MODUS Asia Edition | Q1 2017

MODUS ASIA Q1 2017 RICS.ORG/MODUS

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rics.org/modus

ASK THE BIG QUESTIONS

Q1 2017

GLOBAL POSITIONING SYSTEM China plots its course on the New Silk Road / 14

IN THIS ISSUE The cost of inconsistency 24 / On the trail of dirty money 28 / The graduate skills gap 32

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STEPHEN NAGY, INTERNATIONAL CHRISTIAN UNIVERSITY INTELLIGENCE, P06

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06 DIFFERENCE OF OPINION Is the definition of One Belt, One Road too broad? We hear two points of view

14 COVER STORY How One Belt, One Road is transforming central Asia’s economic landscape

44-45 CAREERS How to handle a new management role; Turner & Townsend’s Ameya Gumaste MRICS

07-09 NEWS IN BRIEF Industry news, advice and information for RICS members

24 A KNOWN QUANTITY Arguing the benefits of bringing international standards to cost management

46 BUSINESS Looking after your employees’ mental health

08 THINKING: ALEXANDER ARONSOHN Cross-border projects such as One Belt, One Road require cross-border standards

28 TAKEN TO THE CLEANERS It’s time the property industry’s actions on money laundering met its words

11 PRESIDENT’S COLUMN Amanda Clack FRICS on the importance of understanding how global trends affect the profession

32 THE COMPLETE GRADUATE Higher education courses must evolve to meet the needs of today’s students 36 DEEP WATER HORIZON Our approach to flooding requires a shift in mindset, and surveyors are key to its delivery

47 LEGAL 101 Protecting the legal rights of investors in China's One Belt, One Road initiative 48 PROFESSIONAL DEVELOPMENT Running the rule on IPMS: Office Buildings 50 MIND MAP The Global Disaster Resilience Centre’s Dilanthi Amaratunga FRICS on risk reduction PLUS 49 Surveyed + Events

40 GAZUMPED! The proptech pioneers upending the traditional estate agency model 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.

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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

WISH FULFILMENT Sir, As a land agent manager for over 35 years – and also a trained psychotherapist – I was very surprised, not to say troubled, that the six principles of the RICS Inclusive Employer Quality Mark (Business advice, p46, Asia edition, Q4 2016) refer only to employees in the context of being a part of a business. Surely, the overriding importance is to first treat all employees as individuals who possess the potential to be fulfilled as themselves, for themselves. At the heart of a fulfilled organisation are fulfilled individuals.

David Sherborn-Hoare FRICS, Cheltenham DO NOT PASS GO Sir, What is holding us back from building more zero-carbon homes? One contributory factor is the overall lack of interest in highquality technical progress within the UK housing market, due to a fault in the market.

Because of the lack of zoning, the UK has the most restricted planning system in the world, which means that any site receiving planning support or planning permission quickly achieves a quasi-monopoly position.

Monopolies don’t need to innovate – a poorquality product will sell just as well.

Michelle Carter-Foster

Join the debate If 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 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。

@RICSnews // #RICSmodus @benghanbari Ahh #RICSmodus smells

so good @RICSnews @woodenstreets

Views like this [right]. Why I #lovesurveying @RICSnews #RICSmodus

BILLING ME SOFTLY Sir, Although it is more than 30 years since I retired from working actively as a chartered surveyor, I try to keep abreast of developments by reading my copies of Modus and the Building Surveying Journal as they arrive in the post.

I still found it very sad to read, however, that the preparation of bills of quantities is a dying art (Linking in, p07, Asia edition, Q4 2016). In my younger days, the production of a good bill of quantities was akin to a work of art. Have taking off sheets and abstract sheets also fallen by the wayside?

I can but wait for someone to confess that quantity surveyors no longer rely solely upon mental arithmetic to handle duodecimal calculations. Is there any fun left in the profession at all these days?

John A Lilley FRICS, Colchester

@tricia_ruth A new chapter in my bedtime reading #RICS @RICSnews @RoyalAgUni #RELM2017 #MSc #RICSmodus @NickW2108 No

newspaper for carving but @RICSnews Modus magazine turned up just in time [right]. @RobChapman_Co

Flooding is more problematic in cities because no. of people living there has > from one third of global population to one half #RICSModus

MODUS ONLINE

Read 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 ricseastasia@rics.org with the subject line “Unsubscribe Modus Asia”.

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, bryan@rofmedia.com / Production Manager Michael Wood / Managing Director Toby Smeeton / Repro F1 Colour / Printers ROF Media / Cover Image Charles Williams / Published by Sunday, 207 Union Street, London SE1 0LN wearesunday.com / For RICS James Murphy and Kate Symons [UK] / Jeanie Chan [Asia]

Q1 2017_MODUS A SI A

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Intelligence

News / Reviews / Opinions / Reactions

DIFFERENCE OF OPINION

Is the definition of One Belt, One Road too broad? Discuss.

Whether the definition of One Belt, One Road (OBOR) is too broad or not depends on the strategic aims of the initiative. Notwithstanding the fact that OBOR draws its inspiration from two historical trade routes, the crucial point is that this is a completely new idea that was put forward in the latter half of 2013. There are no existing standards to which it can be compared, and the precise strategy of the initiative is still not clear. There continues to be considerable debate among academics about it.

STEPHEN NAGY, ASSOCIATE PROFESSOR, DEPARTMENT It is natural to expect that projects undertaken by Chinese OF POLITICS AND INTERNATIONAL RELATIONS, companies with the blessing of China will be associated with INTERNATIONAL CHRISTIAN UNIVERSITY, TOKYO OBOR. The initiative includes six economic corridors – hubs of economic activity that are intended to promote The Chinese government asserts that OBOR is a winregional value chains and production networks. Each win economic partnership in which China helps build infrastructure for corridor will be different, depending on the opportunities participating nations so that they can get access to China’s market and or comparative advantages. There could be hubs for develop their own economies. In practice, it is a form of economic statecraft producing agricultural crops, mining, or industrial schemes. that aims to export excess capacity and expand the Chinese market.

For example, in case of Tajikistan, the Belt programme This reorientation is designed to highlight China’s commitment to open envisages a Sino-Tajikistan Agricultural Industrial Park, trade, its philosophy of win-win relationships, and to demonstrate China’s which will include a chemical fertilizer plant, a flour mill, an leadership capacity in global institutions. The success of OBOR is crucial to oil-pressing mill, a feed mill and an agricultural machinery domestic political stability and for China’s geopolitical rivalries. So all building plant. Similarly, in the case of Pakistan, one infrastructure activities and related projects seem to fall under its umbrella. significant component is industrial cooperation, whereby At the domestic level, the failure of OBOR would leave a slowing Chinese some Chinese industries may be relocated to Pakistan. economy with domestically stranded overcapacity. This is salient in the In view of the wider aims of OBOR, the inclusion of all current economic environment, when the Chinese government is trying to Chinese-aided development projects in Asia can justifiably move away from a manufacturing-based economy to one that is service be included in the scheme. based. The consequence would be increased unemployment, a slowdown in economic restructuring, and social – and potentially political – instability.

Internationally, the success of OBOR is tangentially linked to China’s All in one or exceptions to the rule? geopolitical rivalries with the US and Japan, and would also validate the Join the debate at rics.org/linkedin, “China Dream” vision that the country has something to contribute to the or email editor@ricsmodus.com world. This would bolster the current government’s reputation at home and abroad. Failure would feed the narrative that China does not have the capacity to contribute to the world. In short, China will find it necessary to include any initiative that can be labelled as an OBOR project.

06 RICS.ORG/MODUS

INTERVIEW ALEX FREW MACMILLAN ILLUSTRATION ANNA-KAISA JORMANAINEN

MANZOOR AHMAD, CEO, WORLD TRADE ADVISORS AND FORMER PAKISTAN AMBASSADOR TO THE WORLD TRADE ORGANIZATION, ISLAMABAD

Intelligence Executive Support staff

BOSS ROOM An executive in a typical Hong Kong office gets four times as much space than their secretary, while in Sydney the ratio is 1:1.

4 1

1.9 1

1.9 1

1.5 1

11

Source: Knight Frank, 2016 HONG KONG

NEWS IN BRIEF

LONDON

SHANGHAI

ODDS IMPROVING FOR ASIA’S LAS VEGAS AFTER EIGHT-YEAR LOSING STREAK

rics.org/modus

RICS and IFMA’s career map helps to define FM profession

LIGHT SHOW The 3,000room Parisian Macao, which features a halfscale replica of the Eiffel Tower, opened last September

INFOGRAPHIC IAN DUTNALL

RICS hosts co-working event at MIPIM Asia RICS recently hosted a discussion exploring the impact of coworking space on corporate real estate. The event was held during the MIPIM Asia conference in Hong Kong last November.

Among the guests at MIPIM Asia was Evan Kleinberg, managing director and head of real estate for Asia-Pacific at industry leader WeWork. He revealed that, while 45% of its members come from start-ups and SMEs, most fees are in fact paid by multinational corporations seeking to capitalise on the unique environment coworking space offers. Visit rics. org/coworking for more.

SYDNEY

MACAU

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RICS and the International Facility Management Association (IFMA) used the launch of their partnership at the World Workplace Conference and Expo last October to unveil their career map into the FM profession.

Although the FM sector has risen in status and prominence, the global professional community that has pioneered much of this advance has suffered through fragmented support. The IFMARICS “define.fm” career map will provide clarity and internationally recognised authority on the required skills, training and experience necessary for all professional stages and goals.

Define.fm is one of many resources coming out of the collaboration designed to accelerate career development and build recognition for FM professionals as strategic leaders in the built environment. Find out more at define.fm.

NEW YORK

After 26 straight quarters of falling gross gaming revenue, the signs are that 2017 may be a much better year for Macau.

Standard & Poor’s latest report on the special administrative region, Macau Gaming: The Cards Look Right For A Recovery, shows that gambling revenues should grow as much as 10% in 2017, having fallen 34% in 2015 and an anticipated 3%6% in 2016. This, combined with new casinos, better infrastructure linking to mainland China, and stabilised regulations, has given the ratings agency cause to be optimistic about Macau’s prospects.

Premier Li Keqiang has also announced initiatives such as

LINKING STARTED BY Darren Foy FRICS, director, Berstone, London

What do you tell unsuccessful tenderers? I am a fan of the anonymised list of bid return values, leaving the tenderers to spot their own and to take note of the range received.

We meet all bidders to tell them the news face to face. It is a common courtesy after the time and effort put in. We also tell unsuccessful

making Macau a clearing house for Chinese yuan for Portuguesespeaking nations, encouraging conventions, and pushing the development of non-casino attractions – a move that aligns with Beijing’s desire for Macau to diversify away from “gaming” into a more general leisure destination.

Thanks to the openings last year of the Wynn Palace and Parisian resorts, the number of hotel rooms in Macau has risen by 4,700. That brings the total stock to more than 35,000 rooms, up from 20,000 in mid-2011. Occupancy rates remain a healthy 80%-90%.

This year will see the completion of a new ferry terminal, while capacity at the international airport is due to be expanded from 6 million passengers last year to 7.8 million.

This will be followed in 2018 by the extension of the Guangzhou to Zhuhai railway into Macau.

The casino economy of the “Las Vegas of Asia” had been on a losing streak since mid-2014, as a result of China’s crackdown on corruption and conspicuous spending.

REVIEWING THE LATEST DISCUSSION POINTS AT RICS.ORG/LINKEDIN bidders first so that they don’t hear the news second hand.

There is nothing worse than finding out from a successful bidder that you have lost.

James Pellatt MRICS I believe it is only right and fair that a scoring matrix is given as part of the tender pack, against which proper feedback is given.

This often highlights

that the lowest-cost submission is not the best value for the client. Murray Hibbert You write back including two lists: one with names of tenderers in alphabetical order and a one with the value of tenders received in descending order. Just writing with a thank you tells the poor tenderer nothing much.

Simon Evans MRICS Q1 2017_MODUS A SI A

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“One Belt, One Road presents the perfect opportunity to demonstrate how an overarching set of global standards can benefit large-scale infrastructure projects”

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hina may be the initiator of the One Belt, One Road initiative, but infrastructure projects of this nature are not possible without international standards. China’s National Development and Reform Commission has outlined a vision for OBOR that discusses strengthening bilateral and regional cooperation. But the document stops short of proposing a formal treaty or partnership.

