in rates of at least three percentage points.

After the government imposed a set of cooling measures, the speculative market faded. What we see is strong and genuine demand for self-use and long-term investment, not signs of an overheating market.

No residential mortgage loans were in negative equity as of September 2015, according to the Hong Kong Monetary Authority, and about 60% of properties in Hong Kong are mortgage-free. The unemployment rate remains low at 3.4%. The affordability of prospective buyers is still stable.

The property market is always driven by demand. The annual supply of new flats was just 12,000 from 2011 to 2015, below the average of 19,000 a year. The government is striving to achieve private housing supply of 86,000 new flats for the next four to five years.

Hong Kong property is attractive to both Chinese and multinational companies as part of their global investment portfolio and for business expansion. There have been several record-breaking transactions for commercial properties recently, showing strong confidence in Hong Kong.

We anticipate that prices in will adjust healthily within a reasonable range. But we are not in a bubble.

DANIEL SO STRATEGIST, CMB INTERNATIONAL SECURITIES

much hAs been sAid About hong kong’s record-high price-to-income and price-to-rent ratios. Although these ratios undoubtedly indicate that the city’s housing is

expensive, it is not entirely appropriate to compare current figures with historical averages, due to the widening wealth gap and unprecedented low interest rates.

The real signs of this bubble are panic buying and irrational valuations. In the first half of 2015, as housing in Hong Kong was becoming increasingly unaffordable, demand for small flats surged to the extent that price differentials became irrational. The news that suburban, entry-level flats in City One Shatin were selling at higher prices per square foot than the centrally located, middle-class housing at Taikoo Shing came as a shock.

For 30 years, Taikoo Shing has traded at higher prices than City One Shatin. The change was a result of buyers focusing on the lump-sum down payment instead of the unit price. As long as they could afford the down payment, they were willing to pay a premium to “get on to the train” and own a flat. This was typical panic buying from weak buyers who cannot afford flats that are larger or in better locations.

In any bull market, be it financial or real estate, smart buyers get in early, while not-so-smart people are late to the party. They jump in at the riskiest moments. When these investors join the party, paying irrational entry prices, you know it’s time to get out.

So, how will this bubble end up? My bet is that it will deflate in an orderly fashion rather than burst, barring another global financial tsunami.

Hong Kong’s housing market is overinflated and the bubble is about to burst. Discuss.

Hong Kong housing market hit, p13

Q1 2016_MODUS ASIA 07

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New property measurement standard comes into effect

RICS Property Measurement Professional Statement, which updates the Code of Measuring Practice 6th Edition, became mandatory for RICS members from 1 January 2016. The statement incorporates the new international property measurement standard (IPMS: Office Buildings) and ensures that clients benefit from consistency wherever in the world they commission office measurements.

Surveyors will be required to follow the Professional Statement whenever they undertake any new measurements, unless instructed otherwise in writing by the client, or where local laws may stipulate an alternative.

To support implementation, RICS is developing a conversion tool that will allow users to compare IPMS with various local standards. As part of this work, Director of Technical International Standards Alexander Aronsohn FRICS met with professional bodies in Australia, Indonesia, Hong Kong and Japan to discuss relevant conversion formulae.

The IPMS conversion tool will enable clients of RICS members to benefit from both the local approach and the international standard. Guidance, frequently asked questions and web training classes are also available to support uptake of the new Professional Statement.

IPMS is being led by a coalition of 73 standard-setting bodies, including RICS. It seeks to address inconsistencies in measurement standards, which can lead to deviations of up to 24% depending on the method used.

For more information, go to rics.org/ipms.

WITH LATTICEKengo Kuma’s replaceement design will be partially built

from wood and promises to sit

more discreetly in its setting

THE DATA

Intelligence

NEWS IN BRIEF

rics.org/modus

CONSTRUCTION COSTS OF HIGH-RISE PRIME OFFICE SPACE ($/M2)

Beijing has a Bird’s Nest. Now Tokyo will be home to “the Hamburger”.

The Japan Sports Council has selected a new design for the main stadium for the Tokyo 2020 Olympic Games, after controversially ditching the plans it initially commissioned from British- Iraqi “starchitect” Zaha Hadid.

The new design, which features a curving facade with three graduated tiers, comes from Kengo Kuma, one of Japan’s best-known contemporary architects. Kuma often uses natural materials in his buildings, and the 80,000-seat stadium will have a roof that is partly made of wood.

Prime minister Shinzo Abe’s administration threw out Hadid’s plan after the cost doubled to ¥252bn ($2.1bn) – which would have made it the world’s most-expensive sporting venue. Hadid blamed soaring labour costs in the Japanese capital. Kuma’s design will cost ¥149bn ($1.27bn), within the government’s ¥155bn ($1.32bn) cap.

Hadid’s appointment, as an outsider, was attacked from the outset within Japan and it was essentially a foregone conclusion the re-tender would go to a local proposal. She has complained of “shocking treatment” by the Japanese authorities and claims the new design has “remarkable similarities” with her original plan, which was derided in some quarters for looking like a bike helmet or “a turtle waiting for Japan to sink so that it can swim away”.

WHAT’S YOUR VIEW on the new Tokyo Olympic stadium design? Email editor@ricsmodus.com

TOKYO OLYMPICS FLIPS FROM HADID’S HELMET TO HAMBURGER

JAPAN®

UK€902

Sydney Dublin Munich Doha Singa-pore

Sao Paulo

Dubai BangaloreHongKong

LondonNewYork

Switzerland€822

Spain€622

Netherlands€625

Germany€600

France€598

Sweden€500

Malta€461

Romania€333

Slovakia€239

2014

484k

39.1% 39%31.9% 28.5% 29.5%

34.8% 34.7%29%

13.2%24.8%

2015

524k

2013

324k

2012

246k

2011

220k

2010

226k

£1MillionProperties

26%22%

18%13% 12%

-5% -7% -7%-11%

-22%

$4,840

$4,560

$3,900

$3,350

$3,240

$2,960

$2,950

$2,190

$2,110

$2,080

$780

100

80

60

40

20

12/07 06/08 09/08 12/08 06/09 12/09 06/10 12/10 06/11 12/11 06/12 12/12 06/13 12/13 06/14 12/14 06/15

Apartment sales

Apartment rentals

Villa salesVilla rentals

Source: Turner & Townsend

Singapore SãoPaulo

Dubai BangaloreNew York

London Sydney HongKong

Dublin Munich Doha

US UK Sweden AustraliaGermany France China Malaysia

Residential consents

Non-residential consents

2%4%10%11%11%22%26%32%

NZ$80m

NZ$60m

NZ$40m

NZ$20m

NZ$0

NZ$20m

NZ$40m

NZ$60m

NZ$80m

09/10 09/11 09/12 09/13 09/14 07/15

Lifts andescalators

Fabric repairs and

maintenance

Site management

resources

Security Cleaning and environmental

Mechanical and electrical

services

Electricity Management fee

Major works

69p47p

146p163p

104p

155p

17p43p 31p

London (median cost per ft2)

Rest of UK (median cost per ft2)

46p29p

45p61p76p

64p

12p34p 23p

2010 2011 2012 2013 2014

NorthAmerica

Average dispute values ($m)

64.5 11.4 10.5 14.4 9 11.9 34.3 13.7 29.6 16.2

64.5 11.4 53.1 12.4 39.7 14.3 41.9 14 85.6 12

7.5 6.8 10.2 8.7 27 12.9 27.9 7.9 27 10

56.3 8.3 112.5 9 65 14.6 40.9 13.9 76.7 15.1

33.3 10 35.1 11.7 25 6 27.5 6.5 38.3 18

Average length of dispute (months)

Asia

UK

Continental Europe

MiddleEast

$16.1bnThree Gorges Dam, China

$1.8bnGreat Belt Fixed Link, Denmark

$3.1bnDenver International Airport

$21.1bnThe Channel Tunnel

$1.6bnBudapest Metro Line 4

$13.4bnBoston’s Big Dig

HOT TOPICPercentage of a country’s population that thinks climate change is “not a serious problem”

Source: YouGov

08 RICS.ORG/MODUS

A s an architect who specialises in “healthy” buildings, one of my biggest challenges has been

tracking down high-performance, non-toxic materials. It has been such a painstaking experience that, after 15 years, my firm now runs one of the world’s largest databases of building materials.

One of the most sustainable construction ingredients is right under our feet: rammed earth. It can be generated locally, engineered to match concrete in strength, and is highly cost effective. What’s more, the walls are intended to be left bare both inside and out, eliminating the need for dozens of often toxic finishing materials.

I first came across rammed earth with my co-founder at A00, Sacha Silva, more than 10 years ago. Our client had asked us to source the most ecologically responsible structural material for a resort in China.

Modern rammed earth has come a long way from its origins. The old-fashioned process used surface soils that contain precious organic matter, which should be used for agriculture, not construction. It also contained high percentages of clay, which is unstable and undermines the strength of walls. Modern rammed earth uses only inorganic subsurface soils, which can be engineered for reliability and predictability.

The process of ramming earth walls mimics that of sedimentary stone. You compress one layer on top of the other. The material buffers swings in interior humidity, largely eliminating the risk of mould. Finally, it is also incredibly beautiful. The problem? It originally had very poor insulation properties, and the closest experts were a continent away.

Our research eventually led us to Canada and Meror Krayenhoff, one of the world’s leading experts in rammed earth. Canada’s cold climate had pushed him to pioneer an insulated form called Sirewall. He was also building the most beautiful walls we had seen.

Fortunately, our client agreed to fund the training to localise the technique. The resort, Naked Stables, became the first modern rammed-earth structure in China, which also soon had the first insulated multistorey rammed-earth building in the world in the form of the three-floor River House, which sits in the middle of the Yangtze river. Another project in China, the Yellow River Tourist Center, is now the world’s largest rammed-earth structure.

Several years ago, we brought rammed earth to Sri Lanka, while working on “House No. 5,” one of the classic manors in the middle of Galle Fort, a Unesco world heritage site. The original walls had been built of coral 400 years ago, mined from a nearby reef. Given the mild climate, we opted for non-insulated rammed-earth walls, a culturally appropriate and ecologically responsible replacement for the usual brick and concrete being used in Galle now.

We are happy to see that the approach being adopted by others. To create the optimal rammed-earth mix, the first step is to visit local quarries and analyse the soil samples. We originally used cement as a binding agent to replace clay. In a well-engineered mix, you can achieve the strength of concrete using half the cement. But our aim is to eliminate cement entirely, using other binders. You compress each layer before adding in the next layer of soil. Steel rebar is also added during the ramming process – using 33%-50% less steel than concrete walls. Once stripped, the walls are left exposed and require no finishing.

Rammed earth does come at a cost – in North America, the process is about 15% more expensive than normal construction. But in Asia, with cheap land and plentiful earth to mine, we believe we can match the cost base of “normal” construction methods.

I like that rammed earth fits the “Reduce, Reuse, Recycle” ethos. When a building has served its purpose, it will be possible to crush it and return it to the earth – or “re-ram” it into a new building.

One of the most sustainable construction ingredients is right under our feet. Rammed earth is local, can be

as strong as concrete and is highly cost effective

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Members and staff show their charitable side

Our professionals and staff members in Hong Kong and Japan have recently given something back by helping to raise funds for people in need in their local communities.

On 28 November 2015, nine members and staff in Japan joined a charity run organised by the Run for the Cure Foundation to help raise funds for education and research into finding a cure for breast cancer.

Japan Council Chair Paul Watkinson FRICS, who initiated the idea, commented: “This charity run is proof that chartered surveyors can and should act as role models in society. We conduct ourselves in the public interest, applying our professional knowledge of the built environment and ethical approach to business. However we can also show our passion to personally step up and act to support initiatives that help drive change, investment and support for the communities in which we live, work and play.”

Meanwhile in Hong Kong, staff at RICS’ Hong Kong office dug into their pockets to help children by making a donation to the United Nations Children’s Fund. East Asia customer service manager Cecilia Tsang led this campaign. “Education is the key to holistic and sustainable development of both individuals and society,” said Tsang. “We acknowledge Unicef’s mission in helping children to survive and thrive, from early childhood through adolescence.”

The fund will go to Unicef’s Education for All programme, which provides quality basic education to children in China.