As many as 65 nations are touched by OBOR, representing 4.4 billion people and about 40% of the global economy. That kind of scale requires overarching protocols, which will interact or possibly contradict local and national standards. A simple example: the 1,400-mile BeijingHong Kong-Macau Expressway had to contend with the change from driving on the left-hand side in Hong Kong and the right-hand side in China.

A crucial stage of any infrastructure project is the purchase of tracts of land for development, which often requires compensation to be paid to those blighted by such schemes. That is easier said than done in parts of the world where land registration is informal, and much of the land concerned may be unregistered or in tribal hands. What’s more, some of the necessary land may already be occupied by buildings that will require demolition and an appropriate level of compensation.

RICS is part of the International Land Measurement Standards Coalition, an initiative supported by the UN and the World Bank to deal with the issue of registered and unregistered land. Technical experts from around the world are drafting standards to deal with that challenge.

To aid in that process, there is already an International

08 RICS.ORG/MODUS

Property Measurement Standards Coalition, made up of 84 organisations, which addresses the problem that different nations use different measurement standards for real estate.

The aim is to expand the standards into an overarching principle that can work across all specialities of the built environment sector, including architecture and engineering.

It could act as a bridging standard to translate measurements to the local standards of all the countries involved.

When it comes to working out how compulsory purchases should be remunerated, both the China Appraisal Society and RICS are members of the International Valuation Standards Council. This helps set valuation and compensation standards that can be put to use throughout the One Belt, One Road nations.

The Economist estimates that construction costs for One Belt, One Road will run to more than $1tn, but from experience the final figure is likely to be a considerably larger. Although it predates OBOR, the China-Pakistan Economic Corridor is a good example of the scope of the kind of projects that OBOR will likely support. The two governments plan to build highways, railroads, gas and oil pipelines, as well as communication cables along the corridor, and have already signed off projects worth $46bn to achieve their aims.

Countries and companies price projects in different ways. So it is vitally important that the China Engineering Cost Association, the Hong Kong Institute of Surveyors and RICS are among the ranks of more than 40 organisations backing the International Construction Measurement Standards Coalition. Without such standards, accurately forecasting costs for crossborder projects would be difficult, if not impossible.

A question remains over whether OBOR will eventually need a formal agreement, covering trade, investment and business-climate issues to maximise its impact. For now, development conditions in the countries along the route are highly diverse, and some have challenging governance structures that makes investing in infrastructure difficult. But using the initiative to help countries improve their investment climate, technical standards, customs procedures and logistics through a formal agreement could bring immense benefits.

ILLUSTRATION ANDREA MANZATI

ALEXANDER ARONSOHN FRICS DIRECTOR, TECHNICAL INTERNATIONAL STANDARDS, RICS, LONDON

Intelligence

NEWS IN BRIEF

WE LIKE

®

rics.org/modus

RICS East Asia appoints new managing director Edith Chan has recently joined RICS as managing director for East Asia. She brings with her extensive experience of standards and membership institutions, having led teams at the Hong Kong Securities and Investment Institute and at the Asia Society Hong Kong Center.

Chan began her career in London with PwC and, since her return to Hong Kong has worked for KPMG, the Securities and Futures Commission and Invesco, among others. She was awarded a Hong Kong SAR Government Medal of Honour in 2014 for her contributions to public service.

Professions unite to improve land tenure security RICS has joined standards bodies representing land professionals in more than 150 countries to launch an initiative aimed at improving land reporting systems.

The coalition is drawing up the first global framework for recording land information, under a set of internationally agreed Voluntary Guidelines for the Responsible Governance of Tenure. The aim is to improve tenure security, land rights, access to investment and economic development. Around 70% of the world’s land and property is officially unregistered.

The coalition is comprised of organisations responsible for training, qualifying and regulating experts in land surveying, land management, cadastre, valuation and registration.

RICS Standards Director, James Kavanagh MRICS, said: “This initiative looks to build a bridge between the technically complex land systems of the developed world, and the socially, culturally and legally complex systems of the developing world. It will allow countries to benchmark risk and improve public confidence in land ownership and exchange.”

BEND SETTER Microfibres help produce a concrete at least twice as strong as the conventional material under bending, NTU’s scientists claim

Flexible concrete What’s that? A new type of concrete that is not only bendable, but also stronger and longer lasting than the regular product, according to scientists at Singapore’s Nanyang Technological University (NTU), who created the material last year. The innovation could have a huge potential for use in the construction industry, particularly in road building – for example, precast flexible pavement slabs could be quickly shaped into position on site to reduce the time needed for roadworks.

How does it work? Typical concrete comprises cement, water, gravel and sand. While this makes concrete hard and strong, it is not flexible, and will crack under too much tension or weight. NTU’s ConFlexPave has been engineered to include certain types of hard materials mixed with synthetic microfibres, which let it flex and bend under tension. “The hard materials give a non-slip surface texture while the microfibres, which are thinner than the width of a human hair, distribute the load across the whole slab, resulting in a concrete that is as tough as metal and at least twice as strong as conventional concrete under bending,” says assistant professor Yang En-Hua from NTU’s School of Civil and Environmental Engineering.

Will it be available anytime soon? Not for a while yet. So far, only tabletsized slabs of the material have been undergoing thorough tests at NTU’s laboratories. However, over the next three years the tests will be scaled up at locations within the university’s industrial estates, and in places where there is a lot of traffic from pedestrians and vehicles.

ON RECORD

WHO’S SAID WHAT… AND WHY THEY’VE SAID IT

Amenities outside are as important as what is on site MITCH MARCUS managing director, JLL, Philadelphia The rapid growth of the tech sector and influx of millennial employees means landlords are looking more at the surrounding streetscape.

From outside spaces to food trucks, it is all about increasing activity around buildings to attract talent.

If even a portion of those people are displaced, you have the sort of refugee crisis we haven’t seen in our lifetimes BARACK OBAMA Former US president Shifting monsoon patterns in South Asia could affect a billion people.

Without action, climate change is likely to hit the rural poor hardest.

Q1 2017_MODUS A SI A

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SOMETHING WE CAN ALL REFLECT UPON Mirrors have a long history of use in commercial interiors to enhance space and increase light, making small, dark spaces appear to be much larger and more inviting. But this example, from Chinese book retailer Zhongshuge’s shop in the city of Yangzhou, takes the principle to an entirely new level. The interior, from Shanghai design studio XL-Muse, uses black mirrored flooring and arched shelves to create a tunnel-like reading space, perfect for long periods of immersive browsing by the shop’s customers, while making a positive virtue of the cave-like space available inside.

10 RICS.ORG/MODUS

RIO DE JANEIRO FOR SALE

BRAZIL’S NUTS

236%

SÃO PAULO FOR SALE

Thought Hong Kong’s house prices were crazy? Tell that to residents in Rio, where values have risen 236% since the 2008 financial crisis.

190%

Intelligence

HONG KONG FOR SALE

123%

Source: Knight Frank, 2016

HAIFA FOR SALE

122%

TEL AVIV FOR SALE

115%

BOGOTA FOR SALE

99%

KUALA LUMPUR AUCKLAND SYDNEY FOR SALE FOR SALE FOR SALE 92%

82%

76%

LONDON FOR SALE

73%

JAPAN

HOMES RUN BEHIND UPTURN IN ECONOMY

ILLUSTRATION BERND SCHIFFERDECKER IMAGES SHAO FENG

There are signs that the Japanese economy is on surer footing, and its property market strong, after years of false dawns. So much so, in fact, that some market watchers are hinting at a residential real estate bubble.

The stock market is a leading indicator of Japan’s condition, and shows bullish belief.

The Nikkei 225 closed 2016 at 19,114, which means the benchmark index registered its first five-year run of higher year-end closes since 1990. That is its strongest performance since the end of the bubble years, when the land under the Imperial Palace in Tokyo was calculated to be worth more than all the real estate in California.

After years of false dawns, however, the World Bank remains cautious, pegging Japan’s economic growth at 0.5% for 2016 and 2017. But there are more-optimistic forecasts from Société Générale and the Edmond de Rothschild Group, both of which anticipate growth of at least 1.3% this year.

Property prices have been rising even faster. Tokyo apartment values were 4.5% higher in the fourth quarter of 2016 than the same point in 2015, leading Jefferies to conclude that the Japan’s real estate market will likely peak in 2017. In November the investment bank reiterated its caution, pointing out that real estate values are rising faster than wages.

Japanese bank Nomura reports that property now accounts for 14.8% of all bank lending, making it the second-largest debt sector, behind only personal loans. Its ¥70tn ($601bn) in borrowings is 26% higher than the lending to the manufacturing sector.

GREENHOUSE EFFECT Rising residential values in Tokyo have prompted some lenders to warn of an overheating market

“It is important to understand how global trends affect us all” AMANDA CLACK FRICS RICS PRESIDENT TRADE AGENCY Will initiatives such as the New Silk Road show the way forward for developing nations in a new atmosphere of protectionism?

Recent months have highlighted public disquiet about globalisation.

Populations in the developed world, long regarded as the main beneficiaries of open markets, increasingly feel uneasy about the free movement of goods, services and people. The Centre for Economic Policy Research has identified a significant rise in discriminatory trade policies across G20 countries over the past two years, and the CPB World Trade Monitor highlights a fall in global trade activity since 2015. Trade is now slowly recovering but remains far below its 2010 peak.

Nonetheless, one gains a positive perspective from Asia. I have been in India and China recently, taking every opportunity to promote our profession.

Perhaps the greatest opportunity is the One Belt, One Road initiative (OBOR).

Part-physical infrastructure stretching from China to Europe, and partmaritime routes, OBOR requires trillions of dollars of investment in trade links and in the cities along this modern-day Silk Road (Infrastructure, p14).

How will this be financed? What is the long-term planning behind it? How will city authorities and national governments work together? How do we ensure funding reaches the most beneficial projects? The answers lie in transparency, an appropriate balance between public and private funding, common practices and a cross-border regulatory system – all issues on which RICS has a view, and where RICS professionals can play a tangible role.

For these reasons, we are convening key decision-makers from across the industry and from around the globe, for two days of intensive discussion next month in Shanghai. It will be important for us to understand better how global trends are likely to affect us all, and to look at best practice from the world’s leading gateway cities. We will be asking direct questions about how to ensure a project is investable, how China’s cities can attract foreign direct investment, how cities outside China will attract Chinese investors, and how cities outside Asia will attract Asian investors.

We can offer a vision for a built environment sector that is not only vibrant and sustainable, but also resilient to unexpected shocks. This is a vision that depends on international technical and ethical standards, and creates demand for our professional expertise.

Follow Amanda on Twitter @amanda_clack

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Intelligence

NUMBER CRUNCH RISING VALUE OF CLASSIC CARS MAKES THEM THE STAR PERFORMER OF THE LUXURY MARKET – BUT ARE THEY REALLY THAT SAFE AN INVESTMENT? Source: Knight Frank Luxury Investment Index, 2016

SECRET SURVEYOR

“I’m engaged in a new sport: I get in the way of people walking with their head in their phone”

S

ocial media is dead. As a surveyor who was once named an “early adopter”, I’m now of the view that those first in will be first out, and I’m with them. The disruptors in the room left some time ago.

Why? Well, because surveyors survey, stupid. That means looking around you and interacting with your environment.

It means talking to people to gather intelligence. People do business with other people. Not with a machine.

I’m currently engaged in a new sport: getting in the way of people walking around with their head in their phone. Our lives have become dominated by a tiny screen.

So I deliberately let them walk into me.

The pressure to communicate through apps on our phone, tablet or laptop is allconsuming. Keyboard warriors rule the world. Quite how we are expected to email, tweet, Instagram, WhatsApp, LinkedIn and Facebook message everyone we know is beyond me. And once we have done this, we need to get the blog post written.

We used to spend one-third of our lives asleep. If we are not careful, we will spend the other two-thirds trying to keep up with all these distractions. How often in client meetings do you see people trying to surreptitiously look at their phones?

You know who you are; I know what you are doing. It’s not big and it’s not clever.

The surveying profession is about people. We claim to want to change lives.

Lives that have a beating heart. Switch off the screens for a while each day. Talk to people. Live in the moment, don’t video or photograph it. See it, touch it, smell it.

And if you want to get in touch to let me know you vehemently disagree – you can’t because I am the secret surveyor. But even if you could, it wouldn’t be via social media, because I am closing my accounts down.