WE LIKE

ONE THING I KNOW

What’s that? An ambitious concept to use recycled plastic for a new type of road surface. Dutch construction firm VolkerWessels believes roads could be cheaper and quicker to construct using lightweight plastic instead of asphalt – and require less maintenance – thanks to the material’s greater resistance to corrosion, weather and extreme changes in temperature. And, as asphalt is responsible for around 2% of all road transport emissions, plastic roads could be a more environmentally friendly option, too.How would it work? Prefabricated off site, the sections of road would be formed with space for cables and utility pipes below the surface. At this stage, the roads could also be integrated with anything from traffic sensors, to measuring equipment or connections for street lamps. The idea is to fabricate the roads from plastic waste that is usually incinerated – and one big source could be the estimated 8bn kg floating around in our oceans. Won’t they be too slippery? “The next stage is to build it and test it in a laboratory to make sure it’s safe in wet conditions – for example, we could also apply sand or crushed stone to the surface,” says Rolf Mars, director of VolkerWessels’ roads subdivision, KWS Infra. The company hopes to build the first fully recycled thoroughfare within three years, and the city of Rotterdam has signalled an interest in running a trial.volkerwessels.com

PlasticRoad

KERB APPEALPrefabricated

sections would contain voids to

carry services such as cables

and drainage

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US UK Sweden AustraliaGermany France China Malaysia

Residential consents

Non-residential consents

2%4%10%11%11%22%26%32%

NZ$80m

NZ$60m

NZ$40m

NZ$20m

NZ$0

NZ$20m

NZ$40m

NZ$60m

NZ$80m

09/10 09/11 09/12 09/13 09/14 07/15

Lifts andescalators

Fabric repairs and

maintenance

Site management

resources

Security Cleaning and environmental

Mechanical and electrical

services

Electricity Management fee

Major works

69p47p

146p163p

104p

155p

17p43p 31p

London (median cost per ft2)

Rest of UK (median cost per ft2)

46p29p

45p61p76p

64p

12p34p 23p

2010 2011 2012 2013 2014

NorthAmerica

Average dispute values ($m)

64.5 11.4 10.5 14.4 9 11.9 34.3 13.7 29.6 16.2

64.5 11.4 53.1 12.4 39.7 14.3 41.9 14 85.6 12

7.5 6.8 10.2 8.7 27 12.9 27.9 7.9 27 10

56.3 8.3 112.5 9 65 14.6 40.9 13.9 76.7 15.1

33.3 10 35.1 11.7 25 6 27.5 6.5 38.3 18

Average length of dispute (months)

Asia

UK

Continental Europe

MiddleEast

$16.1bnThree Gorges Dam, China

$1.8bnGreat Belt Fixed Link, Denmark

$3.1bnDenver International Airport

$21.1bnThe Channel Tunnel

$1.6bnBudapest Metro Line 4

$13.4bnBoston’s Big Dig

BUDGET BUSTERSThe most over-budget infrastructure construction projects in the world, adjusted for inflation

Source: Statista

“The threat that the internet is killing off the high street is a particularly outdated myth”

Sean Gillies MRICS Head of UK retail, SavillsThere were a number of myths in retail that took hold during the height of the recession,

however, in this ever-evolving industry, we need to move on. The threat that the internet is killing off the high street is a particularly outdated myth.

We know that the biggest share of retail sales still takes place in physical stores and numerous retailers are now reporting

total retail sales, as opposed to like-for- like online and in- store separately, showing the growing appreciation that both are intrinsically linked.

As the market develops, there will be further opportunities for retailers to bed down their multi-channel operations.

10 RICS.ORG/MODUS

Last year, at the age of 47, I breathed a secret sigh of relief. After two decades of

struggling to manage full-time work as a chartered surveyor and being a mother, my youngest son headed off on a gap year and I was finally free. Free, I thought, to concentrate on my career, to finally take advantage of my 30 years’ experience in construction and property and look for new and exciting opportunities.

What I actually found was that I was considered “past it”. For the first time in my life I’ve applied for job after job after job without success. Last week, a quantity surveyor exactly half my age was taken on for a job we’d both applied for. Now that’s either poor recruitment filtering or there’s something else going on. Since then I’ve been trying to work out whether I should just go and work in Tesco instead.

I’m not sure what the problem is. I think I have a fairly young outlook on life, I keep myself up

to date with new technologies and developments, I’m open to new ideas, I don’t even look my age – so people tell me.

Do employers look at someone in their late 40s and wonder if they’ll get a return on their investment? The generation before mine tended to retire early – my dad retired at 50 on a full civil service pension – but, for people my age, the reality is that we’ll need and, in most cases, want to work into our late 60s and perhaps longer.

My conversations with other “ageing” surveyors suggest that this is not a gender issue but I do think there’s a connection with diversity. As an industry with huge skills shortages we have to let go of our stereotypical images of what an ideal quantity surveyor or valuer looks like and accept that good people come in all shapes, sizes, colours, genders and ages.

ARE YOU INTERESTED in writing a future Secret Surveyor column? Email editor@ricsmodus.com

Land measurement standard coalition calls for new partners

RICS has formally joined the International Land Measurement Standard (ILMS) coalition, an association of 14 professional bodies united and leading on efforts to create a standardised land reporting framework.

Land issues are high on the agenda of the development community. Land and property transactions rank high on the global corruption index, and 70% of land and property in the developing world is classed as unregistered.

For example, in Kenya, six in 10 land transfers are viewed as corrupt, while a study carried out in India estimated that $700m of bribes are paid annually by users of the country’s land administration services.

This creates an extremely volatile land market, in which internal and external investors can never really be sure what exactly they are investing in, or if it even exists.

By creating a standardised land reporting framework that can be used as a platform for land market investment, and to help nations build more complex land administrative systems as necessary, the ILMS coalition aims to increase market confidence and instil client trust in this area.

The coalition is now reaching out to national and international bodies to help grow the coalition. Several key events in the global land professional calendar will have ILMS roundtable meetings.

If your national or regional organisation has an interest in land, cadastre, land administration or mapping, then it is important that your voice is heard. Download the coalition declaration form from rics.org/ilms and join the ILMS coalition.

Email internationalsupport@rics.org for more information and with your complete declaration.

SECRET SURVEYOR“Do employers look at someone in their late 40s and wonder if they’ll get a return on their investment?”

Asian countries have secured seven out of the top 10 places on Cushman & Wakefield’s latest manufacturing index. But rising labour costs in China are forcing a growing number of

manufacturers to reconsider where they locate their operations.

The firm’s report, Where in the World? Manufacturing Index 2015, noted that as China, the world’s largest manufacturer by output, experiences rising labour costs, its cost competitiveness is being reduced. As a result, manufacturers are looking towards the lower-cost regions of Malaysia and Vietnam.

“The markets of Asia-Pacific continue to remain attractive to manufacturers and this shows in our latest index rankings,”

commented Richard Middleton, Cushman’s head of occupier services in EMEA and Asia-Pacific. “Malaysia has retained top place in our main index for the second year running, while Vietnam tops our growth index and is maturing as a manufacturing destination.”

Similar conditions are driving the market in Singapore. Growth in manufacturing output has pushed it into the world’s top 30 for the first time, and this is nearly all driven by science or tech- based manufacturing.

NEWS IN BRIEF

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LABOUR PAINSRising costs in China are

forcing outsourcers to look elsewhere

Q1 2016_MODUS ASIA 11

PAINTING THE TOWN RED, YELLOW, GREEN...Can a lick of paint really turn around the fortunes of a neighbourhood? The question was put to the test last July when artists Germen Crew applied this extraordinary paint job to the working class barrio of Las Palmitas in Mexico. The area has in the past been seen as dangerous after dark, but a new sense of pride in the neighbourhood has reportedly led to inhabitants taking a more active role in its security, and is leading to an upturn in the area’s fortunes.

MULTI-COLOURED WHITEWASH of urban poverty, or art for all? Email your thoughts to editor@ricsmodus.com

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Hong Kong’s property prices, which have shot up higher than the city’s signature skyscrapers, have finally fallen. The change in fortunes has led market participants such as Li Ka-shing to predict a downturn for the year, and often beyond.

Official figures show that prices fell 3% in November compared with the previous month – the biggest drop since the global financial crisis. The data, from the Rating and Valuation Department, show a pickup in pace for a decline that began in August. CentaLine’s private study shows a 7.5% drop from the peak in September.

After the introduction of quantitative easing in the West, Hong Kong and Singapore both enacted countermeasures to deter an influx of “hot money.” Whereas Singapore’s prices have fallen almost 15% since mid-2011 – one of the longest corrections in the city’s history – nothing has dented Hong Kong’s impervious market.

That has left Hong Kong with the highest residential property prices in the world. The average price in the city is $1,416/ft2, reports CBRE, 38% higher than second-place London at $1,025/ft2 – and almost double the price of third-placed New York.

The rapidly slowing economy in China, coupled with the advent of higher interest rates in the US, appear to have finally undermined confidence. Hong Kong’s interest rates are directly linked to those in the US because the Hong Kong dollar has a fixed peg to its US counterpart.

Li Ka-shing, reaffirmed recently as Asia’s richest man by Forbes, said a 10% decline in Hong Kong home prices is “nothing special”, adding that “home prices will climb as demand soars but fall when demand is squeezed in a depressed economy”.

BULLETPROOF HOUSING MARKET FINALLY HIT

HONG KONG

UK€902

Sydney Dublin Munich Doha Singa-pore

Sao Paulo

Dubai BangaloreHongKong

LondonNewYork

Switzerland€822

Spain€622

Netherlands€625

Germany€600

France€598

Sweden€500

Malta€461

Romania€333

Slovakia€239

2014

484k

39.1% 39%31.9% 28.5% 29.5%

34.8% 34.7%29%

13.2%24.8%

2015

524k

2013

324k

2012

246k

2011

220k

2010

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26%22%

18%13% 12%

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12/07 06/08 09/08 12/08 06/09 12/09 06/10 12/10 06/11 12/11 06/12 12/12 06/13 12/13 06/14 12/14 06/15

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HOT OR NOT DESKSFive largest increases and decreases in prime office occupancy costs between Q1 2014 and Q1 2015

Source: CBRE

Dublin,Ireland

Downtown Seattle,

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Belfast, UK

Helsinki,Finland

Calgary,Canada

West Kowloon,

HongKong

Monterrey,Mexico

BuenosAires,

Argentina

Moscow,Russia

Public interest: two banal words that combine to form a comPlex construct – complex and yet imprecise. It is also frustratingly difficult to put into words. RICS’ founders made a noble attempt, set out in our Charter. They talked of usefulness and public advantage. These are words of their time. To the Victorians, usefulness was the application of utilitarianism, a prevailing moral philosophy that society should maximise the utility of all individuals to achieve the greatest happiness for as many as possible.

At a time of unprecedented investment in public works, the wishes of the majority may have seemed synonymous with the public advantage. But is this always true? In the 21st century, should professionals serve the dominant market forces to maximise profit and shareholder dividends? Or should they take a wider view of the public interest, which may lead them to act in line with the opinions of an enlightened minority?

This is not an academic debate, as the accountancy profession has discovered. An appeal tribunal relating to a high-profile case in the UK recently affirmed that accountants should act in the public interest. The same tribunal commented that there was a lack of clarity in how accountants should discharge these responsibilities. The case involved millions of pounds in fines and years of legal wrangling. Much of this may have been avoided had clearer public interest guidance been available.

It is unlikely that codes of professional conduct alone will be adequate to define the public interest. There also remains a question about how in practice professionals can be expected to judge what is in the public’s best interests, not least as they rarely – if ever – have access to all the relevant information. And what if their client’s instruction conflicts with the broader public good?

Furthermore, is the public interest a purely human concept or does it have ecological and environmental dimensions? Even assuming that public interest relates only to human considerations, is the interest of today’s public the same as that of future generations? If not, does today’s professional owe her duty to a future public, or to those who can hold her to account in her own lifetime?

Such questions matter to every RICS member. It is in the public interest for us to look afresh at these two far from banal words. Follow Martin on Twitter @MartinJBruehl

BALANCING INTERESTS

The quest to act to the

public’s advantage is

not just philosophical, it has real-life

implications

MARTIN J BRÜHL FRICS RICS PRESIDENT

“Should we take a wider view of the public interest?”

14 RICS.ORG/MODUS

Hong Kong AnnualConference 2016Unlocking the silver hair market –our future is now

Friday 20 May 201609:00-17:00

Grand Ballroom, Grand Hyatt Hong Kong, 1 Harbour Road, Wanchai

7HOURS

Highlights of conference

ricshk-conference.org

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• High level dialogue forum speakers about the outlook for one of Asia’s most coveted ‘megatrend’ markets for its ageing populations

• Industry insights on how to gain from investment opportunities now and in future

• Key market trends and takeaways from successful international and local show cases

• How to capitalize with scale on “silver dollars” for a new economy

• Private sector models for investing, developing and operating the silver hair market

Joyous Living Project The Tanner Hill Senior Citizen Residences Scheme Project

Joyous Living Project The Tanner Hill

Q1 2016_MODUS ASIA 15

NEWS IN BRIEF

rics.org/modus

RICS plays a key role at COP21 climate talks

At last December’s 21st Conference of the Parties (COP21) in Paris, RICS joined governments, building and construction organisations and funding agencies to launch the Global Alliance for Buildings and Construction.

The alliance is a worldwide building sector network backed by the governments of France, Germany, Japan, United Arab Emirates, Cameroon and Senegal among others.

RICS has joined the alliance an initiating partner in its capacity as a global professional body. In particular, RICS professionals can play a central role in mobilising capital for investment in energy efficient and sustainable buildings.

Asia-Pacific government recognition update

During Chinese President Xi Jinping’s October visit to the UK for meetings with prime minister David Cameron, RICS met with decision-makers from China’s Land Survey and Planning Institute – the government department connected to the Chinese National Land Resources Bureau.

Land reform and resource management are key to the current Chinese five-year plan and representatives from both organisations discussed the links between RICS’ international standards initiatives, the valuation of development land, smart cities and sustainable development.

In Australia, RICS has been approved by the Professional Standards Councils for a scheme that will enable RICS valuers to limit their liability.

CEO Sean Tompkins, meanwhile, met with New Zealand’s housing minister, Nick Smith, to discuss developing the profession and housing supply in the country.

Asia is an increasingly fraught place to invest in real estate, according to the 2016 Asian edition of the Urban Land Institute’s (ULI) Emerging Trends in Real Estate. That has left some property players wondering if Asia’s six-year bull run may be coming to an end.

“It’s a difficult environment in which to deploy capital,” commented one of the interviewees – none of whom are identified by name. “There’s no low-hanging fruit. There are no particularly obvious trades. I struggle with it, and if you try to put normal

assumptions around acquisitions, it’s pretty hard to make them make sense in most markets.”

Industrial and warehouse property has the best prospects for both investment and development, the report found, and was the only category universally agreed on as “good” for 2016. Hotels are essentially on a par with offices, but both are rated only as “fair.”