ARE YOU INTERESTED in writing a future Secret Surveyor column? Send your musings on the profession to editor@ricsmodus.com

12 month

5 year

10 year

Furniture

-6%

-23%

-30%

Chinese ceramics

-5%

7%

25% 458%

Watches

5%

32%

Coloured diamonds

0%

25%

Stamps

1%

21%

133%

Jewellery

3%

58%

157%

KFLII*

1%

45%

180%

Art

-11%

9%

Coins

6%

73%

Wine

8%

28%

Cars

8%

151%

458% 68%

122%

181%

195%

237%

458% 14% 12% 10% 8% 6% 4% 2%

s d Gol SE 100 tamp S FT

10-year asset price volatility

s Car

Art

e ds ns Coi iamon l estat d ea red ndon r u o l Co ral Lo nt e ce e

Win

Prim

Coins, wine and classic cars have shown runaway price growth as the best performing luxury assets over the past 10 years, according to the latest figures from Knight Frank’s Luxury Investment Index.

Moreover, investors’ passion for classic cars shows no sign of

s e s II* ry KFL ewelle eramic atche urnitur W F J ec nes i h C

*Knight Frank Luxury Investment Index

decelerating, with an astonishing 458% growth reported over the past decade, despite being one of the most price volatile luxury assets over the same period.

For those buyers looking for slightly more stable returns, it might be time to have a rummage in the jewellery box.

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Cover story

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RICS.ORG/MODUS

Cover story

ALL ROADS 备 LEAD TO CHINA

Is Beijing’s plan to spend $1tn on infrastructure across central Asia about more than just trade routes?

Words Alex Frew McMillan Illustration Stuart Daly

T

here has been much fanfare over One Belt, One Road (OBOR), the massive infrastructure scheme designed to improve land and sea links between East and West. So far, there’s been more talk about the concept than action, but the programme is certainly beginning to gain traction.

There’s no doubt some of the grand plan will materialise.

And one question we can certainly ask in Asia, a region so fraught with historical and current political tension, is, “Who wins and who loses? Or is greater infrastructure throughout the region a universal good?”

The entire scheme coalesced at the APEC conference in Beijing in 2014. The Belt concept is to build infrastructure such as railways, roads and gas pipelines from China through to the West. The Road, rather confusingly for English speakers, is a recreation of the old Maritime Road that this time should run from the Pacific through to the Baltic Sea. The first – and excellent – thing to surmise, is that OBOR is a way for China to exert a form of economic colonialism in nations that have nowhere near the size of its economy, or construction capability. The second – and no less excellent – supposition, is that China is also using OBOR to put to work a domestic cement and steel production capacity that »

受瞩目的 一 带 一 路 是 一项旨在 加 强 东西方海 陆 通 路的大 型基 建 计 划。 虽然迄今为止，人们对这个构思的谈 论多于行动，但这项计划的吸引力已 然呈现。 无疑，这项宏伟计划即将付诸实施。我们想问， 在过往和现今都存在紧张政治局势的亚洲， “在这 个横跨整个亚洲的大型基建项目，谁会是赢家？谁 又会是输家？或者各方都能受惠？” 这个计划成型于2014年在北京举办的亚太经合 组织(APEC)会议。 “带”是指兴建从中国通往西方 的铁路、公路及燃气管道； “路”则是指重建海上 丝绸之路， 但当今的路线是从亚洲到波罗的海。 人们猜想，中国想通过“一带一路”对经济规模 或建造能力与其有相当差距的国家进行某种形式 的经济殖民。其次中国想通过“一带一路”输出其 严重过剩的水泥和钢铁产能。中国正着手改革其 臃 肿 的国营 企 业，一 带 一 路 有助 于 避 免 大 量 人 员失业。 两种猜测也许都有一点道理，但谁又有资格怪罪 中国输出其过剩的产能呢？对于有人指责中国在开 展工程的国家进行资源掠夺，你也可以反驳“为什 么在 这 些国家需要建 造 水 坝或 新的铁 路网的 时 候，你却无影无踪？” 中国无疑会得益于一带一路，但这并非零和博 弈，它更可能使各方都能受惠。»

条条大路 通中国 北京计划对中亚基建作出1万亿美 元投资，这仅仅为了开拓贸易路线？ 文：Alex Frew McMillan 图：Stuart Daly

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far exceeds its own needs. As it reforms its bloated stateowned enterprises, the plan is certainly a way of averting massive job losses.

There is probably a little truth to both these concepts. But who can blame China for trying to put its excess output to use, even if it ships it overseas? And for those who accuse China of “exploiting” the nations in which it will work on projects, you have to ask,“Where were you when this nation needed a dam or a new railway network?”

China will clearly gain from One Belt, One Road, but it is far from a zero-sum game. In fact, it is more than likely a game in which nearly everyone wins.

The brokerage CLSA noted in a report on the topic that the countries with the worst infrastructure, out of 20 Asian nations in the plan, start with bottom-ranked Bangladesh, then run through Nepal, Pakistan, Indonesia and Tajikistan.

Interestingly, India is next in that ignominious list. But it may be the biggest loser among the OBOR nations. It has a frosty relationship with China at best. And so far it has indicated that it views the initiative as a zero-sum game with the cards stacked in China’s favour. So it has shown that it is not interested in participating.

The programme is certainly going to throw up many opportunities for those in real estate and construction, with surveying, project management, cost management and risk mitigation, to say the least, set to be in high demand.

In fact, the lack of such skills may be one of the weaknesses of the entire plan. Infrastructure is only any use if first, you have the vehicles that are in good enough shape to use it, and second, you are able to maintain what you build.

At least so far, there is no suggestion that OBOR involves anything other than laying concrete and steel. Without also creating an environment in underdeveloped nations where there are professionals who can maintain modern road, rail and pipeline networks, they will fall apart.

“This is the biggest vacuum in the policy,” says Stephen Nagy, a professor of politics and international relations at the International Christian University in Japan. “With the lack of good institutions, one wonders how a great road or train in Afghanistan, Myanmar or Nepal will be maintained?”

Then, the question comes, will this scattershot road and belt link up? The connectivity of such a grandiose plan supposes easy communication and linkages between governments in politically unstable and occasionally wartorn nations. It suggests that OBOR might just be a smattering of unconnected Chinese-influenced projects all over a region spanning at least from Harbin to Moscow.

“At this stage, all things thrown in the hat are categorised as successful OBOR initiatives,” Nagy adds. “The real deal will be better understood when we see the projects linking up. At this stage I don’t see that.”

Chinese president Xi Jinping first proposed a Silk Road Economic Belt in September 2013, on a visit to Kazakhstan, suggesting that central Asia is a little-developed region in which China sees plenty of potential. The first time he suggested that China would implement a maritime equivalent came on a visit one month later to Indonesia. China has been in legal dispute with most of south-east Asia over parts of the South China Sea. The original Silk Road was, of course, not one single road at all. It was a series of trade routes that were formally 16 RICS.ORG/MODUS

The biggest vacuum in the OBOR policy is the lack of professionals to maintain the planned infrastructure

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STEPHEN NAGY International Christian University

证券商里昂在报告中指出，在参与计划的20个基 建最差的亚洲国家中，率先在排名最低的孟加拉 展开，其后延伸到尼泊尔、巴基斯坦、印度尼西亚 及塔吉克斯坦。 有趣的是，印度在这个名单中名列次要地位。它可 能是一带一路国家之中最大的输家。它跟中国的关 系较为冷淡。印度迄今仍视这项计划为零和博弈， 而且话语权全在中国手上，所以并不热衷参与。 这项计划必然会为房地产及建造业带来庞大商 机，退一步说，也至少会在测量、项目管理、成本 管理及风险管控方面带来庞大需求。欠缺这些技 能可能是整套计划的短板之一。如果你拥有良好 的交通工具配合基建使用，以及你能妥善保养这 些基建的话，基建才能派上用途。 至少迄今为止，并无人提议一带一路参与基建以 外的其他事项。若不为发展中国家培养专业人士负 责保养现代化公路、铁路及管道网络，他们便会分 崩离析。 日本国 际 基 督 教 大学政 治及国 际关系学 教 授 Stephen Nagy表示： “这是这个项目的最大空白。 若没有良好的专业培训，你自然会质疑，阿富汗、 缅甸或尼泊尔等国家怎么能够维持现代化道路或 铁路的运作？” 这样的话，问题就来了：这些东一段、西一段的 带与路能否连接在一起？如此宏图大略将政治关 系不稳定、甚至偶尔发生战争的国家政府链接起 来，便于彼此沟通及联系。这意味着一带一路可能 只是由中国主导、由哈尔滨至莫斯科之间的无关 的项目。 Stephen Nagy 补充说: “在现阶段，当中的一切 都被归类为成功的一带一路计划。当各个项目连 接在一起时，才会更清楚看到是否体现真正目标， 但在现阶段我看不到这点。” 中国国家主席习近平在2013年9月访问哈萨克斯 坦斯坦时首次提出丝绸之路经济带。他指中亚是 开发不足的地区，中国认为这里潜力巨大。一个月 后习近平出访印度尼西亚，首次谈及中国将建设海 上丝绸之路。一直以来，中国就南海多个水域跟东 南亚大部分国家有争议。

PAKISTAN

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Khuzdar Jālq IRAN

Nawabshah

Hyderabad

Gwadar Karachi

Islamkot

INDIA

introduced during the Han Dynasty. The trade system ran from Chang’an, the present Xian, in the east through to the Mediterranean, linking China with the Roman Empire. Silk was the costliest cargo. But its most important effects may have been cultural. Once-disconnected societies from China through India, Persia, Arabia, Greece and Rome had a reason to interact. The connection routes peaked in importance for China during the Tang Dynasty.

The German geographer Ferdinand von Richthofen gave the system its name in 1877. But by then it had long gone.

The Yuan Dynasty had been its downfall in the east, led as that was by the Mongol empire, and the death knell came around 1453 with the rise of the Ottoman Empire, whose leaders were anti-Western, effectively inserting a road block right in the middle of the routes.

It is easy to see how truculent nations along the route could disrupt any smooth driving, railing or sailing. A southerly route would run from China through Tibet, into Pakistan, then Afghanistan, Iran, Iraq, Turkey, Greece and on into Europe through Serbia and Hungary. Perhaps that is why Xi chose to announce the Belt in Kazakhstan. A northern route runs straight from China through that nation and into Russia, where it can skirt Ukraine by heading through Poland and into western Europe.

China may not just be playing “economic offence” with its plans. Keeping the nations on the southern route happy protects its interests politically and militarily. Russia and China might become tighter, presenting a substantial counterweight to the current tag-team of the US and Japan in Asia. India, having removed itself from OBOR so far might find itself in a sweet spot of being able to play either of those teams against each other for its own gain. »

原本的丝绸之路当然不是单一条路，而是在汉朝 时正式开拓的多条贸易路线。这个交易系统由东面 的长安 （现在的西安）为起点，经过地中海将中国 跟罗马帝国连接起来。虽然丝绸是最昂贵的货品， 但最重要的影响可能是文化方面。通 过印度、波 斯、阿拉伯、希腊和罗马，一度跟中国中断联系的 国家都能和中国重新建立往来关系。这些连接路 线的重要性在唐朝达到颠峰。 德国地理学家李希霍芬 (Ferdinand von Richthofen) 在1877年命名这条路线为丝绸之路， 虽然当时已不复存在。它没落于蒙古帝国当政的元 朝。丝绸之路的丧钟早在1453年左右就已响起。 当时鄂图曼帝国崛起，帝国的领导人是反西方主 义，于是在各路线中设置路障，截断交通往来。 好战的国家可以轻易干扰丝绸之路沿线的交通。 丝路南线可从中国经由西藏进入巴基斯坦再到阿 富汗、伊朗、伊拉克、土耳其、希腊，再经由塞尔维 亚和匈牙利前往欧洲。也许习近平主席因此选择在 哈萨克斯坦斯坦宣布经济带计划。丝路北线从中 国通过该国进入俄罗斯，绕过乌克兰经波兰再前 往西欧。»

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There is a defensive business strategy to consider, too.

China may now be using OBOR not just to link itself with the rest of the world but also to insulate its own economy. If the infrastructure helps those nations that extend west and south of it, presumably the nations of those economies will do better. And that in turn means that their key trading partner, China, will be buffered from poor performance in trading partners further away such as Europe and the Americas.

Much has been made about how One Belt, One Road is designed to counter the Asian Development Bank (ADB), which has Japan as its biggest donor, and the World Bank. But at least the ADB is already teaming with the Asian Institutional Investment Bank – the finance side of One Belt, One Road – on projects in OBOR nations.

Where will the money for OBOR come from? There is an obvious choice. Hong Kong is set on morphing its existing position as the financial capital of east Asia into a finance hub that directs the funding along the entire land and sea routes.

It is notable that Hong Kong’s unpopular chief executive, Leung Chun-ying, mentioned One Belt, One Road 48 times in his most recent policy address.

Hong Kong’s equivalent of a central bank, the Monetary Authority, has established the Infrastructure Financing Facilitation Office, designed to funnel cash into infrastructure investments. That has already signed on 30 financial institutions, including China’s “Big Four” banks but also AIA, Blackrock and Blackstone, Citigroup, HSBC, Macquarie and Mizuho. Global institutional investors such as the China Investment Corp, the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan are also on board. Most notably, the ADB is also part of the initiative, and a handful of public utilities and professional companies such as accountants are also included.

Quite how the Belt fits and where the Road leads are still unpredictable. We are without the fitting room or a GPS for now. But there are plenty of ways for Asian nations, and the property professionals within them, to mould how the whole plan shapes out. n

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一带一路项目的最大 空白是缺乏专业人才來 维持基建 运作 ll

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STEPHEN NAGY 国际基督教大学

中国的这些计划未必是纯粹“经济攻略”，因为 这也会令丝路南线国家因在政治和军事上都能保 障自身利益而感到满意。俄罗斯及中国的关系可能 更趋紧密，能有效抗衡目前在亚洲联手的美国和日 本。至今仍然对一带一路持观望态度的印度可能 发现自己处于有利位置，可以倒向对抗的任何一方 以利己。 还有就是保护自身的商业利益。现在，中国可能 不但利用一带一路跟全球各国连系，还可能借此保 护自身经济。如果这项基建对沿线以西和以南的 国家有帮助，它们的经济可能会发展得更好。反过 来说，中国作为它们的主要贸易伙伴，当欧洲和美 洲等较遥远的贸易伙伴经济表现不济时，中国可以 免受影响。

同时，一带一路旨在对抗亚洲开发银行（日本是 主要捐款国）及世界银行的言论甚嚣尘。但是，至 少亚洲开发银行已经跟亚洲基础设施投资银行（ 为一带一路提供资金支持）携手，在一带一路相关 的国家推行项目。 至于一带一路计划的资金将从哪里来，有一个显 而易见的选择。香港致力要从现在的东亚金融资 本中心蜕变成为引导资金流向丝路所有陆线和海 线的金融枢纽。值得注意的是，并不受欢迎的香港 特首梁振英在最近期的施政报告中提及一带一路 共48次。 地位相当于中央银行的香港金融管理局已成立 基建融资促进办公室，目的是促进基建投资，至今 已经跟 30 家金融机构缔结伙伴，包括中国四大银 行，此外还有友邦保险、贝莱德、黑石集团、花旗 集团、汇丰、麦格理及瑞穗，另外还包括环球机构 投资者，例如中国投资有限责任公司、加拿大退休 金计划投资局及安大略省教师退休基金会。最值 得注意的是，亚洲开发银行也是计划的一部分，此 外还有数间公共事业机构和会计师事务所等专业 公司。 目前仍无法预测丝路的成果，也没有更好的指路 明灯，但亚洲国家及其各自的房地产专家会有很多 方法去评估整个计划的成效。n

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MATERIAL BENEFITS How China’s vision for the New Silk Road …

Moscow

Kazan

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POLAND

Brest UKRAINE

Budapest

7 2

Aktau

A

Belgrade

12 Anaklia

Tbilisi Kars

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Baku B

Piraeus

TURKEY

Tehran

SYRIA IRAQ

KEY TO SYMBOLS THE SILK ROAD ECONOMIC BELT

IRAN

Suez

THE MARITIME SILK ROAD RAILWAY ROAD

EGYPT

SAUDI ARABIA

GAS PIPELINE PORT DRY PORT POWER PROJECT CONFLICT ZONE A Abkhazia – Russian-

backed breakaway state

B Nagorno-Karabakh –

territory disputed by Armenia and Azerbaijan C Islamist extremist terror threats in Pakistan/ Afghanistan border region D Jammu and Kashmir – territory disputed by India and Pakistan E South China Sea – territorial waters disputed by neighbouring countries

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1 BUDAPEST-BELGRADE

HIGH-SPEED RAIL

A $3bn project split into two phases. China is funding 85% of the $1.6bn cost to upgrade 160km of Hungarian track, which will be carried out by a Chinese-led consortium and Hungarian State Railways.

Finance for the 185km Serbian section will be provided by China EximBank. The upgrades will cut journey times between the cities from nine hours to three.

SUDAN

Djibouti ETHIOPIA

2 STANDARD-GAUGE

RAILWAY PROJECT, KENYA The 472km first phase of this project, a line between Nairobi and the port of Mombasa, is nearing completion. China EximBank funded 90% of the $3.8bn cost, and the principal contractor is China Road and Bridge Corporation. Once all phases are complete, the line will connect Kigali in Rwanda, Kampala in Uganda and Juba in South Sudan to the coast.

SOUTH SUDAN

Juba

Kampala 3

KENYA

Kigali Mombasa

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9

RUSSIA

Novosibirsk

Irkutsk

Astana 1

Khorgos Eastern Gate SEZ

KAZAKHSTAN

MONGOLIA

Harbin

Ürümqi Almaty

Beijing

Tashkent 8

Kashgar

Lanzhou

C D

Chengdu

CHINA

AFGHANISTAN

Shanghai

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Delhi Kunming Gwadar

Chittagong INDIA

Hong Kong

MYANMAR

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Vientiane 5

Bangkok E

4 Colombo

Kuala Lumpur Singapore 3 COLOMBO, SRI LANKA

China Harbour Engineering Company is funding and developing the port area into Colombo Financial City. After a host of delays and legal wrangles, construction of the $1.4bn project has resumed.

4 SINGAPORE-KUNMING RAIL LINK

China is building a $6bn, 470km high-speed line from Kunming to the capital of Laos, Vientiane. The project will connect both countries with Thailand, where Beijing has agreed to fund a $23bn programme of rail upgrades running through Bangkok and on to Malaysia. Meanwhile, an agreement to build an $11bn, 350km highspeed line between Singapore and the Malaysian capital, Kuala Lumpur was signed by the respective governments last December.

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KEY PROJECTS

… is redrawing the map of Asia’s trade routes SPECIAL ECONOMIC ZONE

A 5,740 hectare logistics, trading and manufacturing hub on the Kazakhstan/ China border, adjacent to a rail link to Aktau on the Caspian Sea and the 8,445km Western Europe-Western China highway.

Dubai-based DP World runs the dry port with Kazakh state railway company KTZ, which secured $600m of funding from China’s Jiangsu province in 2015.

6 CHINA-PAKISTAN

ECONOMIC CORRIDOR (CPEC)

A flagship project of new roads, railways and pipelines that will vastly improve links between the two countries (map, p17).

A look at the most expensive schemes either completed or under way, however, reveals that four of the top five are energy related: coal-mining blocks and coal-fired power stations in Tharparkar ($5bn); a natural gas pipeline from Gwadar to Nawabshah ($2bn); power plants at Karachi’s Port Qasim ($2bn); and a hydropower dam in Karot ($1.7bn). In total, CPEC-related projects stand to benefit from around $50bn of Chinese funding. One other crucial element is Gwadar Port. China is spending more than $1bn upgrading the facility, with another $2bn being committed by the port’s operator, China Overseas Port Holding Company. Importing oil to China through Gwadar would cut the distance it travels from 12,000km to 3,000km, but, more importantly, bypasses the territorially disputed South China Sea. That Beijing regards the idea of piping its oil through the powder-keg region of Kashmir as the less risky of the two options, shows just how seriously China views its energy security.

7 KHORGOS-AKTAU RAIL,

KAZAKHSTAN

Kazakhstan is spending $2.7bn to upgrade its rolling stock, repair track and construct new lines, with the backing of China. The railway would be standard gauge, allowing Chinese trains to travel seamlessly through the “dry port” on the Chinese border at Khorgos, to the Caspian Sea at Aktau.

Completion of the line allows for a more direct connection between China and Turkey, but the long-term success of the route depends on stability in the Caucasus region.

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8 CENTRAL ASIA-CHINA

GAS PIPELINE

Built by China National Petroleum Corporation (CNPC) at a cost of $7.3bn, three pipelines run 1,833km from Turkmenistan, through Uzbekistan and into China via Khorgos in Kazakhstan, supplying up to 55bn m3 of gas a year. In September 2013, China signed agreements with Uzbekistan, Tajikistan and Kyrgyzstan to build Line D, which could boost supply to 85bn m3 a year. Construction of the 1,000km pipeline began in 2014 but has become mired in delays. Uzbekistan blames the suspension in activity on technical issues, but reduced demand for gas from Beijing has also been cited as a factor.

9 POWER OF SIBERIA The Russian and Chinese governments signed a deal in 2014 to develop the fields and pipeline required to supply 38bn m3 of gas to China each year, but the project has become mired in political and economic wrangles between the two state-run operators, Gazprom and CNPC. The former is having difficulty financing the scheme’s colossal $55bn price tag, while the latter will only agree to funding if Gazprom reverses its position on not allowing Chinese contractors to tender for the work.

Furthermore, the agreement was signed at a time when a gas price of around $300/m3 made the cost of the project viable. Now that the price is much cheaper, Gazprom is trying to persuade CNPC to accept a revised figure that, frankly, it could walk away from, given that it has other sources of gas in the region, and demand from China might not be as great as it once was.

10 MOSCOW-KAZAN

HIGH-SPEED RAIL

The first phase of a planned high-speed rail link between Moscow and Beijing, the Russian and Chinese governments announced a joint funding agreement to construct the 770km line in September 2015. China will provide around $6bn of debt and $2bn in equity as part of the deal. Once completed in 2020, Chinese-built trains travelling at 400kph will blast between the Russian capital and Kazan in 3.5 hours. The journey currently takes around half a day.

11 PORT OF PIRAEUS, GREECE Chinese shipping company Cosco has been managing the Greek port of Piraeus since 2009, when the country’s debt crisis started to spiral out of control. Since then it has invested millions in upgrading and extending facilities and, in August last year, bought a 51% controlling stake in the port’s operating company for €280.5m. Cosco has the option to acquire a further 16%, €88m stake in the next five years, during which time it aims to grow the port’s container traffic to 5 million TEUs (20-foot equivalent container units) a year. If it succeeds, Piraeus would become Europe’s fifthbusiest container port which, connected to a high-speed railway linking Greece to Serbia and on to Hungary, could reshape the continent’s logistics landscape.

12 PORT OF ANAKLIA, GEORGIA A textbook One Belt, One Road project, given that Georgia sits on the shortest route from China to Europe and benefits from having preferential trade agreements with a host of countries, including the EU. The contract to develop the $2.5bn port and associated free industrial zone was awarded in February last year and construction is due to complete in 2020.

What makes the project interesting is the government’s last-minute decision to give the tender to the Ankalia Development Consortium – a partnership between Georgian investor TBC Holding and US engineer the Conti Group – over a Chineseled bid. The border with the Russia backed breakaway republic of Abkhazia, less than 4km away, raises the risk profile, however.

13 IRAN-CHINA RAIL In December 2014, the presidents of Kazakhstan, Turkmenistan and Iran inaugurated a 930km line running through the countries that sped up cargo transit between them by cutting 600km off the previous route. In February 2016, a cargo train made the 10,000km journey from China’s east coast to Iran’s capital, Tehran, in 14 days. The journey time could come down further once future upgrades to rail networks throughout the central Asian states are factored in.

ADDITIONAL REPORTING ANDY PLOWMAN

5 KHORGOS EASTERN GATE

Cost measurement

‘People are making very ‘If standards are expensive mistakes because inconsistent, you will they don’t understand the eventually make some very basis of measurement’ expensive mistakes’ Martin Darley FRICS Martin Darley FRICS

‘Construction ‘Construction is a global industry is a global industry now … There’s a huge now … There’s a huge cross-fertilisation cross-fertilisation of ideas in design and of ideas in design and procurement’ procurement’ Roger Flanagan FRICS Roger Flanagan FRICS

‘If ‘If one one standard standard is used, is used, it it will will have have aa significant impact significant impact on on the the spread spread of of BIM’ BIM’ Julie dela Cruz FRICS

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A KNOWN QUANTITY Construction might be a global industry, but the way it measures costs varies enormously.