Tokyo, like last year, is the most-attractive city for both real-estate development and investment. Sydney, Melbourne and Osaka occupy the next three slots.

The report is based on interviews with around 350 executives from property developers and investment funds. It is compiled each year by PwC for the ULI.

There is an increasing interest in emerging markets, and Ho Chi Minh City, Jakarta and Manila in particular have attracted attention. But the report notes that, in practice, very little foreign capital ultimately finds its way into any of those markets.

Amid turbulence for currencies such as the Indonesian rupiah, which is at its lowest ebb since the Asian financial crisis, some investors are watching for signs of distress among developers with US dollar debt.

“There is a time to invest and a time to wait,” one investor said. “We think some of these countries may be heading for a correction and we’re just getting ourselves ready.”

END GAMETokyo has

maintained its position as

Asia’s top city for investment,

but the sun might be

setting elsewhere in

the region

Intelligence

HAS ASIAN PROPERTY REACHED THE TOP OF THE MARKET?

INVESTMENT

PAGETURNER

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it details the economic benefits of using concrete in green building, as well as outlining ways in which concrete can be easily and affordably reused.

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whole life-cycle of construction projects, such as the benefits of thermal mass, or using concrete to improve water quality, reduce the urban heat island effect, or reduce construction waste. Productivity Press, $137

WHAT ARE YOU READING? Email editor @ricsmodus.com

GREEN BUILDING WITH CONCRETE: SUSTAINABLE DESIGN AND CONSTRUCTION GAJANAN M SABNIS

16 RICS.ORG/MODUS

GROWINGPAINS

This is the Asian century. And it is taking a form that is both encouraging and disheartening. The continent is essentially under construction and able to shape

its own landscape. But the one it has been most successful in forming involves blocks of city skyscrapers obscured by smog.

It is an outcome that Asia’s population will refuse to accept. The idea that buildings should become more environmentally friendly is a given. But the idea that the built environment should be liveable, smart, sustainable, poses questions the region is finding hard to answer.

To prosper, there is no dispute that Asia had to urbanise and expand. But as the continent moves from emerging to developed economies, those in the real estate and construction industries realise they need to make sense of what Asia has already got in terms of its urban environments, and decide where to go from here.

“Sustainability in an urban context means a city that works well for its citizens in the present, without causing problems for them and the rest of the world in the future,” says William Taam MRICS, executive director of Asia operations at Arcadis. Taam outlines some of the prerequisites: transport systems that enable people to navigate the city quickly and affordably; a clean water supply; strong social structures; institutions that are predictable and effective; good public health; a well-educated workforce; and an environment that is conducive to strong economic performance.

It is worth noting that economic performance comes at the end of this list. For Taam, terms like smart, liveable and sustainable are merging when looking at modern urban planning. It is an issue highlighted in Arcadis’ first Sustainable Cities Index, which rates 50 of the world’s most prominent cities. Here, the headline ranking is divided into three subcategories: People, Planet and Profit, which correspond to social, environmental and economic sustainability.

The quest is to find the perfect balance across these three perspectives of sustainability and, according to the report, although cities across the world are performing better for being sustainable for profit and planet, they are failing to sufficiently meet the needs of their people. »

How can we ensure that Asia’s rapidly developing

cities evolve to suit the needs of future generations?

Words Alex Frew McMillan Illustrations Francesco Bongiorni

二十一世纪是属于亚洲的世纪，但它却一方面鼓舞人心，另一方面又令人沮丧。亚洲正处于构建阶段，并将形成自己的特色。不过，其最成功之处却是建立了烟

雾笼罩、高楼林立的城区。这是亚洲人所不愿见到的情况。建筑物变得更环保本应是理所当然的，但建筑环境应宜居、智能、可持续这个理念，却为这个地区提出了许多难以解答的问题。亚洲要繁荣，就必须推动城市化及进行城市扩张。但随着亚洲从发展中经济体转变成发达经济体，从事房地产和建造业的人士会发现，他们必须搞清楚就城市环境而言，亚洲现在已拥有什么，并决定从哪个方向去去发展。A rc a d i s亚 洲 执行 董事 、皇 家特 许测 量 师学 会 会员谭 永 康 MRICS 表示：“城市的可持续发展是指城市在现在要与居 民共融，并在将来也不会对居民及世界其他地方带来问题。”谭先生罗列了一些必备条件：拥有快捷、可负担的交通系统；洁 净的供水；良好的社会结构；可预测及高效的体制；良好的 公共卫生；受过良好教育的劳动力；以及有利于维持强大 经济绩效的环境。值得一提的是，经济表现列于清单的末尾。对于谭先生而言，在现代城市规划中，智能、宜居及可持续开始融为一体，并成为Arcadis第一份“可持续城市指数”中的其中一项重点。“可持续城市指数”对全球 50 座最主要城市作出评分。在这里，“可持续城市指数”排名细分为三个子类别：人、地球和收入，三者分别对应社会、环境及经济的可持续性。其目的是要在可持续发展的三个方面找到最佳平衡點。报告显示，虽然全球城市在收入及地球方面有较佳的可持续性，但在满足人的需要方面却差强人意。亚洲的分化情况最为明显。首尔、香港及新加坡凭出色表现而跻身 10 强，而持续性最差的城市则包含亚洲发展最快的一些城市，例如雅加达、马尼拉、孟买、武汉和新德里。这些城市由于受到旧有的重工业影响，导致城市无序扩张和污染等局面。那么，亚洲要发展真正宜居的城市，有什么要学习呢?事实上, 亚洲各地面对着截然不同的挑战。上海的人口预计到 2030 年将增加 54% 至 3000 万人，因此将面对巨大的压力。但在日本,却可能要采取必須但有违常理的城市规划方案。日本是面对 小型市镇人口大规模下跌的第一个国家。根据政府数据预 测, 在 2050 年之前，日本将有超过 60% 居民区人口至少减半, 更有20% 变成无人居住。为此，日本国土交通省制定了“2050 鸿图计划”，鼓励改善紧凑型城市的网络。本质上而言，该规划旨在缩短区域城市之间 對於共享服务和资源的需求。»

如何确保快速发展的亚洲城市能 满足下一代的需要?

成长之痛撰文 Alex Frew McMillan 插图 Francesco Bongiorni

Q1 2016_MODUS ASIA 17

Xxxxxxxx

18 RICS.ORG/MODUS

Smart cities

Asia provides the starkest divergence. Seoul, Hong Kong and Singapore perform well enough to make the top 10. However, the least-sustainable cities include some of the fastest-growing metropolises on the Asian continent: Jakarta, Manila, Mumbai, Wuhan and New Delhi. These fall short on aspects such as sprawl and pollution, the result of old and heavy industries.

So, what can Asia learn as it attempts to deploy truly liveable cities? The challenges are extremely diverse. Yes, the pressure on cities such as Shanghai will be immense as its population surges 54%, to 30 million by 2030. But Japan, for example, may be the harbinger of a necessary but counterintuitive approach to urban planning. It is the first nation to face a wholesale decline in the population of its smaller cities and towns. Government data predicts that, in the years through to 2050, more than 60% of Japan’s inhabited areas will lose at least half of their population, and 20% will become uninhabited.

To that end, Japan’s lands and infrastructure ministry has developed its “Grand Design 2050”. This focuses on encouraging compact cities with improved

networks. In essence, the plan aims to shrink the gap between regional cities that must start to share services and resources.

“Regional cities are dying off,” says Jon-Paul Toppino, managing partner for real estate at PAG Real Estate Investment, about the 2050 scheme. “But I do feel the next 20 years for Japan will not be as bad as people think.” He points to the country’s world-leading spending in research and development per capita as signs that its cities will work more intelligently at the highest-end of the value chain.

In the Arcadis ranking, Seoul scores highly in the people category, the area that has, to date, drawn the least attention from futurists and city governments. Good health and the second-best transportation network in the world make it highly liveable.

In another report, devoted just to nations that border the Pacific, the Asia Pacific Economic Cooperation (APEC) commissioned PwC to put together Building Better Cities: Competitive, sustainable and liveable metropolises to look at what works, and what does not, in 28 cities across the region.

Again, there is a clear pattern of the most-developed nations producing the most-sustainable cities. Toronto and Vancouver rule the roost, while Singapore and Tokyo – the best-planned cities in Asia – are placed next. Auckland and Melbourne also fare well – arguably, New Zealand and Australia lead the world in green planning and sustainable building and city development. Again, sprawling Seoul also scores high, with Osaka ranking above Hong Kong – a relatively lowly 11th place for a city frequently depicted as a model of the highly dense, vertical pocket city of the future.

Hong Kong fared particularly badly in terms of its wealth gap, its “GINI rankings” showing that one million residents, or one in five, live in poverty – mainly as a result of high real-estate costs. The APEC report claims that greater income equitability actually boosts economic growth.

This would be a lesson well learned by economies such as Malaysia, Taiwan and Thailand, which are in the middle of the pack in terms of their urban development. They have an urgent need to adapt. Bangkok, Manila and Jakarta are already snarled with traffic and seemingly endless in their expansion.

PAG 房地产投资公司的房地产管理合伙人 Jon-Paul Toppino 在谈到 2050 规划时表示：“区域城市正在相继消失，但我认为在未来 20 年，日本的情况不会如人们想象般糟糕。”他指出，日本的人均研发开支全球领先反映出日本城市将会在价值链的最高端上更高效地运转。在 Arcadis 排名中，首尔在“人”这个类别中取得高分,但該类并未引起未来学家和城市政府的太多关注。此外，良好的卫生及名列全球第二佳的交通网络都令其成为非常宜居的城市。在针对太平洋邻近国家的另一份报告中，亚太经济合作组织(APEC) 委托普华永道 (PWC) 编撰“建设更美好城市：有竞争力、可持续发展及宜居的都市”报告中了解在区内 28 个城市中，什么是可行的，什么却行不通。拥有最多可持续发展城市的发达国家均有其一套清晰的模式。多伦多和温哥华领先全球，而新加坡和东京这两座规划最佳的亚洲城市则紧随其后。奥克兰和墨尔本同样表现出色，可以说，新西兰和澳大利亚在绿色规划及可持续建筑物和城市发展 方面领导全球。不断扩张的首尔同样获得高分，大阪的排名 也高于名列第 11 位，常常被视为高密度、高楼林立的未来城市的样板的香港。香港贫富差距问题严重，其“基尼排名”显示，香港有 100 万 人（或1/5人口）贫穷人口，造成这种状况的主因在于房地产价格 高昂。亚太经济合作组织的报告指出，收入公平性有助于推 动经济增长。这对于比上不足、比下有余的马来西亚、台湾和泰国来说，无疑是一个很好的教训。它们亟需作出调整。交通问题及看似无止境的扩张已令曼谷、马尼拉和雅加达等城市焦头烂额。精明的投资者已开始留意到这些情况。爱马仕投资管理公司私人市场总监 Chris Taylor 表示：“为了我们投资者的利益，令建筑可适应未来需要，重点在于确保其建立在可持续发展并具社会包容性的环境。”他相信，这涉及到地方营造、审视位置的舒适度、其基建和周遭的公共空间。换句话说，建筑物并非那么重要。重要的是建筑物环境、社区, 连 通性 及 空间感。因此可能是 时候 从 地 理和 时间角度考 虑更广义的发展。Taylor 表示，只有 37% 机构投资者认为养 老 基 金 应 考 虑 受 益 人 的 物 业 投 资 会 否 提 高 或 降 低 其 退 休时的整体生活质量。养老基金的投资期极长,因而最有筹码坚持要求所投资的

llThe way to future-proof buildings – for the benefit of our investors – is to make sure they are in a sustainable, socially inclusive environmentll

CHRIS TAYLOR Hermes Investment Management

Q1 2016_MODUS ASIA 19

为了我们投资者的利益，令建筑可适应未来需要，重点在于确保其建立在可持续发展并具社会包容性的环境

CHRIS TAYLOR 爱马仕投资管理公司

The smart money is starting to take note. “The way to future-proof buildings – for the benefit of our investors – is to make sure they are in a sustainable, socially inclusive environment,” says Chris Taylor, head of private markets at Hermes Investment Management. He believes this involves placemaking, looking at the “amenity value” of the location, its infrastructure and the public realm that surrounds it.

The building, in other words, is not that important. It is the built environment that matters, the community, the connectivity, the sense of space. It may be time to consider the broader reaches of development both in geographic and temporal terms. Taylor says that only 37% of institutional investors feel pension funds should consider whether their property investments will improve or detract from the overall quality of life experienced by beneficiaries when they retire.

Pension funds, with their very long time horizons, are in prime position to insist that the property investments that they back must enhance the location in which they fit.

Developers are beginning to heed that call. Global property group Grosvenor is putting those concepts to work in its current target markets of Tokyo, Hong Kong and Shanghai, aiming to ensure that any new development in which it engages links that project with its surrounds.

That is a concept lacking, for instance, in Hong Kong’s West Kowloon, where skyscraper condos for the wealthy sit atop huge luxury shopping malls. Entering the Elements Mall above Kowloon Station from street level is almost impossible, a transgression that Grosvenor vows to avoid in its own buildings. “The quality of the urban fabric is one of the biggest subjects for the next generation,” says Ben Cha, CEO of Grosvenor Asia Pacific. “It goes from the grand scale, with connectivity and infrastructure, right down to the building.”

Will Asia’s construction and development industries take a similar view? Most companies currently look only at the bottom line. They are going to need to embrace sustainability in all its forms to drive economic growth and liveability, while retaining a city’s diverse mix and heritage. n

物业项目必须能提升其所位处的地区。开发商开始响应诉求。全球房地产集团 Grosvenor 将这些概念纳入东京、香港和上海等现有目标市场，并致力确保其参与的任何新发展能将项目与其周遭联系起来。这个概念正正是香港的西九龙所欠缺的。在这里，为富裕人 士提供的摩天大楼公寓坐落于巨大的高档购物商场之上。 从 大街中进入九龙站上方的圆方商场绝不容易，Grosvenor 誓言自己的大厦要避免这种情况。Grosvenor亚太首席执行官 Ben Cha 表示：“城市结构的质量是下一代最大的课题之一。它涉及上宏观规模、连通性和基建，下至建筑物等各个层面。”亚洲的建筑和发展是否持相似的看法？多数公司目前只会留 意底线。他们将须接受可持续发展的各个方面，以推动经济增长和宜居性，同时保持城市的多元结构和传统。n

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Q1 2016_MODUS ASIA 21

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It was a $364bn meeting. That was the value of global real estate controlled by the investors around the table at RICS’ Parliament Square HQ, where representatives of leading global

investment funds had convened for the first session of the RICS Global Investment Risk Management Forum. They had been invited by RICS President Martin J Brühl FRICS to exchange best practice and perhaps lay the foundations for an industry-endorsed approach to investment risk management.

As head of international investment management at German fund manager Union Investment Real Estate, risk management is a primary preoccupation for Brühl. That is one reason why he has chosen to make it a key theme of his year as RICS President. The other is that he feels RICS is ideally placed to make a difference, as an internationally respected body and a source of professionalism, thought leadership and ethics for investors around the world.

“Eight years after the crash, we are now talking about the potential overheating of the market,” Brühl explains. “I thought it was important to bring people together to show the world that we have learned, that we do have best practice in risk management. I think RICS is the right forum.” »

Risk management

Property is an inherently risky investment class, as the last global

downturn proved. How that risk

is managed is one of the most pressing

challenges facing the profession

Words Katie Puckett Illustration Robert Frank Hunter

SHOW

THE WAY

ME

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Q1 2016_MODUS ASIA 23

Risk management

Brühl’s initiative is particularly timely as investors flock into real estate markets around the world. Banks,

insurers and pension funds must all meet tougher regulatory requirements imposed since the crash, but property is not as stringently regulated as other asset classes and its risk management procedures are less well developed. This is the gap that Brühl wants RICS to address. As the current cycle wears on, investors will inevitably be drawn into taking riskier positions to secure improved returns, which could leave them exposed in the absence of robust risk management processes. RICS members cannot dictate the highs and lows of market cycles, nor predict them with any certainty, but they can ensure their clients are in the best position to weather any storms.

This is not just a matter for multi-billion-dollar investors, points out Richard Stokes, RICS’ Head of Global Corporate Affairs: “Since 2007, equity market volatility and low yields have prompted greater investment interest in real estate as an asset class. In many markets it is now considered a safe haven for capital.” Much of this is the pension savings of millions of ordinary people: “Pension funds have been steadily increasing their investments in real estate over the last decade, so how investment risk is managed ultimately affects all of us.”

Risk is not an inherently bad thing – it is, after all, the flipside of reward. Every investor or fund has a particular appetite or level of tolerance for risk, and it is often the role of an RICS professional to identify this and devise a real estate strategy that delivers the desired level of returns within acceptable parameters. There is no such thing as a risk-free investment – even cash will lose its value over time due to inflation – and there are many factors that can influence volatility. At a macro level, there are the ups and downs of global economics, political unrest and currency fluctuations that affect every investment and, at a micro level, the vagaries

of local markets, individual assets and tenants. There are risks associated with bricks and mortar, but also with the way a transaction is funded. If an investment is highly leveraged, the impact of even tiny fluctuations in value will be magnified – great if prices rise, but disastrous if they fall, as the global financial crisis demonstrated.

“People focus on the real estate cycle and they forget the external factors,” says Philip Cropper FRICS, chairman of CBRE Capital Advisors in the UK. “If you go back to 2007, the market had increased the level of risk by leveraging higher and higher. They were doing extraordinarily well with very little equity if the market went up, but got wiped out pretty quickly when it went down.”

Generally speaking, property is regarded as less stable than bonds but less volatile than stocks. The crucial difference is that investors in the equity markets have access to extensive, highly transparent data on the performance of their assets, compiled from millions of transactions. Properties, on the other hand, change hands less frequently and may be valued only once a year. “Compared with other investment options, real estate is highly illiquid, unique and often opaque,” explains Philip Barrett, global chief investment risk officer at Pramerica Real Estate Investors and a founder member of the RICS forum. “Real estate is a cyclical business that does not have the standard risk metrics that exist in other investment classes.”

As every building is unique, risk management in real estate is much more labour intensive: “If you were to look at one of our investment committee books, it would include extensive details about the asset, location, rent roll, lots of pictures – everything you would expect if someone is considering investing in a piece of real estate,” says Barrett. “But there will be a separate section on what we consider to be the key risks and the mitigants against that risk. The fun bit about real estate is that you have to do that on an asset-by-asset basis.”

Barrett has noticed a much greater focus on risk management from investors, owners and regulators, and he believes RICS has an important role to play. “If I go to an emerging market in Asia and I learn that someone is RICS accredited, that gives me some serious confidence. That’s the kind of power RICS can bring to it – there aren’t that many international organisations in our industry.”

Capital is now flooding into property, particularly into core markets in Europe, as historically low interest

rates across Europe, the US and the Asia-Pacific region are driving investors to seek higher returns elsewhere. Sovereign wealth and pension funds are increasing their real estate allocations, while the relaxation of foreign investment rules in markets such as Taiwan has unleashed some significant new players. Meanwhile, wealthy individuals from around the world are flocking to real estate in core markets as a safe haven for their wealth.

“The investment industry has completely changed during the last 36 months,” says Jan-Willem Bastijn MRICS, chief executive of the EMEA capital markets team at Cushman & Wakefield in Amsterdam. “Where it was probably international and cross-border before the global financial crisis, it is now completely global. Money flows are coming from all parts of the world, not just the ones that we know quite well.” »

llCompared with other investment options, real estate is highly illiquid,

unique and often opaquell

PHILIP BARRETT Pramerica Real Estate Investors

24 RICS.ORG/MODUS

Risk management

A ll of this is activity driving demand for internationally recognised standards in areas such as valuation

to improve transparency and confidence for investors. “Valuation is one of the key areas of risk management – investors want to make sure they are paying a fair price,” says Nicholas Talbot, RICS Director and interim chief executive of the International Valuation Standards Council (IVSC). “If a valuation has been done improperly, by someone who is not a professional or not to a consistent standard, the real value could turn out to be much lower than the price you paid.

“Even if investors have their own risk management processes in place, and their own in-house valuers doing checks and balances, there could still be situations where people are trained to different standards and levels of professionalism,” Talbot adds. “In a seamless, ideal world, you would have a single approach so you know you’re comparing apples with apples.”

The IVSC has succeeded in rallying some of the world’s largest valuation organisations behind its initiative to develop a common approach to valuation practices. In the longer term, this is what Brühl is hoping to achieve with the RICS Global Investment Risk Management Forum. There is plenty of best practice in the profession already – now he is seeking to bring industry leaders together to compare notes and learn from each other. “We won’t be able to prevent the next crash or the next crisis, but we can start to influence the market,” he says. “Hopefully it’s going to advance the industry and contribute to market confidence.”

After all, $364bn may only be a fraction of the money swirling around the global real estate investment landscape, but you always have to start somewhere. n

traditional sectors do not have enough assets for the weight of equity chasing it. Also, as we move through the cycle, investors are increasingly looking for properties that have more defensive qualities. Alternatives provide these because they’re underpinned by very strong supply-and-demand dynamics.” Historically, alternatives would constitute around 10% of institutions’ real estate allocation in the UK, says Guilfoyle, but this is forecast to reach 28% by 2019.

The key is that these sectors have an operational element, where a good manager can outperform the market and increase the value of the asset. The caveat is that investors

cannot afford to take their eye off the ball: “Once investors have taken the decision to invest, proactive management to maintain those cashflows is absolutely essential,” says Guilfoyle. “The better managers maintain a continual investment in their asset.”

Diversification makes risk management more complex, too, as maintaining the correct level of exposure requires constant monitoring. “One of the key aspects is managing that risk and making sure that changes in the risk profile don’t creep up on you,” warns Martin. “It’s an ongoing process. Where people sometimes go wrong is that they buy a portfolio and then sit on it. What they don’t realise is that their risk profile is not constant and will change. It is important that real estate strategies are monitored and then adapted to changing conditions.”

In today’s market, assessing the source and associated risks of capital has become even more important: “You always had to do that, but now we like to understand not just the face that we see in the market, which might be the investment manager or the front line of the investor, but also the money behind that investor. That’s a huge game-changer.”

The increasing diversity of capital has brought a more sophisticated approach, says Tony Martin MRICS, head of investment advisory at CBRE Capital Advisors, from investors who are now more likely to target a particular area of the market. He has noticed greater demand at both ends of the risk curve. “The desire for long-term, lower-risk assets such as ground-rent funds has increased. At the same time, opportunistic, high-risk funds have also increased in scale as they seek to take advantage of the market coming back.”

W ith so much capital flooding into core real estate markets, investors are also having to look

further afield to less-established destinations to achieve the right level of returns. Investors have always sought to diversify their portfolios to insulate themselves against peaks and troughs in individual markets. The challenge is to identify genuinely non-correlated assets, notes Martin. “What 2007 showed is that most assets were correlated with each other in some way. If you’re going to have a 100-year or 200-year crash, you find that what were previously thought of as groups of assets with low correlation are in fact more closely correlated.”

There is increasing interest in alternative sectors such as student housing, healthcare, self-storage and private-rented residential. Student accommodation is having a record year, for example. Investment in the UK rose from £2.4bn ($3.7bn) in 2014 to an estimated £5.7bn ($8.2bn) in 2015, says Joe Guilfoyle MRICS, head of corporate transactions at JLL Alternatives. “Institutions are, in part, being forced to look at new products because

llInstitutions are having to look at new products because

traditional sectors do not have enough assets for the

weight of equity chasing itll

JOE GUILFOYLE MRICS JLL

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Illustrations Melvin Galapon

BIM Manager

Knowledge is power in construction, and new technologies such as BIM challenge professionals to extend their skills further. It is into this context that RICS has launched a BIM Manager certification, to offer an industry standard that guarantees an individual’s ability to work with BIM on live projects. Andrew Brister talks to three of the first wave

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Q1 2016_MODUS ASIA 27

o say that Mac Muzvimwe is passionate about BIM is something of an understatement. Although still in his mid-30s, Muzvimwe is head of BIM at

Faithful+Gould in the UK, where he is also an associate director. “My BIM journey really started back in 2009 when I was studying for my MBA in construction and real estate. I did my dissertation on BIM, and I questioned why it was not being adopted more widely in the UK given the many benefits. I suggested that the government needed to take a leading role – this was before the 2016 mandate was issued on public sector work.”

The insightful Muzvimwe suggested that Faithful+ Gould set up the BIM working group that he now leads. “Our strategy is to make BIM business as usual. Today, BIM is still seen as a specialism, but my argument is that there are so many benefits, so many advantages, that it needs to become just the way we do business. We are doing that internally by making the tools more visible to the staff, making them aware of the advantages and rolling out training programmes.”

Muzvimwe ably demonstrated the advantages to the business on a pilot project at City College in Plymouth. Faithful+Gould and parent company Atkins were appointed to provide both project management and quantity surveying services for the scheme. “The £7.5m [$10.8m] project was split into two main phases, and following the completion of phase one in 2011, we proposed to the client that BIM was used for phase two. Atkins started work on creating a model of the existing building, all design work was done using Revit and other BIM-compliant applications, and we used BIM for taking off the quantities and for auto-generation of schedules. The client was extremely satisfied with the results: 3D images and walkthroughs were provided to the college which, in turn, used these as part of its consultation process with various stakeholders, including students.”

Muzvimwe thinks the best argument for BIM is the fact that you are building twice: once virtually and once on site. “Building virtually allows you to sort out any problems first, early on in the programme. If you have

T

THE VISIONARYMAC MUZVIMWE MRICS ASSOCIATE DIRECTOR AND HEAD OF BIM, FAITHFUL+GOULD, EXETER, UK

to resolve those problems on site, it’s much more complicated, expensive and costly in terms of time.” Collaboration and sharing data is the key to success.

As a member of both the Construction Industry Council’s BIM2050 Group and the RICS Technology & Focus Group, he is well placed to look at what the future holds for the profession. “We need to find our position in a digital world. The technology will do the quantity take-offs and remove human error, which gives us more time to add value and improve outcomes for clients. We can be part of the team, providing real-time cost advice on design options. The BIM2050 Group looks at what we can do to improve collaboration across the disciplines, and one area we are examining is digital qualifications that are recognised across institutions such as RICS, the Institution of Civil Engineers, Royal Institute of British Architects and so on. That way, when I meet with an architect or engineer, we have a common ground and a common knowledge. In a way, the RICS BIM Manager certification is a first step towards that.”

Muzvimwe foresees a future in which Spon’s price books are replaced by a subscription-based app service, featuring real-time price data that the quantity surveyor can use to advise on implications of design options, such as the use of a steel frame over concrete. “This is not about technology – it’s all about improving outcomes for clients,” he says. »

She is excited by the opportunities BIM presents for surveyors. “We are used to being in the middle of things – accepting information, doing something with it and passing it on. We’ve often done that through reproduction and that creates risk. BIM allows us to manage those risks better. It creates a link between designers, cost managers and contractors, so when things change, we can quickly address any issues. It also takes away many mundane activities that don’t add value, allowing us to devote more time to things that do, like pricing and managing the risk. BIM also allows surveyors to move into asset management. If you understand how an asset is going to perform and how it can be optimised, you can make decisions based on long-term performance rather than short-term capital delivery.”