Five leading industry figures discuss why the international standards movement is turning its attention to the issue Words David Blackman Illustration Cajsa Holgersson

L

ike many other industries, construction is now a globalised business. And it has been a long time since this traffic was one way, as can be seen in the growing appetite for Western markets displayed by Asian companies.

Architects, contractors and developers will often seek to import their own tried and trusted supply chains, helping to explain the spate of recent mergers in the consultancy and engineering fields.

But although the industry is becoming more internationalised, the way it measures costs is often still determined by the markets in which work is carried out.

Such inconsistency in standards breeds misunderstanding and uncertainty, which the industry is now seeking to remedy. The International Construction Measurement Standards Coalition, an umbrella group of more than 40 professional bodies that includes RICS, has been developing a new international construction measurement standard (ICMS), a draft version of which is currently out for consultation.

Why do our panel think such a standard is important, and what do they hope its introduction will achieve?

HOW HAS THE INDUSTRY BECOME MORE INTERNATIONAL OVER THE PAST 10 YEARS? RF: It’s a global business now. Take a company such as Skanska, where I used to be a nonexecutive director. It’s now the number two firm in the US, so the board in Stockholm is driven by an international agenda. There’s a huge cross-fertilisation of ideas in design and procurement. I go to China a lot, and their biggest focus now is how to internationalise the supply chain. Building steel to Chinese standards won’t help, you have to build it to the very highest international standard.

TC: We started our business 10 years ago, but now we have customers from all over the world, including several multinational companies. Although our primary market is the UK, 65%-70% of our operations are around the world, and we are getting more and more work abroad. »

Who’s in the discussion: » Tolis Chatzisymeon CEO of cost-estimating software developer Nomitech, UK » Martin Darley FRICS Vice-president of cost management association, AACE International, Houston » Julie dela Cruz FRICS Technical director, Arcadis GEC, Philippines. Founder of the Philippine Institute of Certified Quantity Surveyors and the Philippine Institute of Built Environment » Roger Flanagan FRICS Professor of construction management, University of Reading, UK » KC Tang Director, KC Tang Consultants, Hong Kong

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Cost measurement

Where standards are different, “ordinary quality” will have a different meaning. We may find it difficult to explain to the client why the building is more expensive because we are building to a higher classification of quality. Standards will be quite different, so there will be apparent inconsistencies in costs/m2 between country A and country B. JC: Using another method of definition creates an additional expense. We cannot do a comparison for cost analysis because you cannot compare like with like.

MD: To bring all these standards together, you have to conduct a high level review and translate all these different definitions into a common platform. People are making very expensive mistakes because they don’t understand the basis of measurement.

HOW IMPORTANT IS IT TO HAVE PROFESSIONAL ADVICE AND THE RIGHT DATA TO SUPPORT YOUR SERVICES IN VARIOUS MARKETS?

‘The time and effort spent understanding and explaining will be much diminished with ICMS’ KC Tang (above)

KT: Most Hong Kong-based quantity surveying firms have a global partner. Clients have been coming to Hong Kong for a long time from the US, Japan, Australia and the UK. But now people are talking about going to places such as Vietnam and Cambodia.

HOW DIFFICULT IS IT TO OPERATE GLOBALLY WHEN THE STANDARDS USED IN DIFFERENT MARKETS ARE SO INCONSISTENT? TC: Trying to get international work is difficult because there are different standards. People trying to invest in a foreign country don’t know how their money will be spent.

MD: We have to be totally transparent. Major corporations publish their results on the New York Stock Exchange.

Everything they do is out there in the market – stakeholders want to see what’s going on. You can’t operate in a global environment without transparency.

JC: When we work on a particular project a certain standard method of measurement is required. On the next project, in another country, we might have to use another method and have to learn different measurement standards. Efficiency is affected because we are on a learning curve all the time.

KT: Most clients appear to be rather receptive to the Hong Kong method of working. Those from a Commonwealth background are used to Commonwealth standards. Even those from the US, which has its own standards, accept the Hong Kong way of delivering projects. It gets more difficult in mainland China and Macau. We have to follow their standards and their way of working, which causes some difficulties as it takes time to learn them.

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RF: It’s hugely important. If we could reduce construction costs by 3%, you could probably build 200 new schools in the UK. MD: There’s enormous scope for improving the industry and how we invest capital. The construction sector is a huge part of any country’s GDP. If you are doing that inefficiently, it’s not good. The only way to improve that is with better information.

If you can define your cost elements, you will have confidence in what you are doing.

If you don’t know what you are doing, you can’t improve it.

If standards are inconsistent, you will undermine confidence in the ability of the organisation.

HOW WILL INCONSISTENCIES IN REPORTING COSTS HINDER THE WIDESPREAD ADOPTION OF AN OPEN PLATFORM SUCH AS BIM? JC: This is a major issue, to be honest. If one standard is used, it will have a significant impact on the spread of BIM. KT: Clients are keen to use BIM but when they come to costing it’s a headache, which is limiting its spread. Because of the openness of sharing in BIM, some standardisation on cost classification is very important.

MD: BIM gives you lots of data. You can do plenty with it, but if you are not using it in a consistent manner, you are not adding any value.

HOW DO YOU ENVISAGE THAT ICMS MIGHT SUPPORT YOUR BUSINESS? JC: It will help Arcadis. We operate globally, but our businesses are working on different standards, so you can imagine the value of having a consistent standard. The process will be more efficient because we will all be looking at the same standard.

TC: In an international marketplace, not having a common language and culture brings many difficulties, because people are used to working in different ways. With ICMS, we won’t have to spend so much time and effort localising the project because people will know that it’s compliant.

The standard will help professionals communicate with each other, and it’s going to reduce the time that people spend investigating markets. We are coming up with a new toolkit for cost benchmarking and forecasting, which people will be able to use anywhere in the world.

It also means that construction professionals will be able to work in other countries, as well as their own.

KT: If we have a standard like ICMS, the time and effort spent understanding and explaining will be much diminished, which will be very useful.

A WIDE RANGE OF STANDARDS ARE BEING USED TODAY. HOW ACHIEVABLE IS A GLOBAL ADOPTION OF ICMS? JC: In time, companies should adhere to ICMS because they will see the value of it.

When we launch in 2017, it will only address high-level definitions for the time being.

The first stage should be the definition of terms and exclusions and what is included in the cost estimate. Later on, it can include volumes. We will have the high-level standard and then businesses can adapt whatever local standards they have.

KT: We are trying to establish a simple enough standard that everybody can follow in parallel with the local standard, which can be very detailed and specific to allow for the variation in construction methods and policies in each market.

ICMS is going to give a high-level standard so that you can easily compare one project against another.

We are not trying to replace the local standards, we are trying to provide a simple way of comparing costs.

HOW WILL A PROJECT LIKE ICMS LEAD TO A MORE STANDARDISED APPROACH? MD: Integrity of information is important – the better the information, the better the quality of the decision.

Any decision made on a significant investment is based on the quality of the data. ICMS will improve the quality of project information.

RF: We report in very different ways and ICMS is about trying to bring some consistency. If I am building housing in Hong Kong, I am very interested in what housing costs in Rio or London. I use the comparison of financial reporting, which the accountancy profession has very carefully tried to shape to global standards. This is an attempt to bring a similar discipline to the way we report cost information.

KT: Ensuring that the data can be rolled up into a consistent format is going to help a lot. With ICMS, we are trying to describe the major features consistently so we can compare country A with country B. Without this consistency, we are always talking about apples and oranges, so will spend a lot of time searching for the inconsistencies. We can’t afford to miss any costs that go into the total cost report, so it’s very important. Once you classify costs in a systemic way, differences in local practice will be ironed out.

Also, if any country doesn’t have a local standard, ICMS can be a good reference. Once we have a standard that everybody is following, we won’t have to spend so much time explaining. Life will be a lot easier and happier. n

‘With ICMS, we won’t have to spend so much time and effort localising the project because people will know that it’s compliant’ Tolis Chatzisymeon (above)

RICS PROFESSIONALS can still give their input on the draft of the International Cost Measurement Standards.

Please check icms-coalition.org for further information

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Money laundering

TAKEN TO THE CLEANERS

Property is an easy target for money laundering and, until now, the industry’s response has failed to scrub up Words Mark Wilding Illustration Ben Fearnley

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n 15 July 2016, an influential cross-party group of British MPs issued a statement on money laundering in UK real estate. Its verdict was damning. The Home Affairs Select Committee warned that the London property market had become a“safe haven”for those seeking to hide dirty money, with the committee’s then-chair, Labour MP Keith Vaz, adding: “Supervision of the property market is totally inadequate, and poor enforcement has laid out a welcome mat for launderers and organised criminals.”

Although the UK has emerged as a centre for money laundering, it is far from just a British problem. The flow of corrupt funds from around the world means tackling it is a global issue. On 28 July 2015, then-UK prime minister David Cameron used a speech at the Lee Kuan Yew School of »

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Money laundering

Public Policy in Singapore to declare: “We need to stop corrupt officials or organised criminals using anonymous shell companies to invest their ill-gotten gains in London property, without being tracked down.”

Since then, public authorities have stepped up efforts to disrupt the flow of corrupt funds. In April last year, the UK government published a money-laundering action plan, promising more robust law enforcement, reform of anti-money-laundering regulation, and greater international cooperation to tackle the issue. A month later, the Monetary Authority of Singapore (MAS) announced that Swiss bank BSI would be stripped of its merchant bank status and referred six of its managers to the public prosecutor. National development minister Lawrence Wong said in July that MAS would “not hesitate to take action against financial institutions whose anti-money-laundering controls are found to be lacking”.

The estate agency sector has a very low level of reporting, considering the scale of activity

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STEVE GOODRICH Transparency International

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ttention is now turning to the role that the private sector, and in particular the real estate profession, can play in helping tackle the problem. Many believe it could be doing much more. Steve Goodrich, senior research officer at anticorruption organisation Transparency International, says: “What we’ve seen, certainly over the last two years, is that the estate agency sector has a very low level of reporting, considering the scale of activity in which they engage.”

The UK National Crime Agency (NCA) has estimated that £100bn of dirty money filters through the country’s financial sector every year. Although real estate is far from the only asset class affected, the high value of property in the UK makes it a prime target. In July 2015, campaign group Global Witness reported that “London’s high-end property market seems to be one of the go-to destinations to give questionable funds a veneer of respectability.”

A report from Transparency International, published in November, concluded that a“radical overhaul of the UK’s anti-money-laundering system is needed to stem the flow of corrupt money and help prevent UK professionals from being corrupted by vast sums of money stolen from around the world.”

Identifying the true owners of companies investing in property is a key strand of anti-money-laundering efforts. The EU’s Fourth Anti-Money Laundering Directive, which came into force in June 2015, requires member states to maintain registers of the ultimate beneficial owners of businesses based in their jurisdiction. The UK’s own register was opened in

April last year and the government has until 26 June 2017 to write the directive into law, but this could get tied up in Britain’s Brexit negotiations. To add to the uncertainty, it is unclear whether the policy is being pursued

by Cameron’s successor, Theresa May. Robert Palmer, anti-corruption expert at Global Witness, believes such a register would be a significant step: “It would certainly make it harder to hide and disguise the ownership. You’d have to find people who would be willing to have their name listed as the real owner when, in fact, they weren’t. That would be quite a substantial step forward.” But he also highlights the key role of the real estate industry in flagging up suspect deals. “We need to look at the sort of checks that are carried out by estate agents when people are buying property.”

High-profile cases of money laundering in property tend to involve super-prime real estate. However, Hugh Lumby, head of global real estate at Ashurst, says there is a need for greater awareness at all levels of the industry.

“The smaller houses can equally be the level it takes place,”he says.“If you’re involved [in property transactions] in any way at all you need to be very alert to money laundering and to the rules. The way you get caught out isn’t through actually indulging these things, it’s just missing something obvious.”

Property professionals have an existing responsibility to flag up suspicious activity under anti-money-laundering regulation.