Davidson believes the BIM Manager certification lends credibility to what is still a relatively new skill. “It’s allowed me to provide evidence to clients that I can do this job and enable them to have confidence in me. It also allows the applicant to evaluate themselves and gives them some direction over how they might want to progress.”

The UK government’s construction strategy requires all centrally procured public projects to be built using Level 2 BIM by 2016. At this level, parties create models using their own software and data can be shared with project stakeholders. This puts a focus on intelligent modelling and project data generation, transition and application. “A lot of progress has been made, but there is still a way to go,” says Davidson. “There’s still a lack of awareness over what Level 2 BIM means – many think it is a software solution, rather than a data and information solution … It’s about the industry trying to work smarter, which has to be beneficial in the long term.”

28 RICS.ORG/MODUS

SARAH DAVIDSON FRICS Gleeds

llBIM allows us to manage risk better. It creates a link between designers, cost managers and contractors, so when things change, we can quickly address any issuesll

THE STRATEGIST SARAH DAVIDSON FRICS HEAD OF CORPORATE RESEARCH & DEVELOPMENT, GLEEDS, NOTTINGHAM, UK

I f BIM is all about management of data, then no one is better qualified than Sarah Davidson FRICS. Following 20 years as a practising quantity surveyor, Davidson

now leads Gleeds’ corporate research and development department, managing a team that has developed the group’s internal data and benchmarking systems. “We now have a robust, structured database that allows us to better support projects and to better manage risk. We can integrate more with the design team because we understand where the allocation of cost ought to be for certain types of design.”

With the arrival of BIM, Davidson could see the potential synergies with Gleeds’ data capabilities. “We can use data to address some of the problems around lack of predictability and certainty over cost and delivery, to better inform the briefing and project progress.”

Since 2011, Davidson has been responsible for raising the awareness of BIM within Gleeds and developing its capabilities. “We’ve created a lot of guidance, there’s an internal, online BIM training course, we’ve introduced a Centre of Excellence and developed a mentoring scheme. We have highly motivated staff, who are very clever and many are of the generation that understand modelling.”

BIM Manager

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CHUANG QIU MRICS JCM International Engineering Management Institute

llThe most important level of BIM is the management of the model. This is perfect for the quantity surveyor because the profession is good at management of datall

Q1 2016_MODUS ASIA 29

THE PIONEER CHUANG QIU MRICS DIRECTOR, JCM INTERNATIONAL ENGINEERING MANAGEMENT INSTITUTE, BEIJING, CHINA

A recent survey, conducted by Dodge Data & Analytics in association with Autodesk and Glodon Software, predicted that BIM

implementation in China will grow by 108% within the next two years. JCM International Engineering Management Institute is well placed to take advantage. It specialises in 3D, 4D and 5D construction project management and has several high-profile BIM schemes under its belt. “Our first BIM project was the Shenyang Taoxian International Airport terminal back in 2011,” says JCM’s director, Chuang Qiu MRICS. “We realised the whole project in 3D and BIM is excellent for project management – for example: cost management, quality management and clash detection. It’s a really good technology for communication and collaboration.”

An architect by training, Qiu has more than 20 years’ experience in construction project management. He was the chief engineer of the China International Engineering Consulting Corporation’s project management arm, and set up JCM in 2011 to take advantage of the opportunities presented by BIM. “My company is still relatively small, but we are carrying out some very large projects because of our experience with BIM. A few years ago, only the most high-profile buildings were adopting BIM, but it’s now filtering down to more and more projects. Some regions in China have mandated its use by 2017, driven by the anti-corruption agenda, as BIM is a very transparent technology.”

Qiu sees the surveyor as central to a future involving BIM. “If the first level of BIM is the creation of the model, the second level is the modelling itself, and the third and most important level is the management of the model. This is perfect for the quantity surveyor because the profession is good at management of data. The key part is how data is transferred from the design to the operation of the asset over its lifetime. The advent of sharing of digital data will provide an advantage for surveyors. We are now providing 5D service for Shanghai Disney Resort. It proves surveyors’ important role in data management.”

Qiu believes that China has taken huge steps with BIM adoption. “There was a big cultural issue in China around sharing data and intellectual property rights. Designers did not want to share their building models. Now the customer wants to implement BIM and it is up to us to advise on the best way to put it into practice. We have enough people with the skills to create the model but we lack people who can fully integrate 3D, 4D and 5D processes.” An opportunity for RICS-certified BIM Managers, perhaps? n

TO FIND OUT MORE about the BIM Manager certification and how to apply, go to rics.org/bimmanager

30 RICS.ORG/MODUS

Valuation

Consider this: roughly 80% of the value of companies on the NASDAQ 100 is, these days, attributed to intellectual property (IP). This means

that, for some of the world’s most powerful companies, the main drivers of wealth creation are no longer the hard assets of old, but intellectual capital such as patents and trademarks, and even copyright. Yet until relatively recently, IP and intangible assets were the invisible class: poorly understood and unrepresented in company accounts. That is now starting to change, and it is opening up opportunities for business valuers with the right expertise.

IP is typically protected by copyright, patents, trademarks and design rights. But it is also a subset of a wider group of intangibles that can be valuable but are not legally protected, such as know-how, customer relationships and supplier contracts. A brand, for example, is usually a bundle of lots

How much is a concept, patent or trademark worth? Putting a price on intangible assets is becoming

an important part of a valuer’s job

OFIDEAS

Words George Bull Illustrations Joey Guidone

of IP and intangibles. Although these assets may hold no obvious physical value, they can underpin a company’s market dominance and profitability, and are increasingly the target of mergers and acquisitions.

“Industry has always had IP,” says Kelvin King FRICS, senior partner at London firm Valuation Consulting. “It just hasn’t been properly identified to allow valuation. Accounting is to blame for this. Until recently, we didn’t have any reporting for intangible assets, despite the fact that they are 80% of the asset class.”

In 2008, a revised version of International Financial Reporting Standards 3 finally made it compulsory for all companies making acquisitions to produce a purchase-price allocation that identifies and assesses the fair value of all intangible assets. “You now see these assets in reporting and that helps everybody,” says King. “Before, if bankers didn’t see an asset in public accounts, they didn’t think it existed in a viable way.”

Valuation can play an important role in the effective management of IP and intangible assets, from how they are developed, exploited and acquired, to how they can be used to create new revenue streams. It can also help companies decide what IP to protect and what to sell or abandon. One of the questions King is often asked by companies is: “Should I register this patent?”

Registering a patent can be a complicated and expensive process, and legal protection does not always affect how valuable something is, he says. “You can have a very valuable brand without it being trademarked, for example. The more important question is: ‘In which jurisdictions should we concentrate our registrations?’ And that is driven by a valuation assessment. A valuer will put the real crown jewels in the portfolio so that management can focus on that area.”

How that valuation is reached is a hot topic. Only a small number of business valuers are recognised experts in IP valuations. Decisive moves by organisations such as RICS aim to address this. The ninth edition of RICS Valuation Standards (the Red Book), »

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Valuation

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Valuation

published in 2014, introduced chapters written by King on the value of intangible assets and business valuation. This was followed in May by the RICS global guidance note, Valuation of Intellectual Property Rights, to help valuers unpick the legal, functional and economic characteristics of IP, all of which can have a profound impact on the value of an asset (box, below).

“We always had visible, challengeable methodologies in the hands of good experts, but now it’s encapsulated in the Red Book,” says King. “This is the first worldwide accreditation of business and IP valuation. It really is a giant leap forward.”

That still might not be enough, says Stuart Whitwell MRICS, joint-managing director of London-based Intangible Business. “When we first started, all the auditors pretended they were the only ones who could do it. Your typical business valuer is going to face that hurdle. Having people with some experience in accounting standards helps you get over the credibility hurdle.”

Steve Choi, RICS’ International Director of Business Valuation in New York, says there is more momentum than ever behind industry-wide standards. “In recent years, the US Securities Exchange and Commission called into question whether individuals conducting fair-value measurement estimates had the requisite training, qualifications, experience and independence to perform this type of work. Basically, they said: fix it or we’re going to regulate you.”

KELVIN KING FRICS Valuation Consulting

llEncapsulating the methodologies in the Red Book is the first worldwide

accreditation of business and IP valuation. It is a giant leap forward ll

Intellectual property (IP) is a creation of the intellect that has value to the owner and for which exclusive rights are recognised. They are negative rights, in that they allow the owner to prohibit others from using the IP without permission.

The RICS guidance note, Valuation of Intellectual Property Rights, expands on International Valuation Standards 2013 and the Red Book. It provides important information on how the valuer identifies, defines

and describes specific rights attached to the IP being valued.

The subject of an IP valuation can be a single right, or a portfolio of complementary IP rights and other intangible assets. Valuation is complex, particularly as a single asset

is rarely the sole driver of value. For example, a company may have a valuable patent, but that patent may be associated with a brand that drives sales. The IP valuer must be able to understand these interactions.

What is intellectual property?GUIDANCE NOTE

Specifically, regulators criticised the lack of consistent qualifications and credentials. “If you interview valuation appraisers about how much work should be performed to value intangible assets, they will generally have different views,” says Choi.

Since then, RICS, together with the American Institute of Certified Public Accountants, the American Society of Appraisers, The Appraisal Foundation and a group of leading accounting and valuation firms, have focused on creating a fair value measurement credential focused on business valuation and intangible asset valuation.

Although the initiative is US-centric, it has international consequences, says Choi. “Anyone performing valuations of intangible assets for US publicly-traded companies should or will need to have this credential.”

The US is not the only country making a noise about IP. Hong Kong, given its position straddling Asia and the

West, is being touted as a future IP trading hub. The opportunity has arisen, says Gary Man FRICS, managing director of Greater China Asset Services, because Chinese-listed companies engaged in overseas mergers and acquisitions have realised the importance of the IP they are buying. “Chinese companies won’t engage foreign companies to do the valuation for them and domestic firms can’t handle this kind of valuation, so the best choice is to find the expertise in Hong Kong.

“I see more of this happening over the next five years. Hong Kong is in a good position to develop as a trading centre for all kinds of IP activities: valuation, management, buying and selling patents, marketing, and raising finance for research and development.”

The opportunity is not just confined to Hong Kong. As Chairman of RICS’ Asia Business Valuation Committee, Man travels widely across Asia-Pacific. He says the latest guidance note has been well received by the Japan, South Korea and Taiwan governments.

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Valuation

Whitwell agrees: “China, south-east Asia and India are waking up to what brands are about.

They’ve been more production-orientated, commodity-based industries, but now they see a need to develop other value-added components, which are mostly built around brands. So we see a lot more demand for that knowledge.”

Most work, says Whitwell, is coming from Indian companies that want to know “what their brands are worth, what credibility it gives them, and how they can leverage their assets – including those that aren’t on their books, which are intangible assets”.

In Malaysia, Intangible Assets has also worked on valuing IP for small and medium-sized enterprises (SMEs). A report published by the Association of Chartered Certified Accountants in July last year revealed that small businesses in the country may be missing out on finance, and even government funding, in failing to measure and report the value of their ideas and innovations. Whitwell says: “A lot of SMEs haven’t got many hard assets, most of it is code or software. So the government wanted to develop the skill set to value that, secure it, and lend against it, so those businesses can develop more quickly.”

Lending on IP and intangible assets is, however, a relatively new concept for the banking market. Traditional asset-based lenders have generally lacked confidence in valuation practices to lend on intangibles. But as methodologies become more accepted, and as new industry-wide standards bed down, things are changing.

In 2013, the UK Intellectual Property Office commissioned King to write Banking on IP – a report to investigate whether those who created or owned IP assets could use them to secure the financing needed for company growth. Although no government recommendation followed, the report was well received and King has since joined the panels of several large banks, which he says

shows the sector is starting to pay more attention to specialist IP operators.

Where IP is of greater use to companies is as collateral, says King. With the number of companies running pension deficits on the rise and with no cash to put in, many RICS members may have been asked to value traditional assets, such as land and buildings, as security against future pension obligations. IP and its income streams is starting to be used in the same way. “Pension trustees are increasingly willing to take patents, trademarks and copyright as security against pension liabilities.”

Business valuation is big business across the globe. It underpins stock market activity. With so much of this activity generated by technology, brands and artistic content, internationally recognised and consistent standards for their valuation is crucial. Not only could it provide regulators and traditional asset-based lenders with the reassurance they need to lend on IP and intangible assets, but it could finally put those assets at the top of company agendas. RICS business valuers could be at the forefront of a very interesting shift. n

DOWNLOAD THE RICS GUIDANCE NOTE, Valuation of Intellectual Property Rights, at rics.org/valipr

STUART WHITWELL MRICS Intangible Business

llCompanies want to know what their brands are worth, what credibility it gives them, and how they can leverage their assetsll

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Humankind has a serious concrete habit. In fact, after water, the material is the second-most consumed substance on earth. The Geneva-based World Business Council for Sustainable Development

(WBCSD) estimates that we manufacture 25 billion tonnes a year of the stuff – more than half of it in China and India.

And although the level of embodied carbon in concrete is not particularly high compared with other building materials – 0.107kg of embodied carbon per kilogram of material, compared with 1.460kg for steel, according to CO2 bible the Inventory of Embodied Carbon – it is the sheer quantity of it that makes it an oft-singled-out carbon criminal. For example, the WBCSD’s Cement Sustainability Initiative estimates that production of cement – the key ingredient in concrete, alongside aggregate and water – causes an immense 5% of manmade CO2 emissions worldwide.