RICS guidance lists a range of potential red flags – including clients using agents or intermediaries without good reason, clients who express an unusual interest in the standards for identification and suspicious activity, and connections between two parties involved in a transaction without apparent business reasons. In November 2015, RICS published mandatory guidance on real estate agency and brokerage, which stated that members must take “every

reasonable effort to confirm the identity of your client” and should have “procedures in place to prevent and identify money laundering within your company”.

Geraldine Mash is UK compliance director at CBRE, which requires all employees to take mandatory training on money laundering. She says awareness of the problem has become much more prevalent, but finding the resources to deal with it can sometimes be an issue. “There is no doubt that larger property companies have had to invest substantially in tools and training to drive greater transparency, deepen knowledge and raise levels of expertise,” she says. “Smaller property companies do not always have the resources to employ antimoney-laundering experts or pay for these systems.”

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aced with increasing pressure to do more about money laundering, property companies have taken steps to present a united front. In the UK, 11 firms including CBRE, JLL, Cushman & Wakefield and Savills, are signatories to a joint statement, “Combating money laundering to safeguard investment in UK property”, which informs clients of the due diligence that all property companies are required to carry out. The statement concludes: “We appreciate your support in ensuring the UK property market has robust controls to combat the threat of money laundering.”

Property companies in France have taken a similar step.

“We decided to create a document and a letter we send to our clients which is signed by all the heads of these companies to show our clients that they can’t avoid this process,” says Jacques Bagge, director of investor development at JLL in Paris.“If they think that JLL demands too much paperwork, they will know from this document that other brokers will have the same process.”

Despite these steps, statistics from the NCA suggest there is still more to be done. In 2014-15, estate agents submitted 355 suspicious activity reports to the agency – from a total of 1.2 million transactions. The figure represented close to a 100% increase on the number of reports filed the year before, but still only 0.05% of the total across all industries. With governments demanding greater assistance from the private sector to tackle money laundering, real estate professionals may have to more than redouble their efforts. n FOR GUIDANCE on anti-money-laundering regulations from RICS’ Regulation team, visit rics.org/moneylaundering

VIEW FROM ASIA

Change of culture is required within industry It is no secret that the Asia region faces a lot of challenges from money laundering, primarily in financial centres such as Singapore and Hong Kong.

Corrupt money and the proceeds of crime need to be parked somewhere and these places are the conduit that criminals seek to use for the

purpose of money laundering.

In Singapore in particular there has been a great increase in awareness and stringency of both laws and enforcement.

In general terms, your obligation is to try to ensure you know who you are dealing with, and that your counterparty is not of questionable repute.

You also need to have an idea of from where the funds originate.

I think it would be fair to say that the property sector has not been the most robust compared with financial institutions, which have much more stringent processes. The culture of signalling suspicious transaction reports is also not so strong.

A change of mindset is required. For banks, it used to be embarrassing to ask clients too many questions but now it’s pretty much par for the course. Property companies need to move in that direction.

WILSON ANG is a partner at Norton Rose Fulbright, Singapore

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Higher education

THE COMPLETE GRADUATE A rapidly evolving industry is concerned that students are graduating with insufficient skills for the modern workplace.

Time for a spot of revision?

Words Emma Crates Illustration Yann Legendre

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he urgency with which the profession needs to replenish its ageing workforce is beyond dispute. By 2025, nearly 25% of RICS’members will be aged 65 or over. But recruitment is no longer simply a question of replacing like with like.

Employer requirements are becoming ever more complex, and new graduates need to be versatile, adaptable and technologically literate. They should have a global outlook and a broad understanding of the sector.

Most importantly, they must be comfortable working within multidisciplinary teams.

Many employers complain that graduates lack sufficient knowledge and skills on entering the workplace – a problem explored in a 2013 RICS report, Commercial Awareness in Real Estate Graduates, by Dr Joanna Poon, once of Deakin University in Australia, now

senior lecturer at the University of Salford’s School of the Built Environment in the UK. Poon surveyed students and academics about the commercial components of RICSaccredited real estate courses in the UK. Her report recommended that universities embed more problem-based and workbased learning into their modules, using highly simulated real-life scenarios from industry. It also advocated greater employer involvement to ensure that courses keep pace with evolving processes and technologies.

Poon concedes that, as companies are so desperate to fill job vacancies, they may be expecting too much from their newest recruits. “Employers should remember that a fresh graduate is not a final product,” she warns.“Students need at least two years’ experience in the industry as part of their professional training.”

Nevertheless, the world’s institutions are busy strengthening their partnerships with the industry, in line with the report’s recommendations. They are also finding ways to nurture skills that are difficult to teach in the classroom: leadership, negotiation, collaboration and working with clients.

This is also central to the strategy of the RICS School of Built Environment at Amity University in Noida, near Delhi, established three years ago to help meet the needs of a sector that employs 50 million people in India, and which requires another 26 million by 2022. “There is a massive shortage of skilled manpower, and many people in the industry don’t have relevant qualifications,” says RICS’ global managing director for emerging business, Sachin Sandhir. »

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Higher education

Hopefully we’re developing graduates with resilience and high levels of confidence who can make a difference

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DAVID PROVERBS FRICS Birmingham City University

“We’ve had 100% placement of students into jobs and, last year, 20% were placed internationally,” says Sandhir. He adds that the model could work well in other emerging markets, particularly Indonesia and Africa.

Much of the school’s success is down to the backing of 200 employers that have been closely involved with developing the curriculum. The teaching staff mixes leading academics with senior figures from industry.

“Teaching is entirely practice led,” adds Sandhir. “As well as polishing technical skills, we also place a lot of emphasis on students developing their written and verbal communication.”

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rustrated with the limitations of academic courses, Daniel Ho FRICS has recently joined the Technological and Higher Education Institute of Hong Kong (THEi) to set up a vocationally focused surveying programme.

“A lot of universities are chasing after rankings, so they focus more on research and production of academic papers, which is reflected in the recruitment process and performance evaluation of teachers,” Ho explains. “As a result, professionally based programmes are becoming less practical.

Employer feedback is that students are not mastering core skills. For example, quantity

surveying graduates don’t know how to do measurements, building surveying graduates can’t do inspections. These skills have to be learned on the job.”

Ho believes the problem lies not just with the universities, but also in the attitude of students who are more focused on becoming managers. “Students need to know the basics. They have to learn how to read a drawing before they can understand BIM models, let alone how to design and manage a project using BIM,” he argues.

Twenty built environment organisations are supporting THEi’s BSc (Hons) in Surveying. Ho’s intention is that some students will work in placements with these partners during their degree. He will be drawing up “earn and learn” contracts between students and employers.

Ho is also excited at the prospect of exposing the students to new technologies: non-destructive testing techniques, development of drones for surveying, 3D scanning, 3D printing and photogrammetry.

A similar approach can also be found at Birmingham City University (BCU) in the UK, where technical skills are tested and honed from the first to the final year.

David Proverbs FRICS, associate dean (international) at BCU, encourages all his built environment students – including surveyors – to get their hands dirty, testing materials in laboratories, mixing concrete and crushing bricks.“We feel it is important, so that when graduates get to run their

own projects, they can make decisions with a real level of understanding about how materials behave.”

Reflecting industry best practice, students must work in interdisciplinary groups throughout their time at the university, collaborating on practical tasks. “They are developing interpersonal skills in communication, negotiation and persuasion.

We’re trying to develop an understanding of how other disciplines operate,”says Proverbs.

“These qualities will be even more important as the industry becomes more integrated.”

As many parts of the industry still cling to old-fashioned working practices, Proverbs believes that students could play an important role in cultural change.“Hopefully, we’re developing graduates with resilience and high levels of confidence who can make a difference. We want them to challenge the status quo, and not be afraid to ask questions. Feedback from employers is that they welcome this kind of ethos.”

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roverbs is also in discussions with industry partners to start running higher apprenticeships schemes – launched by the UK government last year – at the university. These courses would be equivalent to degree level, and students would work and study for them part time.

The content of the higher apprenticeship is likely to be similar to the degree programme, but Proverbs anticipates some subtle differences in delivery. “It will be interesting to see how the curriculum shapes up, as it is being led by employers in the first instance,” he says, adding that such courses could ultimately have an impact on more traditional learning. “This is a positive opportunity for universities.”

A new initiative at the University of Salford offers further evidence that the lines between apprentice-style learning and conventional courses are becoming blurred.

The university is launching accelerated degrees, for which students continue to study and work through the traditional holiday periods. This, says Poon, is partly down to the changing profile of students: “Fifteen years ago, most students were full time. But we’re seeing more who want to study part time, sponsored by employers.”

Salford’s accelerated part-time degree has been compressed from five to three years.

The same model is being offered to full-time students, who can now squeeze their threeyear degrees into two, saving themselves a full year’s tuition fees in the process.

It is the kind of initiative that will be welcomed globally, as student priorities shift towards affordability of education, and employability.

“Indian students no longer ask about the dean or the faculty,”says Sandhir.“They want to know whether the course will get them a job, and what level of salary they can expect.”

Ho adds that students are also looking for different career paths: “Twenty years ago, students wanted to be civil servants, or to join large consultants. Now, a lot of them want to start their own business. They don’t want to be bound by office hours, or place of work.” As a result, the new course at THEi

contains a commercial element that helps students understand the complexities and liabilities associated with running a company.

But while agreeing on the importance of developing technical skills and commercial awareness, Proverbs underlines the crucial role that universities play in research, helping industry understand critical issues such as technology and climate change.

“As an industry we are sometimes guilty of being short-termist,” he says. “Universities have a responsibility to see what is on the horizon. We should not only be meeting today’s needs, but also preparing graduates for their long-term future.” n

PERSPECTIVE

What can Generation Y teach us?

Students born in the 1990s operate rather differently to those from previous decades.

They are often more digitally literate than teaching staff, and open to collaborative learning and ongoing social media interaction.

They are just as likely to take a picture of a slide on their smartphone as to take notes, and to stream lectures on their laptops and tablets.

But Steve Wheeler, associate professor in information and computer technology at Plymouth Institute of Education, believes that many institutions are not adapting fast enough to this social revolution. “Students use their personal devices in multiple ways to access information and connect with each other. But how often do we see these tools being used for formal learning in universities?”

One university that has used technology to flip the learning process is Massachusetts Institute of Technology.

Instead of attending lectures, students watch a video online at home.

Time in the classroom is spent discussing what they have seen.

“This way, students can maximise their classroom time with an expert,” says Wheeler.

In his own classes he goes one step further, switching roles and asking students to teach him something new. He also encourages them to edit or write Wikipedia pages that relate to the topics they are learning.

MAKE A MARK Wheeler welcomes the introduction of “makerspaces” at some institutions, where students have access to equipment such as 3D printers,

scanners and sensors, and can learn about technologies such as the internet of things.

But for leading innovation, he advises universities to look at initiatives in schools.

CRAFT WORKS Recently, Wheeler met some 12-year-old students at a school in New Zealand. They were building a 1:100 scale model of their school in the video game, Minecraft. When asked what they had learnt, the students reeled off a long list: fractions, ratios, percentages, building materials, social spaces – even the history of the building.

“The amount of transferable skills they had picked up was incredible: problem solving, teamwork, negotiation, creativity, critical thinking,” says Wheeler. “Those kinds of skills will last a lifetime.”

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Resilience

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Flooding is becoming more frequent and less predictable. How can we adapt to this ‘new normal’?

im Nadeau is going back to school – again. He is already a realtor, land surveyor, certified floodplain manager and surveyor, and an associate in the US’ National Flood Insurance Program. This time, he has enrolled in a master’s degree in a rather different field: how adults learn. “Getting people to understand flood risk means changing their perceptions and logic,” he explains. “I’m intrigued by why people make choices that are not in their best interest.”

As the owner of Portland-based Nadeau Land Surveys in Maine, he advises property owners on their flood risk, and provides the elevation certificates necessary to challenge a requirement for mandatory insurance. It is a significant cost for buildings in the flood zone, which clients are understandably keen to avoid. What mystifies Nadeau is why they would leave themselves exposed to the much greater cost of being flooded.“Mother Nature doesn’t care where the line on the map is – around a quarter of all flooding happens outside high-risk flood zones. But people don’t want to hear it. If they get put in the flood zone, they often believe the maps are wrong, and if they’re outside it, they think they’re not going to get flooded.”

Nadeau’s experience is set to become familiar to surveyors across the profession.

Assessing and managing flood risk will be a moving target throughout the 21st century and beyond, as climate change causes sea levels to rise and rainfall to become more intense (box, overleaf). Surveyors have an important role to play in advising clients of their exposure and how they can reduce it, as well as overseeing disaster recovery. As professionals in the built environment and land more broadly, they are ideally placed to translate complex data into insightful information, and are arguably failing in their duty to clients if they do not – no matter how unwelcome the message may be.

Flooding affects half a billion people each year, according to the EU’s Global Flood Observatory, and this could quadruple by 2050. Reinsurance broker Aon Benfield has calculated that flooding was responsible for $27bn of economic losses in 2015, often in areas that never used to flood. That was a good year – the annual average loss over the last decade has been $48bn. Munich Re’s NatCatSERVICE shows a steady increase in global hydrological events.

Climate change is only half the story.

Flooding has become more problematic as the number of people living in urban areas has increased. Whereas in 1950, only onethird of the global population lived in cities, or 746 million people, today its more than half, or 3.9 billion people. Much of the resulting urban sprawl is in coastal areas or on floodplains. By 2070, Kolkata and Mumbai will be the two cities whose populations will be most at risk, while Miami, Guangzhou, New York and Kolkata will have the most to lose in terms of assets.

But that does not mean we cannot do anything about it, says Jessica Lamond, who is the associate professor in flood risk management at the University of the West of England. “Part of the cause is man made, and part of the solution is in our hands – we should be planning for it. This is where surveyors and other built environment professionals can play a huge role.”

Munich Re’s data backs this up: actual losses from flooding events have only risen by a small amount. The bulk of losses since 1980 were due to flood events in China in the 1990s, it says, adding that one reason why such losses have not reoccurred is that China invested heavily in improving protection measures immediately after the devastating floods. »

DEEP WATER HORIZON Words Katie Puckett

Set design Hattie Newman

Photography John Ross

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Resilience

Not that it is simply a case of keeping the water out. One of the most difficult lessons for the public to digest is that we must learn to live with it. Urbanisation has changed the nature of flooding – built-up areas are less permeable and more prone to flash floods, which are far more difficult to predict. Over the past decade, policy has shifted from building more robust defences, to making space for water. It also means accepting that buildings will flood, and making them more resilient. And although Lamond says there is recognition of this among professionals, “there is not within the communities that are actually being flooded”.

Schemes that provide insurance at artificially low rates – such as Flood Re in the UK – have an unfortunate side effect, says Lamond:“There is no incentive to spend money sorting this out for yourself.” Flood Re will expire after 25 years, the idea being that, by then, people will have adapted their properties. She thinks this is unlikely unless insurers insist on more resilient reinstatement after a claim. “It will be quite difficult to tell people ‘you must do this’. But the alternative might be that they are not eligible for insurance once the pool expires.”

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here is already plenty of information for surveyors advising homeowners about flood risk, but much less for commercial property – where the availability of insurance will have profound ramifications for valuations. Lamond is leading an RICS-funded research project on the role and capacity of the profession in the UK, Germany, China, the US and Australia.

It is too early to draw conclusions, but Burrell Montz, a professor at East Carolina University who interviewed surveyors for the project, stresses the need for closer interaction between banks, insurers and surveyors: “They’re all involved but they

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PHILIP WILBOURN FRICS Wilbourn & Co

don’t necessarily talk to each other because they have different responsibilities. It’s a rare surveyor who understands the insurance process, for instance.”

There is also a huge difference between small and large businesses, in both exposure and awareness.“Small businesses have much more invested,” says Montz.“All their assets are in one place and many rent their property, rather than own it.” The US Federal Emergency Management Agency says that 40% of small businesses do not reopen after a disaster, and another 25% fail within a year of reopening.

This has been the impetus for companies in the English city of Sheffield to use £19.4m raised from local business rates to pay for flood defences. Following severe flooding in 2007, premiums soared and it is hoped that the defences will return them to a more sustainable level. It was the idea of Philip Wilbourn FRICS, a flood risk expert whose own practice was flooded at a cost of £85,000.“I was really angry. I had a metre of water in my office, but we were not in a flood plain or even a flood warning area, according to the Environment Agency. No money had been spent on that catchment area to defend it or even to survey it, nothing at all.”

This is the danger of spending formulas that are based on the value of assets to be protected. Wilbourn is referring to the amount of money channelled into the south-

east of the UK, where the most valuable assets are, but the message can be applied globally – the poorer the community, the less able it will be to recover. Without appropriate funds for defences or mitigation measures, Wilbourn warns of the emergence of “flood ghettos”. “It’s not just the immediate flood area, it affects the surrounding areas, and the wider community drifts down the economic scale. It becomes a self-fulfilling prophecy of less investment and fewer opportunities.”

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ilbourn says the surveying profession is “extraordinarily well-placed” to contribute to protecting communities. But it has a lot to learn. Today, he is wading through the flood risk assessments for an investment property, which weigh in at 260 pages.“It’s a highly complex field, so the role of the chartered surveyor is to bridge the worlds of environmental science and property. We can’t continue to brush flood issues under the carpet, because they will come back and affect indemnity premiums.”

It is a classic chicken-and-egg situation.

“The thing is, not many surveyors will do [flood risk assessments] unless requested to by the client,”says Wendy Lathrop, owner of Pennsylvania-based Cadastral Consulting and a provider of floodplain management training to other surveyors. But she has noticed a difference in the classroom and thinks the message is getting through:“This is a great field for us. Surveyors are the ones on the ground and we have the ability to recognise conditions that would make a project more or less flood-prone. More people are actively involved in saying ‘what if?’ and asking really insightful questions.

That, to me, is a good sign.” n RESILIENT CITIES are a focus of RICS’ World Built Environment Forum: rics.org/wbef

IN DEPTH

Why does global warming mean more floods?

In November, the UN reported that 2016 was on course to be the hottest year on record, beating the previous highs set in 2014 and 2015.

Rising temperatures are increasing the frequency and severity of flooding in several ways. Global mean sea level is rising through a combination of thermal expansion, melting ice

sheets and glaciers. Storms and hurricanes derive most of their energy from the oceans, so they also become more powerful.

The UN’s Intergovernmental Panel on Climate Change (IPCC), reports that, during the 20th century, sea levels began to rise at an average annual rate of 1.7mm. Since 1993, more accurate data has shown an

average rise of 3mm. The IPCC projects that sea levels will rise by a further 0.26m-1m by 2100, and even if all emitting activities stopped tomorrow, it will continue to rise for centuries.

Inland, more frequent torrential downpours will increase surface water and river flooding. Warmer temperatures cause water to evaporate more

quickly from the oceans and the soil, while a warmer atmosphere holds more water, causing more intense precipitation events.

RICS is a founding member of the Global Alliance for Building Construction, formed at the 2015 Climate Change Conference in Paris (COP21). Learn more at rics.org/wbef

Q1 2017_MODUS A SI A 39

GA ZUM !

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ARE ESTATE AGENTS ABOUT TO BE

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Proptech

a buyer or vendor, there is an abundance of online firms clamouring for your business.

With many offering more services and lower fees than traditional firms, could this spell the end of estate agents on the high street?

This is not the first wave of innovation to sweep over the property market. In the early part of this century, the emergence of online property portals moved estate agency online.

But while sites such as Rightmove in the UK are run and used by existing agents, the current wave of innovation is being driven by firms with much grander ambitions.

Matt Robinson is the man behind London-based start-up eorge Spencer is not a fan of letting agents. “I’d moved Nested. He is also the co-founder two or three times in London and had a really bad time,” of GoCardless, a company that he says. The process of finding a property seemed full allows small businesses to easily of inconvenience and expense for tenants. He suspected accept direct-debit payments, and landlords were not finding the experience any better. which has raised close to £20m “My dad’s a portfolio landlord; he constantly bitched and moaned in funding. For his new project, he about letting agents. These guys don’t deserve to exist in 2017. It seems “wanted to get into a space where like nobody is happy with the system.” the average customer is extremely Six years ago Spencer launched Rentify, an online agency aimed at dissatisfied, and property ticked making renting easier for both landlords and tenants. He saw no need that box. None of the online agents for a high-street presence or a fleet of branded estate agency cars. are run by technologists. They are Instead, he ploughed the money he saved on these into offering a wider just estate agents who have range of services and reduced fees. Prospective tenants could call to thought, ‘maybe we could do this book viewings around the clock. Landlords were offered a tiered fee without a shop front.’” structure depending on the services they required. Rentify now claims Nested is aimed at vendors in to have 10,000 landlords using its services every month. need of a quick sale. Customers Spencer is far from the only tech entrepreneur to have spotted an enter their property details online opportunity in property. In the years since Rentify launched, a host of and are offered a guaranteed sale other start-ups have entered the estate agency market (box, overleaf). price within 24 hours. If the Purplebricks, an online firm that operates in Britain and Australia, now property sells for a higher price, claims to be the third largest estate agent in the UK. Whether you are the company takes 20% of the additional sum. If a buyer is not found within 90 days, Nested promises to stump up the cash.“It’s incredibly powerful for anybody who needs to move on a particular timeline,” says Robinson. »

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AGENTS PROVOCATEUR Proptech start-ups are moving in on estate agency, but are they underestimating the professional’s role in the sector?

Words Mark Wilding

BEATEN BY A BETTER OFFER?

Q1 2017_MODUS A SI A 41

Proptech

particularly in cases where online firms struggle to match the service provided by their high-street rivals. An RICS report ll published in January 2016, New Business Practices: Estate Agency Interactions in England and New Zealand Housing Markets, found that Kiwi clients continue to expect a high level of engagement from ll their agent and that “previous attempts of agencies offering lower fees and less service have tended to be unsuccessful.”

In the UK, online-only firms have established a foothold, but they RICHARD DUNNING University of Sheffield continue to operate alongside both traditional agents and start-ups offering innovative approaches. Jan Hÿtch FRICS, partner at estate agent Arnolds Keys and past president of the National Association of Estate Agents (NAEA), says tech firms have“realised the entirely automated model is too extreme for the uch of what businesses such as average consumer and have gradually introduced more Nested and Rentify offer has been of the traditional services. At the same time, traditional made possible by dispensing with agents have started to introduce the benefits of online many of the costs traditionally associated service. So what’s happened has been a gradual creep with estate agents. But they have found one towards somewhere in the middle.” element that is still indispensable: people.

Nested still uses valuers to check the prices it guarantees.“People are incredibly important he market currently supports businesses that to our business,” says Robinson. Likewise, provide a range of services with varying levels Rentify employs a team of agents to manage of engagement between agent and customer. properties and strike deals with tenants.

Richard Dunning, research associate at the University Other start-ups work closely with more of Sheffield and author of the RICS report, believes this traditional agency firms. In Hong Kong, will continue. “Buying a house is a difficult process to OneHouse is an online property portal that go through and for most people it means imagining a allows agents to bid for instructions on home new, different future. Agents play a key role in that and sales. The site also allows buyers and sellers it’s difficult for an online tool to do that at the moment.” the chance to connect directly, but chief Mark Hayward, managing director at the NAEA, executive Chester Leung MRICS says most shares a similarly optimistic view.“The online models still choose to use an agent. According to have found they have got to narrow the gap between Leung, OneHouse has helped new agencies online and traditional because people need people,” find a space in a market traditionally he says. Hayward believes existing agents should learn dominated by established firms. “We’re from their start-up competitors while maintaining a finding new ways for SMEs to enhance their personal touch. “Don’t feel threatened. Adapt to it. exposure and find new clients,” he says.

With all threats there are opportunities.” n There is also evidence from other countries that suggests technology does not DOWNLOAD THE RICS REPORT on English and spell the end for traditional agents, New Zealand estate agency at rics.org/agencyinteract

For most people, buying a house means imagining a different future.

Agents play a key role in that

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TAKE FIVE

The online start-ups remodelling agency RENTIFY Aims to be a one-stop shop for landlords, and guarantees rents based on algorithm-generated valuations. Rentify says 10,000 landlords use its services every month. With more than £150m of property under management in London, the firm has its sights set on new markets such as Manchester and New York.

NESTED Founded by tech entrepreneur Matt Robinson, Nested caters to vendors in need of a quick 42

RICS.ORG/MODUS

sale, the UK start-up offers customers a guaranteed sale price within 24 hours. Any sale above that valuation nets the company a 20% commission, but if the property fails to sell within 90 days, Nested will come up with the cash.