In response to this notoriety, the concrete and cement production industry has been working to reduce its emissions. Building materials giant Lafarge, for example, is on target to reduce its emissions by one-third by 2020 against a 1990 baseline. But although significant progress has been made, there is no doubt that more can be done.

One area of focus is recycling, which extends concrete’s lifetime in use, lowering whole-life carbon emissions. The smartest approach is to reuse in situ, as demonstrated by architect MVRDV’s conversion of a pair of giant industrial seed silos in Copenhagen into apartment blocks.

It is rare that such convenient circumstances coincide, however, and concrete has limited applications once broken up, so if not sent to landfill, old concrete is most likely to be

used as aggregate in new concrete. The WBCSD’s Recycling Concrete report states that recycled materials account for 5% of aggregate in the US and 6%-8% in Europe – the greatest users being the UK, the Netherlands, Belgium, Switzerland and Germany. Meanwhile, Australian building rules allow up to 30% of old concrete to be used in aggregate.

As encouraging as this may sound, Rob Russell MRICS, partner and head of sustainability at John Rowan & Partners in the UK, says: “Reusing concrete as aggregate doesn’t make much of an impact in the new product’s embodied carbon.” This is because sourcing the alternative, virgin aggregate is not very carbon intensive. “It tends to be found locally and does not require energy-intensive processing.” In addition, the structural limitations of recycled-aggregate concrete means that its use is mainly restricted to road sub-base.

The biggest problem to address is the energy used to make cement. The WBCSD says that around half of cement’s carbon emissions are generated during the chemical reaction that produces clinker, the main constituent of Portland (standard) cement. Burning fuel to heat the cement in a kiln to around 1,400° celsius accounts for the other half.

A global shift away from wet kilns to more energy- efficient dry kilns began in the early 1990s. “It is now practically standard for new installations,” says Philippe Fonta, managing director of the WBCSD’s Cement

TIMETO MIX

UPTHINGS Versatile, cheap and strong, concrete is also

responsible for huge levels of CO2 emissions. How is the industry cleaning up its act?Words Roxane McMeeken Illustration Nicolas Dehghani

3 4 RICS.ORG/MODUS

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Q1 2016_MODUS ASIA 35

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Sustainability Initiative, “but existing kilns are likely to be operated until the end of their technical lifetime.” This has put emerging economies, where more new kilns are being built, ahead of more developed regions.

Barry Piper FRICS, Faithful+Gould’s chief operating officer, industry, in Asia-Pacific, adds that in China – the world’s biggest cement producer – “there has been a shift to dry-process kiln production, but these plants are still consuming up to 25% more energy than their international counterparts”.

A shift to using greener fuels is also already under way. The European Cement Bureau (Cembureau), which represents the industry in Europe, says that its members have replaced one-third of fossil fuels with greener alternatives. But Koen Coppenholle, the Brussels-based organisation’s chief executive, admits: “We could go further. We have set a target of replacing 60% by 2050.”

Chris Spicer, associate director and carbon expert at Sweett Group in London warns, however: “These alternative fuels normally need to be ground before

they are burnt and that requires electricity, which emits more CO2 than gas. So alternatives must be combined with efficient plant, which may require investing in upgrades. As we are facing another potential global economic downturn, this may not appeal to manufacturers right now.”

It will be difficult for the sector to be weaned off gas fully, adds Sean Lockie FRICS, UK director of sustainability at Faithful+Gould. “What else can you burn that is that efficient?” A smarter solution could be the symbiotic use of energy, he suggests. “There are various processes, such as burning municipal waste, where heat is not being used efficiently. You could connect a concrete plant to these processes and power it with the waste heat.”

There is perhaps even more potential for lowering concrete’s embodied emissions by replacing clinker with a readily available, less carbon-intensive material. Offering the most immediate hope are two industrial waste products that require much less energy to process when used to make concrete: ground granulated blast furnace slag (GGBS), a by-product of the steel production process; and fly ash, from coal-fired power stations. Spicer suggests that switching to these can reduce concrete’s embodied CO2 by half.

Paul Sargent, an engineer at Aecom who has written a PhD on concrete, cautions that these new ingredients “affect the structural properties of concrete, so they may not be suitable for all applications” but he believes that “up to 25% of standard cement could be replaced with fly ash and up to 50% with GGBS”. More appealingly for developers, using these materials should make concrete cheaper to produce, he adds, because they are waste products.

Already, worldwide, there has been “a general introduction of fly ash and slag of about 4% and 5% respectively”, says Fonta. Some manufacturers are achieving much higher levels, too: “In India, the use of fly ash can reach 18%, while in Germany and Brazil the use of slag can be around 15%.”

However, GGBS and fly ash are finite resources and their energy efficiency is dependent on there being a local supply. Simon Rawlinson MRICS, head of strategic research at

Arcadis UK, says: “A by-product depends on the primary industrial process happening – and happening locally, since cement is a heavy material that tends not to be transported long distances.”

To find a solution that would be less reliant on external factors requires radical technological innovation, in either the concrete mix or plant. Could nanotechnology hold the key to lowering concrete’s

emissions? Zongjin Li, a professor researching concrete at Hong Kong’s University of Technology and Science, says that “a Chinese government research project has found a way to use a nanochemical that increases the toughness of cement, allowing you to use much less of it”.

A plethora of other new cements are being developed. Limestone calcinated clay cement (LC3) – a Swiss-funded research project between educational institutions in Switzerland, Cuba and India – is claimed to produce 30% of the carbon emissions of standard cement; Californian company Calera has developed a process to capture CO2 emissions and convert them into a calcium carbonate-based cement; while Ferrock, developed by Arizona University, uses waste dust from steel-making to create a type of cement.

As interesting as these developments are, they are all at very early stages. Li says: “The process of replacing or changing cement will take a long time.” New materials will need to be tested in structures for decades before they can gain wide acceptance, and finding developers willing to use their buildings as a testbed will not be easy.

Ian Hunter, co-founder of London-based construction products consultancy the Materials Council, adds: “Several attempts to develop cement replacements have foundered because it wasn’t possible to scale up the production process and commercialise it.”

For many, the holy grail is carbon capture and storage (CCS). “CCS would allow the cement industry to cut 80% of its CO2 emissions,” claims Coppenholle.

However, with the technology at an early stage, wide-scale adoption of CCS is likely to be decades away. “Our members are investing in CCS research but commercialisation is another step, which will require either public financing or intervention, since the current low carbon price disincentivises the private sector to invest in CCS,” he says.

So although CCS would undoubtedly be a game- changer, and innovations in the composition of concrete could be transformative, they are not going to offer a real option for concrete producers any time soon. While recycling holds less potential to make a serious dent in CO2 emissions, the further inclusion of industrial by-products in cement and greener energy strategies are already making a palpable difference. The concrete industry would, therefore, be well served by continuing with these incremental changes. With water being a key component of concrete, too, the sector has a duty to make every effort to become more efficient – especially since the world appears destined to remain hooked on the stuff. n

DOWNLOAD THE RICS GUIDANCE NOTE, Methodology to Calculate Embodied Carbon, 1st edition, at rics.org/carbon

llReusing concrete as aggregate doesn’t have

much impact on the new product’s embodied carbonll

ROB RUSSELL MRICS John Rowan & Partners

36 RICS.ORG/MODUS

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GLULAMHow does it work? Glued, laminated timber and cross-laminated timber (CLT) comprise layers stuck together to form, respectively, structural glulam beams and load-bearing CLT panels used in walls and floors. CO2 performance? Ian Hunter, co-founder of the Materials Council, says: “Glulam is lower CO2 than concrete and, in some cases, even carbon negative,” because by growing trees you lock up CO2. It’s an effective insulator, too. What can it do? “There is a push to do high-rise buildings with timber and you can go up to 20 storeys,” says Hunter. “Rotting is a potential problem but there are products that can make it less likely. But you would not build a glulam sewer.”

HEMPCRETEHow does it work? The woody core of the hemp plant is mixed with lime and water to form a concrete-like paste.CO2 performance? Hempcrete is carbon negative. Growing the plants removes more carbon from the atmosphere than is emitted when creating the lime binder. Hunter says: “Hemp is classed as ‘rapidly renewable’ because it regrows in less than a year.” It is also a good insulator. Aecom’s Paul Sargent adds, though, that the use of lime is not ideal: “We are trying to move away from products that need to be blasted out of quarries.” What can it do? “It’s great for low-rise buildings but it doesn’t have the strength for, say, a bridge or the core of the Shard,” adds Hunter.

BAMBOOHow does it work? Strips of bamboo are compressed and glued to form lightweight – but tough – boards, panels and blocks. CO2 performance? Another material that captures carbon while regrowing rapidly, Hunter says: “It grows up to a metre a day.” It is ideal for use in Asia, where it is abundant. What can it do? It is being used increasingly in interiors, such as at Adolfo Suárez Madrid- Barajas Airport’s stunning Terminal 4. It is not as robust as concrete and not commonly used for structural applications, but Vietnam practice Vo Trong Nghia Architects has had some success with bamboo roof supports.

Interestingly, Singapore’s Future Cities Laboratory is also trialling bamboo as reinforcement in concrete instead of steel.

Material fitness: alternatives to concrete TAKE THREE

Sustainability

RUBBISH IDEATo improve efficiency, the energy required to make concrete could come from burning municipal waste

Q1 2016_MODUS ASIA 37

38 RICS.ORG/MODUS

Investment

COME HELL OR HIGH WATER

TOP 20 MOSTRESILIENT CITIES*

Toronto

Vancouver

Calgary

Chicago

Pittsburgh

Stockholm

Boston

Zurich

Washington DC

Atlanta

Seattle

Amsterdam

Melbourne

New York

Detroit

San Francisco

Frankfurt

London

Sydney

Brussels

Q1 2016_MODUS ASIA 39

Over the next few decades, commercial real estate developers could be just as likely to base investment decisions on rising sea levels as on rising interest rates. As factors such as urbanisation, climate change and social unrest exert

increasing pressures on cities, traditional metrics for measuring investment risk cannot hope to capture the whole story. Instead, forward-thinking investors are turning their attention to resilience – a city’s ability to function in the wake of a disaster – to guide capital allocation.

In April 2014, UK-based global property group Grosvenor published a three-year study, Resilient Cities. The report ranked 50 of the world’s most important cities according to their long-term resilience, with surprising results. Scores were arrived at by weighing a city’s “vulnerability” against its “adaptive capacity”. While New York City may be prone to hurricanes, its ability to bounce back quickly – as it demonstrated in the wake of Hurricane Sandy in 2012 – puts it higher than cities you might expect to be less vulnerable.

People sat up and took note. Here was an investor putting resilience ahead of projected vacancy rate and using the research to determine its own future capital allocation. “Historically, when we were evaluating cities, we were looking at the value drivers and making our long-term forecast on that basis,” says Kate Brown MRICS, group sustainability director at Grosvenor. “That tells you the upside, but it doesn’t let you evaluate the risk in a systematic way. It’s enabled us to have a much more informed discussion at the boardroom table.”

For cities you know well, Grosvenor’s report might not tell you anything you did not know already. But it might get you to think differently about it. When London – which attracted £52bn ($75bn) of real estate investment in 2013 alone – came in 18th out of 50, Brown says the result did not feel comfortable until she started to dig into the reasons. “Poor air quality, lack of affordable housing – these are all things that we know instinctively about London but hadn’t pieced together in a systematic way to say, ‘this is the overall resilience’. That has been hugely helpful for us, both in terms of evaluating one city against another, and in terms of prioritising our influence within a city.” »

Investment strategies are usually based on market fundamentals such as yields and vacancy rates. But is resilience – how a city bounces back from disaster – a better indicator of risk?Words George Bull

SHOCK ABSORBER(clockwise from opposite) Resilience can be measured by how a city bounces back from events such as the Japanese tsunami of 2011, the London riots of the same year, and Hurricane Sandy, which left swathes of New York without power in 2012

*Source: Grosvenor

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Investment

Grosvenor is not the only company interested in this area. The Cities Research Center at JLL exists, in large part, because “we are being asked by clients

more and more about the dynamics of risk and resilience in cities, rather than national economies”, says Jeremy Kelly, JLL’s director of global research. To take transparency as an example, Kelly says he knows of several international investors who use JLL’s Global Real Estate Transparency Index as a way of filtering out cities to start considering.

More enlightened investors are even thinking along the lines of stewardship, Kelly adds. “On the one hand it’s about making sure it’s an innovative, entrepreneurial business environment, and on the other that it contributes to the wellbeing of citizens.” But it would be wrong to think this approach is the norm. Although many investors may implicitly recognise issues surrounding resilience, most won’t recognise it explicitly in their decision-making until it has practical implications for their portfolios. “At the end of the day, investors want a secure investment with attractive returns and that’s ultimately what drives them.”

Chris Brooke FRICS, executive managing director at CBRE Consulting in Hong Kong, agrees that the industry has been slow to model non-financial factors, but adds that Asia-Pacific investors are realising they need to “model the factors over and above the pure real estate play”. For now, the shift is being led primarily by long-term investors – sovereign wealth funds, large institutions and pension funds – that see resilience as a way to preserve capital over 10-20 years. “We will get to a point when those institutions won’t put money into funds that don’t invest responsibly through sustainable measures, contributions to the community, and energy and water management.”

Brooke believes resilience rankings will become increasingly important, not least because they also create competitive impetus for cities themselves (box, below). Hong Kong might be a mature market with great infrastructure and a sound regulatory environment, but its housing affordability is one of the worst in the world. While

on paper that might not seem as urgent as traffic pollution in Beijing, or the plans to rebalance Indonesia’s economy away from its flood-prone capital, Jakarta, left unchecked it can be a deal-breaker for companies with plans to expand.

“We’ve seen the way Singapore has responded by providing a framework that accommodates more headquarters – it’s become more of a capital markets hub,” comments Brooke. “So that challenge facing Hong Kong has opened up opportunities for other cities, which has an impact on its long-term resilience.”

Affordable housing is a hot topic from San Francisco to Sydney, because more people are choosing cities over jobs. “Employers are starting to question whether their graduates can afford to move into this or that city for their job. So cities actually have a pretty big responsibility to get this right,” says Dan Cook, Director of Strategy and Planning at RICS.

Cook hopes that the growing attention on urban resilience will act as a wake-up call to cities, but stresses that we are still in the infancy of defining what risk indicators they need to measure. Another issue is the availability of consistent data. This becomes harder to find once you venture outside OECD [Organisation for Economic Cooperation and Development] countries, where international real estate investment markets are immature. “There’s a

greater role in the future for professionals who can verify the data that underpins some of these things,” says Cook.

The real estate sector may find that cities themselves are more than happy to play their part in building a standard ranking system. Brown says that following release of Grosvenor’s research, Manchester City Council had told her the report had enabled it to shift gear. “Until that point, resilience had been perceived as a risk dealt with through their civil contingencies department, but now it was being perceived as an opportunity. Because if you could get it right, you could be on the forefront of attracting investment.” n

DOWNLOAD the Grosvenor report at bit.ly/resilient_cities

At Salford University’s Centre for Disaster Resilience, researchers are working to help communities plan for, and recover from, natural and man-made disasters.

Often a city’s or community’s resilience is about managing more than a single hazard – it is also about managing the cascading impacts that result from it.

Through exploratory work with the United Nations Office of Disaster Risk Reduction, the Rockefeller Foundation’s Global Resilience Partnership and industry leaders such as Arup, the centre, in north-west

Resilience strategies could change a city’s fortunesCASE STUDY

England, helps cities understand these chain reactions and how to coordinate a response.

Bingunath Ingirige MRICS, director of the Centre for Disaster Resilience, says one way for cities to do this is to look at the role of the private sector in disaster risk reduction, not just the big emergency responders.

Ingirige’s work in flood-prone towns in the UK, such as Cockermouth in Cumbria and Braunton in Devon, revealed that there are significant reputational benefits for small businesses that are better able to cope with successive floods than their competitors.

But there are challenges to adapting, says Ingirige. “We found that if a premises is affected by flooding, the insurer wants it rebuilt in the same way as before. There is no incentive for the owners to build-in adaptive capacity so it doesn’t happen again.”

Ingirige and his team are now looking at ways in which local councils and the private sector can support communities in changing their behaviours. “If your resilience strategies aren’t good enough, then that will have an impact on new investment coming into an area,” he says.

FIVE LEASTRESILIENT CITIES*

Dhaka

Jakarta

Cairo

Manila

Mumbai

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For a city to host a cricket World cup opening ceremony Four years aFter a devastating earthquake must be a tribute to an effective rebuilding programme. But sports venues alone are not enough to restore Christchurch and, despite progress with homes, commercial and retail space, years of work lie ahead.

New Zealand’s Canterbury region, of which Christchurch is part, was hit by an earthquake registering 7.1 on the Richter scale in September 2010. Recovery had hardly begun when, in February 2011, a 6.3-magnitude earthquake struck. Although smaller, its epicentre was near the city centre and at a shallower depth, and caused far worse damage than its predecessor. In all, 185 people died, more than a quarter of the central business district was destroyed and some 10,000 homes had to be demolished, while more than 100,000 were damaged. The destruction was particularly acute in the eastern suburbs, which had been built on swamps and were engulfed by water and sludge.

The city, though, is rising again. The New Zealand government’s building statistics for March 2015 show that residential consents in the year to December 2014 reached 6,668 – a 31.8% increase on the previous year. The total value of non-residential planning consents granted rose 38.6% over the year to NZ$121m ($94.6m). At the start of 2015, average Christchurch house values were NZ$471,550 ($368,766) – a 3.4% increase over the year. Rents over the same period rose by 3.1% to reach NZ$432 ($338) per week.

The Ministry of Business, Innovation and Employment estimates that housing supply is likely to catch up with demand by 2017. In a January 2015 progress report, Canterbury Earthquake Recovery Authority chief executive John Ombler noted the coming Cricket World Cup ceremony and said: “The fact that we have enough working infrastructure, hotel rooms, and transport services is testament to the entire Canterbury community.”

FINGERS CROSSEDThe Crossing (1), a NZ$140m ($91.7m) development by the Carter Group, will provide 151,000 ft2 (14,000 m2) of retail and 54,000 ft2 (5,000 m2) of offices and is due for completion this October

SLOW BUSINESSDemolition work continues in the central business district and, although the crane count is up, rebuilding activity has not occurred at the expected pace (2)

NO GREAT SHAKES1

Five years on from being devastated by a series of earthquakes, rebuilding activity in Christchurch is progressing slowly. Mark Smulian reports

2

Q1 2016_MODUS ASIA 43

are then bought relatively cheaply by fixer-uppers who repair, refurbish and rent out the properties, or sell them on.

Another unusual approach is the planned creation of a container village for construction workers who will vacate homes, releasing these for families. This idea draws on the container mall in the city centre, built as an emergency measure to provide shops after the earthquake. Known as the Re:Start Mall, it remains in use as no new retail space is available, although Gary Reynolds FRICS, South Island manager at building surveyor Alexander & Co, says: “Since its inception it has changed size and been progressively moved to make way for ongoing construction work.

“Currently no ‘new’ retail has been finished, so the Re:Start Mall remains. I would expect units in the new retail precinct [ownership and development of which is fragmented] will start being brought to market and occupied in the next few months, especially when anchor tenants have been secured.”

Reynolds notes that “the crane count is on the up” in Christchurch, although demolition work still continues, particularly in the central business district. “It would appear that office rents are levelling off, but A-grade stock seems to be more than meeting demand.”

David Soper MRICS, senior building surveyor at property services firm Hampton Jones, has worked in assessing residential and commercial earthquake building fabric repairs for insurers and policyholders. He says: “It appears that residential supply is stabilising with more homes coming on stream, particularly to the west of the city and outlying towns such as West Melton, Rolleston and Lincoln.”

Despite efforts to recruit internationally, rebuilding has been a largely home-grown effort. Tiplin says: “There has been very little international involvement, except for some American experts being involved in the seismic design of base isolators and buckling resisting braces, though there have been some joint ventures with Australian contractors.”

The devastation of 2010-11 was so great, however, that many years of reconstruction lie ahead. As Tiplin concludes: “It will probably be another 10 years or so before a first-time visitor to Christchurch isn’t immediately aware of the damage the earthquake sequence did to the city.” n

US UK Sweden AustraliaGermany France China Malaysia

Residential consents

Non-residential consents

2%4%10%11%11%22%26%32%

NZ$80m

NZ$60m

NZ$40m

NZ$20m

NZ$0

NZ$20m

NZ$40m

NZ$60m

NZ$80m

09/10 09/11 09/12 09/13 09/14 07/15

Management fee

Site management

resources

Electricity Security Cleaning and environmental

Mechanical and electrical

services

Lifts andescalators

Fabric repairs and

maintenance

Major works

69p47p

146p 163p

104p

155p

17p43p 31p

London (median cost per ft2)

Rest of UK

46p29p

45p 61p76p

64p

12p34p 23p

2010 2011 2012 2013 2014

NorthAmerica

Average dispute values ($m)

64.5 11.4 10.5 14.4 9 11.9 34.3 13.7 29.6 16.2

64.5 11.4 53.1 12.4 39.7 14.3 41.9 14 85.6 12

7.5 6.8 10.2 8.7 27 12.9 27.9 7.9 27 10

56.3 8.3 112.5 9 65 14.6 40.9 13.9 76.7 15.1

33.3 10 35.1 11.7 25 6 27.5 6.5 38.3 18

Average length of dispute (months)

Asia

UK

Continental Europe

MiddleEast

$16.1bnThree Gorges Dam, China

$1.8bnGreat Belt Fixed Link, Denmark

$3.1bnDenver International Airport

$3bnMontreal Olympic Stadium

$21.1bnThe Channel Tunnel

$1.6bnBudapest Metro Line 4

$895mMillennium Dome

$678mWembley Stadium

$13.4bnBoston’s Big Dig

He conceded there had been criticism over the slow pace of rebuilding, but added: “We could not have rebuilt any faster – the components of planning, design and the construction required the ground to have stopped shaking.”

Andy Tiplin FRICS, a chartered surveyor at local quantity surveying firm Rawlinsons, says residential rebuilding has been subject to “many wrangles between owners and insurers which has prolonged the painful process. Commercial rebuild has not proceeded at the originally expected pace but is now happening and will continue to happen relatively quickly over the next three to four years.

“The benefit of the slow, deferred start,” Tiplin adds, “is that hyperinflation has not kicked in and resources are generally available.”

Ombler’s progress report claimed that, during 2016, more than 2,000 public-sector staff would be back working in new offices in the city centre. As of October 2014, more than 237,000 ft2 (22,000 m2) of office space had been built since the earthquake and some 88% had been leased, on a par with New Zealand’s other main cities. “Our population has almost returned to pre-quake levels and employment is booming,” he concluded.

One interesting characteristic of the post-earthquake market has been the rise of “as is, where is” sales. These are damaged but structurally sound homes on which an insurer has paid out to an owner on the condition they move out and sell the – now uninsurable house – at land value. The homes IM

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GAUGE OF CONSENTSConsents for new houses are still at healthy levels post earthquake, whereas commercial activity appears to have peaked

Source: NZ government

MEANWHILE USESFive years have passed since the first quake and the city’s residents are still having to use temporary facilities, such as the striking “Cardboard Cathedral” and shipping- container mall

Canterbury Earthquake Recovery Authority Agency established to lead and coordinate the ongoing recovery effort cera.govt.nz New Zealand Government Building Information Helps housebuilders to comply with building regulations. building.govt.nz

Rebuild Christchurch Community-led siterebuildchristchurch.co.nzChristchurch City Council Dedicated post- quake microsite. ccc.govt.nz/the-rebuildHarcourts gold real estate Explanation of “as is, where is” bit.ly/asis_whereis

REFERENCE POINT REPORTS AND RESOURCES

NO GREAT SHAKES

Briefing

BY NUMBERS

44 RICS.ORG/MODUS

FoundationsCareers / Business / Legal / Training

For further careers advice, go to rics.org/careers, and for the latest jobs, see ricsrecruit.com

NEXT ISSUE: BEAT THE EMAIL BEAST

You are about to land your dream job – they want you, and you want them. But the details need to be finalised. There is no point taking a new role unless the package is right – salary, pension, flexible hours, a car parking space – the details that make all the difference. But how do you get everything you want?

Employers suggest that the market is favourable for jobseekers right now, provided they have the right skills and experience. Jon White, UK managing director of construction

manager Turner & Townsend, hires more than 100 people every year and says skills shortages are playing to the advantage of jobseekers. “There’s a fight for talent, we are all trying to attract the best and in the construction industry there are definitely skills shortages,” he says. “We’ve come through a recession and had fewer graduates coming through in those years, so there’s a shortage of talent.”

However, White adds that his business is well informed of market rates for employees and operates within strict salary bands. “We are quite clear about the salary grades and work within bands. We understand what the market rates are. It wouldn’t be sensible to make an offer outside of our salary structure as that would create a lot of issues.”

Both employers and candidates have red lines when it comes to job packages. For instance, some employers are very open to flexible working, others are not. Job candidates should not expect an employer to overhaul their entire company culture for them. Instead, they should seek out those who can offer the types of packages they

require. Research on prospective employers is therefore imperative, either by talking to recruitment companies and contacts, reading industry media, searching online or, in some cases, making contact with a company and asking them directly.

Lee Biggins, founder and managing director of UK recruitment site CV-Library, advises candidates on the best ways to secure a new job. He says it is important that candidates have a clear idea of what their ideal package looks like. “Be sure to know what salary you’re after and be clear about other package details, such as holiday allowance, working hours, pension plans and bonus schemes,” he suggests. “But also make sure that you are being realistic. While everyone would like six months’ holiday and a six-figure salary, it is not likely to happen.”

Peter Willis MRICS has been on both sides of the table in job interviews and advises candidates to demonstrate ambition when discussing employment packages. “When you ask someone about their salary expectations and their answer is ‘make me an offer’, I just think it lacks ambition,” he says. “It’s worth asking for more than they first offer. If you don’t ask, you don’t get.”

When Willis applied for his current role as project manager at building management company HCP, he understood it would involve higher commuting costs and the offer would need to be at the top of the advertised salary bracket. “After the first interview they did make an offer and it was at the bottom of the salary bracket. I fed back that the role wasn’t financially viable unless I was at the top and they took this on board. We did another interview and I was hired on the top salary,” he says.

THE PERFECT PACKAGE

01  Understand your worth. Knowing the market rate is key to 

any negotiation. 02  Research your 

employer. All businesses have  

red lines – know what can and can’t  

be negotiated. 03  Define your goals. 

You cannot hit  a target without 

taking aim, so focus on what you need. 

04  Be confident.  Sell yourself, describe your unique 

selling points and make your prospective employer want you. 

05  Have other options. Sometimes you have to walk away, so it is a  

good idea to have other employers lined up to meet. W

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BECAUSE YOU’RE WORTH ITCAREERS It’s the job of your dreams but does the pay package meet your expectations, or are you a bit wide of the target?

Q1 2016_MODUS ASIA 45

Foundations

Choose the right contract There is no one-size-fits-all energy contract. Suppliers offer a range of packages tailored to suit the needs of different businesses. It’s important that your tariff is tailored to your usage.Carry out a simple energy audit Make an inventory of all the electrical equipment you are using and how much energy each consumes to identify any unnecessary usage. The time of day at which you consume energy is also important. For businesses that use heavy machinery, rescheduling operations to take advantage of low, off-peak rates can deliver significant savings.Invest in new equipment Look carefully at the age and condition of your equipment and investigate whether buying newer or more advanced options could deliver greater efficiency. Technologies such as motion-sensing lighting and timers for other appliances can also help.Use smart meters They allow a supplier to bill customers based on actual, rather than forecast, energy use. Find a supplier that offers this service and have one installed – it will give you much greater control over your energy spend.

TIM JARVIS is manager of Mid Market at Gazprom Energy gazprom-energy.com

MANAGE ENERGY USE

HOW TO

Like many quantity surveyors, I actually wanted to be something else. I was always keen on being a structural engineer, but I didn’t pass my school physics exam. So I took a part-time surveying degree at Liverpool Polytechnic while working for a local practice in north Wales. It was a great formative time, which usually involved building new roofs for castles and churches.

After graduating in 1986, I took a job with the British Airports Authority at Stansted. The experience couldn’t have been better for a young QS – we were tasked with building much of the airport’s infrastructure, such as access roads and drainage channels. I was also able to pass my test of professional competence within a year, as I had already completed much of the practical criteria.

By the early 1990s, I had moved to London to join Capita’s cost plan team on the Jubilee

HEAD OF CONTRACT SOLUTIONS, ARCADIS, DUBAI

MY WAY

Phil Moss FRICS

“With global oil prices so low, focus in the Middle East is now

much more on value for money. It’s been a culture shock, but the people are great and you’ve got to fit in with local ways to get on”

Tube line extension. I remember only four of us were allowed to know the true cost figure – it was, and still is, a spectacular project, but it suffered many delays.

I joined EC Harris’ Birmingham office as a partner in 1999, travelling back and forth to London while leading teams on the West Coast Main Line and again on Underground projects. And in the lead-up to London 2012, I was seconded for a year to the Olympic Delivery Authority, negotiating budgets with delivery partners on the project.

After the Olympics, I took an opportunity to direct the restructuring of the Hong Kong Jockey Club’s property portfolio. I’d advise any young surveyor to gain experience working in that city.

Lately, I’ve been working in Riyadh, Saudi Arabia, heading up EC Harris’ – now Arcadis’ – Middle East team. With global oil prices so low, focus in the region is now much more on value for money. It’s been a culture shock, but the people are great and you’ve got to fit in with local ways to get on. It’s also a bonus to get up in the morning and not have to check whether you need an umbrella or not!rics.org/philmoss

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HOW DO YOU evolve your business to become more client focused? To take part in future business advice columns, email editor@ricsmodus.com

NEXT ISSUE: SERVING YOUR CLIENTS

Barely a week goes by without another story of a company being hit by hackers. Attacks that make the headlines tend to involve well-known businesses, but small companies can be targets, too. Criminal gangs are the main culprits – often to steal data, occasionally to demand ransoms. Some cyber attacks are conducted by young thrill seekers, whereas others have malicious intent.

Cyber attacks take many guises, but are quite often begun by a person, unwitting or otherwise, installing a virus on a network. Experts say using an insider is often more likely to yield results than attempting to hack through a firewall.

Andy Crocker is the CEO of cyber security firm Protect 2020 and previously was a senior investigator in the now defunct UK National Hi-Tech Crime Unit. He cautions that small and medium-sized enterprises (SMEs) might be seen as an “easy entry point” to a larger organisation. “Criminal gangs are the main threat to businesses, and their intentions are primarily profit,” he says. “SMEs are often regarded as a softer target than their bigger partners.”

Crocker says many cyber attacks are inside jobs, with staff members the culprits. “A great deal of serious hacks are done by disgruntled ex-employees. Businesses need to have exit policies in place to ensure that, when a person leaves, they don’t take the crown jewels with them.”

More businesses are now embracing cloud-based services but that means companies are then reliant on their suppliers’ security. Nick Blenkarn MRICS, managing director at UK-based 3D visualisation company Seeable, moved his business’s systems into the cloud to take advantage of a wide range of Google

apps and to improve security. He has more confidence in Google’s servers than his own. “If you store all your data on your office server, what are you going to do if the building burns down or someone breaks in? It’s about ensuring your data is backed-up and ours is across multiple locations on Google’s servers, which is more secure than being on your premises.”

But this means that access and password controls are of the utmost importance. Therefore, the company uses a two-step verification to access Google apps. It also runs password management software such as Lastpass, as well as YubiKeys – essentially a USB stick combined with a password, which ensures a two-step verification before allowing users to access business-critical data. “It’s about having a sufficient level of paranoia to get to the right level of security. Geomatic surveyors need to be a little bit paranoid to make sure they are doing a good job,” Blenkarn adds.

RECOVERY POSITIONBusiness owners using the cloud need to be sure they are taking advantage of the security measures that come with them. They also need to have a plan in place to recover data and resume operations if their business is disrupted.

Mervyn Green MRICS, owner of quantity surveying business the Merv Green Consultancy in Newport, south Wales, has built in a range of methods and rules to mitigate against attacks. Like many business owners, he opted to use cloud- based services such as Dropbox. However, he also uses encrypted pen drives to transfer documents to clients and, rather than store data in the cloud, he archives via hard disks and has set reminders to ensure this is done regularly. Security updates and virus checks are scheduled and automatic. Finally, access to his computer systems is restricted. “I’ve seen other companies suffer cyber attacks and they can be very costly,” he says. “I’m the only one who uses my laptop and I don’t ever go on any suspicious-looking sites.”

Such incidents are becoming more frequent and insurers are reporting an increase in claims as a result of IT security breaches. Emma Vigus, head of professional indemnity at Howden Insurance Brokers, cautions that some professional indemnity insurance policies only cover the policyholder directly and would not include data loss from a third-party supplier.

BREAKING AND DATA ENTERING

BUSINESS Companies of all sizes must take their IT security seriously

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Q1 2016_MODUS ASIA 47

Rising tide of water services LEGAL 101

The explosion in the global population over the last two decades has sparked a revolution in the water-services industry. Opportunities for investment in water services and sanitation infrastructure have been attracting tremendous attention from international financial institutions. They see potential profit in addressing problems such as freshwater scarcity, inadequate sanitation infrastructure and the inability of many public authorities to meet supply demands.

Today, and especially in Asia, businesses are vying to engage with the water-services industry. The Water Partnership Program estimates that, by 2025, the combined annual spend on water infrastructure will exceed $1tn in Organisation for Economic Cooperation and Development (OECD) countries and the BRIC nations of Brazil, Russia, India and China alone. The need for additional infrastructure investment will certainly increase demand in the market, potentially spawning billion-dollar valuations. The scale of the opportunity largely explains why water has earned the moniker of Earth’s “blue gold.”

As demand grows, the sophistication of water services must also improve. The industry requires advanced technologies

and novel infrastructural concepts to meet demand for greater volumes of drinkable water. The resulting investment market is complex yet lucrative. It is also a sector in which investors fiercely protect their investment and technical know-how.

The last decade has brought with it a dramatic surge in investment disputes between foreign investors and host governments. Arbitral panels have been charged with applying the rules of international trade-law agreements in specific cases – not a straightforward task given the broad and ambiguous terms of these agreements.

This new phenomenon of investment litigation has resulted in a series of decisions from arbitration tribunals in the water-services sector. Most of these disputes had to deal with the uncertainties generated by state regulation over concession contracts. In technical terms, there was often no issue of “expropriation” by a local government, but rather claims of breaches of “fair and equitable” treatment.

Such decisions have contributed to the formation of an embryonic water-service jurisprudence sector and the elucidation of key provisions, concepts, and definitions embedded in bilateral trade agreements and water-service-related concession contracts. All of this has created a nascent framework for global economic regulation of the sanitation and water-services industry.

Foundations

JULIEN CHAISSEAssociate professor, Chinese University of Hong Kong

Recovering from a cyber attack can be expensive, so standalone cyber security insurance should be considered. “If you experience an infiltration, are infected by malware or experience a system outage, you need to be confident in your ability to rectify the situation quickly. The costs charged by IT forensic firms may be very high unless negotiated in advance,” she says.

Businesses often neglect to consider the impact of mobile devices on their security,

yet smartphones connected to your network can potentially wreak havoc. Some companies have a “bring your own device” (BYOD) policy, but security experts warn this increases the likelihood of malware entering the network and removing data. “BYOD is one of the biggest things that has played into the hands of criminals,” says Professor John Walker, a lecturer in cyber security at Nottingham Trent University. “Companies just lose control of their data.”

Walker says cyber crime is both under- reported and underestimated and is costing companies vast sums of money. His advice is to get proactive, better understand the risk, and make changes.

Every business should have a secure IT policy. Here are six measures you should take. n Enable automatic updates. This is a must for all businesses, as updates on software and browsers include security patches and remove bugs. n Use anti-virus and firewall software. Regular scans prevent the accumulation of

malware, which can act as a Trojan for future attacks. n Enable two-step verification. Most cloud services have this, preventing outsiders from gaining access by guessing your password.n Audit and check all mobiles, which are often the weak spot for companies. Install anti-virus software on your mobile.n Only download from trusted and verifiable sources. This is easier said than done and accidents happen. Encourage staff to own up if they make this mistake.n Control access. Ensure former staff cannot access your systems after they leave.

HOW SECURE IS YOUR IT POLICY?

“If you store all your data on your office server, what are you going to do if the building burns down? It’s about ensuring your data is backed- up and ours is across multiple locations”

NEIL BLENKARN MRICS Seeable

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to be of any practical value. Developing solutions usually encourages innovative thinking, with the objective of avoiding risks or reducing their impact.

There is no standard way of managing risk. The process is typically driven by a single individual, the risk manager, in concert with the rest of the project team. Individual accountability for managing each risk can be assigned to its own custodian. Updates from the risk manager are collated on a periodic basis by the risk manager and added to the project risk register. Collaborative software such as Sharepoint allows a risk register to be held centrally and shared via computers, tablets and smartphones. A project risk register should include the probability, impact assessment and cost contingencies for each risk.

It can be developed into a complete collaborative risk analysis and management tool with mitigation plans and contingencies for not only individual risks, but also for the whole life-cycle of the project.

Risks can be operational, such as weather, flooding or accidents, but they can also include more abstract, strategic problems such as insolvencies, skills shortages or policy changes. Risk management is therefore a proactive method of reducing susceptibility to cost and time overruns, and improves value for money while leaving an auditable trail of decisions and actions.

NIGEL BARR FRICS is managing director of Stradia stradia.com

Risk management is increasingly at the forefront of modern construction contracts, as clients strive for time and cost certainty. Effective risk management involves the entire project team. There are several strategies to consider. Risks may be avoided entirely – usually by eliminating their cause – transferred to another party through contracts or insurance, or exposure to the risk can be reduced through mitigation plans. Acceptance of the risk should be considered only as a last resort. Clients should manage risks during the procurement stage, but once a contractor has been appointed, mitigation plans should be developed between the client, the contractor and its supply chain. Plans must be appropriate, cost-effective and achievable

BRAIN GAIN

WHY TAKE THE RISK?

HONG KONG››RICS Annual Dinner/Awards Hong Kong, Presentation Ceremony11 March, Grand Hyatt Hong KongThe RICS Annual Dinner in Hong Kong is a platform for professionals in the local property, real estate and construction industries

to unite, catch up and celebrate success. Celebrating excellence, professionalism, achievement and overall contributions of projects, teams and development to our built environment, the presentation ceremony of RICS Awards, Hong Kong 2016, will take place at the

same occasion where winners of 13 accolades will be announced. rics.org/awardsdinner

››RICS Hong Kong Annual Conference 201620 MayAccording to population projections from the Government of the Hong Kong Special Administrative Region, by 2041 around one in three Hong Kong residents will be an elderly person, up from one in seven in 2013, leading to reduced GDP and a

shrinking workforce. Drawing references from Asia-Pacific countries, the RICS Hong Kong Annual Conference will explore the challenges and opportunities presented by this increasingly ageing population, with a focus on master planning in the city to cope with the changes in needs; sustainable business models for an emerging silver-hair market; and the creation of a workforce to support it.ricshk-conference.org

EVENTSBOOK RICS EVENTS ONLINE AT rics.org/events For inquiries, call +852 2537 7117

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HOW IS INDIA BUILDING ITS SMART CITIES?

The government has allocated Rs70.6bn

($1.056bn) for smart cities. A special-purpose vehicle could be created for each

city and funding options being considered include

infrastructure bonds, public- private partnerships

and municipal bonds.

Cities such

as New Delhi, Mumbai, Chennai, Hyderabad and

Raipur have already started to use smart technology such as energy meters, geographic

information systems to manage property tax, and

online planning approvals.

India plans

to develop 98 smart cities, which

will account for nearly 35% (130 million) of its total urban

population.

The

objective is to enhance quality of life by

addressing deficiencies in urban infrastructure, so green building norms, smart parking

and intelligent traffic management systems

would all be part of the plan.

Mind map

Anshuman Magazine FRICS Chairman and managing director, CBRE India, and Chairman, RICS South Asia

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One big

challenge will be how various levels of

government collaborate for fund allocation.

India’s stringent land acquisition norms may also hinder development.

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