ONEHOUSE In a market dominated by major players, OneHouse aims to give smaller agencies a leg up. The Hong Kong-based portal allows agents to bid for instructions on house sales, while also

offering sellers and buyers the opportunity to connect directly.

The company launched an online auction service for car parks earlier in 2016.

PURPLEBRICKS The online agency launched in April 2014 and now bills itself as the third largest estate agent in the UK. The company operates a hybrid model – attracting enquiries online but employing “local property experts” to provide valuations and assist with sales. The company floated

on the London Stock Exchange last December at £240m and recently expanded to Australia.

JUWAI Launched in 2011 and provides international listings in Chinese, catering to buyers from China who last year invested more than £35bn in properties abroad. Juwai claims to have more than 2.5 million listings in 89 countries and makes money from listing fees. A flotation on the Australian Stock Exchange is expected in the coming months.

DEC/JA N 2016_MODUS

43

Careers / Business / Legal / Training

Foundations CAREERS Now that you’ve landed that hard-earned promotion, you need to make sure you can handle the step up in responsibility

RECRUITER’S TIPS

Napoleon Bonaparte famously said “a leader is a dealer in hope”, but HR directors will know that giving someone their first role in management is often a decision they made with their fingers crossed, too.

“Most people move up because they are good at the job they currently do, not because they’re actually proven as managers,” says Margo Manning, development coach and author of The Step-Up Mindset for New Managers.

“That’s why, time after time, businesses suffer from managers realising they’re not as good as they had hoped.”

Statistics bear this out. The UK Chartered Management Institute found that 25% of people in management positions are what it calls “accidental managers” – those who never set out to be one. Not surprisingly perhaps, its research also shows only one in five staff rate their manager as effective.

“The single biggest mistake new managers make is holding on to the things they currently do well, but not giving themselves time to set out clear expectations about what their new role entails,” says Manning.

New managers often worry about the transition into a more senior role – especially if the people they now oversee are friends. “This is why those fresh to management must acknowledge the transition is tricky, isn’t natural and takes time,” says Richard Gelder, UK sector director for property and built environment at recruiter Hays. “New managers can often be too dismissive of certain management styles because they don’t seem aligned to them. But they need to be open to what is good for certain people or different

Find yourself a mentor Management involves a day job plus people responsibilities, so learn from others, preferably not your immediate boss.

Volunteer to gain other experience Particularly outside your professional remit, because you need to be a manager on your own terms, with confidence in yourself and your abilities.

Be honest You’ll get more respect from simple, straight talking and by saying what you mean, rather than repeating management platitudes.

Stay level headed Keep the passion, but drop the emotion.

44 RICS.ORG/MODUS

circumstances. No style is wrong, but some are more appropriate than others.”

“No-one’s saying change personality, but what has to change is a delivery style,” adds Manning. “Being a manager is a different job. It’s often not about you any more, but getting more from others. Not doing so is simply being a very expensive administrator.”

That is why learning to delegate has to be a key skill. “It may take longer telling someone else how to do something,” says Manning, “but eventually this time invested will be earned back.”

Because it knows new managers can sink without support, Turner & Townsend runs a scheme for its graduates so the step up is less of a shock. “Strategic and analytical thinking is a central part of our programme,” says graduate recruitment manager Lois Wilson. “It’s about helping people consider the impact their decision-making has on others, and the future of the business.

“A mistake all new managers make is to think the same approach works with all teams,” Wilson adds. “So, we also break learning down into specific areas, such as dispute resolution, and management styles.”

Not all businesses are so well structured, however, and new managers will need to use their own initiative. “Managers are expected to seek their own advice and make their own self development calls,” says Gelder.

“The business won’t wait for them to ask.”

And amid all the structured support, one other fact should not be ignored: “The best predictor of success is wanting to be a manager in the first place,” says Manning.

“Those who take it on reluctantly will struggle. Those who want it and want to support others take immense satisfaction – and it shows.”

ON RICSRECRUIT.COM Have you moved into a senior position recently? Don’t let your CV get left behind.

Follow our advice at rics.org/seniorcv

WORDS PETER CRUSH ILLUSTRATION GIOVANNA GIULIANO PORTRAIT ATUL LOKE

CAN YOU MANAGE THAT?

Foundations

TIMELINE

1993 Senior engineer, Sharpoorji Pallonji & Co 1998 Resident representative for Gujarat region at Consulting Engineering Services India

MY WAY

Ameya Gumaste MRICS COUNTRY MANAGER, TURNER & TOWNSEND, INDIA

THE BEGINNING Many of my father’s friends were civil engineers, and from an early age I was regaled with stories from the construction world. It fascinated me that you could plan a building on paper, and then sometime later it appears before your eyes.

After taking a degree in construction engineering at the University of Mumbai in 1992, my early career began with one of India’s largest contracting companies. I then moved into engineering consultancy, but when India’s real estate market started to pick up in 2004 with the IT boom, it really inspired me to forge a different career path in real estate.

2005 Associate director, project management group, CBRE

THE PRESENT I had a very rewarding time directing Turner & Townsend’s Mumbai office for four years, working with multinational corporations such as Shell, Goldman Sachs, Intel, Bloomberg, Iron Mountain, DHL and many more. Last January, I was promoted to country manager for India – it was an enormous step up, and something one dreams of. I’m now responsible for 125 professionals across Mumbai, Delhi and Bangalore, when only a few years ago, there were 80.

THE FUTURE I feel a great deal of responsibility for growing the business, in particular developing our professional teams of project managers and cost managers in India by helping them attain professional accreditations such as RICS chartership.

India is one of the world’s fastest-growing major economies, so it really is real estate’s time to grasp the growth opportunities with both hands. rics.org/ameyagumaste

2010 Associate director, Turner & Townsend, Mumbai 2011 Vicepresident, Synefra Engineering & Construction 2012 Director of business operations, west and south India, Turner & Townsend 2015 Country manager for Turner & Townsend India

THE CAREER BREAK In the 1990s I gained a lot of experience on complex projects, for example, I helped to build an earthquake rehabilitation township in Turkey. I felt I could bring my technical skills as an engineer into real estate project and cost management, and joining CBRE in 2005 gave me the best opportunity to understand how real estate works. When I moved to Turner & Townsend in 2010, I became much more aware of the work and legacy of RICS from speaking to colleagues in the UK. I knew I had to be “I feel a great deal of responsibility for part of a large professional certification body, so I vigorously pursued gaining my developing our teams by helping them gain chartered status in cost management. accreditations such as RICS chartership”

Q1 2017_MODUS A SI A 45

SHARE IN THE BENEFITS

FIVE-POINT PRIMER

Despite the fact that one in four people in the UK experience a mental health problem each year, there is still a stigma attached to mental illness in the workplace.

As an employer, not only do you have a duty of care to ensure the physical and mental wellbeing of your staff, but it makes good business sense, too. Figures from the British mental health charity Mind show that mental health problems account for an estimated 70 million sick days each year, at a cost to the UK economy of more than £26bn a year.

Minimising these occurrences in your own business starts with being able to identify signs that an employee might be struggling. “Immediate managers who know their staff well are often best placed to spot signs like small changes in behaviour or personality, such as persistent lateness or being withdrawn or irritable,” comments Davina Goodchild, CEO of LionHeart, the benevolent fund for RICS members.

Mental health in the workplace still carries an undeserved stigma – staff are uncomfortable about seeking help for fear of damaging their career prospects. Research carried out by Mind in 2014 found that 95% of people who took time off for stress cited a different reason for their absence.

Goodchild says that, within a sector such as surveying, problems can be more pronounced as there is great pressure to achieve and perform. “Often, very driven people will find

Spot the signs A good manager will notice changes in behaviour.

Have their back Knowing they can rely on your support could help speed an employee’s recovery.

Take the lead Responsibility for creating a culture of non-judgemental behaviour, openness and support starts at the top.

Share your knowledge Regular communication and training on mental wellbeing will help ensure everyone’s on the same page.

Bear in mind Bring mindfulness techniques into the workplace and consider practising it yourself.

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FROM THE TOP By taking steps to create an environment in which mental health can be disclosed and discussed openly, employers can help break down the stigma and enjoy the benefits of a more productive, loyal and happy workforce.

However, this must start at the top, with senior managers sending out a positive message that they are committed to an open culture with employee wellbeing at its heart.

“It’s about creating a culture where people feel able to talk, be themselves and support each other,” says Howard Morgan MRICS, founder and managing director of customer experience consultant RealService.

Morgan coordinated the recent John O’Halloran Symposium on mental health in the property industry, in memory of John O’Halloran FRICS, who took his life last year after suffering with long-term depression.

“I worked with John for 15 years, and neither I nor any of my colleagues had the slightest clue that he suffered from depression,” he explains. “If we’d had a more open culture, perhaps we could have made a difference.”

Regular communication and staff training are therefore vital. “You need to train managers so they have the tools to support people,” advises Danny Clarke, group operations director at HR consultant Elas.

“Once managers are aware of it, they will know what the triggers are and can try to remove them as much as possible.”

You could also help by addressing any work-life balance issues and having clear

WORDS LUCIE MITCHELL

BUSINESS Foster a feeling of openness to safeguard your employees’ mental wellbeing

it difficult to be open or admit that they are struggling,” she remarks. “The fact that the profession is male dominated also means mental health issues are more likely to be swept under the carpet until people have reached breaking point.”

Greg Walsh MRICS, residential asset manager at the Portman Estate in London, struggled with anxiety for years and, more recently, with depression. He completed his APC in 2015, but the stress of doing so contributed to a breakdown, leading to five months off work. He says his employer’s support was vital to his recovery.“I had been hiding the anxiety and depression but my employer was supportive from the moment I told them. When I had the breakdown they told me to take as much time as I needed and that my job was safe no matter what. While I was off work, they were in touch every week.

“Since I’ve been back at work, the support has continued,” Walsh adds.“Knowing I had a supportive employer was motivation for getting better.”

Foundations

LEGAL 101

policies in place that acknowledge the links between work-related stress and mental health. “Some big firms have introduced ‘mental health champions’ to try and encourage openness,” adds Goodchild.

Many organisations now run mindfulness sessions, to show employees their mental wellbeing matters. Mindfulness is an effective and therapeutic technique for preventing, managing and recovering from mental illness. It involves training your mind

“The fact that surveying is a maledominated profession also means mental health issues are more likely to be swept under the carpet” DAVINA GOODCHILD LionHeart to pay attention to the present moment, thus providing greater calm, clarity and focus.

Dr Michael Sinclair and Josie Seydel, practitioner psychologists at London’s City Psychology Group and authors of Working With Mindfulness, recommend employers set up groups and special spaces for practising the technique.“However,” they add,“the most effective strategy would be for employers to practise themselves, and to bring mindfulness into everyday work culture.”

It is vital we strive to break the association with mental ill health and “weakness”, and ensure employees are supported, concludes Goodchild. “Plenty of people recover from mental health problems and, with the right support, there is no reason why they can’t continue to perform well at work.”

ON THE RICS SMALL BUSINESS HUB There are many benefits to having a well-qualified and developed team. For a business, these include higher staff retention, increased productivity and improved competitive advantage. For the team itself, this includes new or

enhanced skills, improved confidence and a focus on long-term career ambitions.

But with so many pressures on your time, you may find that developing your staff falls into the “too hard” box and may drop down your priority list – not a great situation when they’re your greatest asset.

RICS’ UK Small Business Hub has published five top tips for developing your team. To read them, go to rics.org/topteam.

Potholes on One Belt, One Road?

QIAN WANG, Research assistant, Faculty of Law, the Chinese University of Hong Kong Beijing has vowed in its One Belt, One Road initiative to “protect the lawful rights and interests of investors”. Will that actually be the case?

There have been at least two instances of Chinese investors pushing their weight around in treatybased disputes. A Chinese construction firm claimed forced deprivation of an airport-terminal deal worth $114m with the Yemeni Civil Aviation and Meteorology Authority. Another case was filed by a trio of Chinese mining investors against the Mongolian government for cancellation of a key licence.

Signs of seizure One of the first tenets of international law is that investors should be protected against expropriation.

Private partners must be compensated in a prompt, adequate and effective manner if they have suffered from any seizure of assets – lawful or unlawful – by a government, for the government’s own use.

These days, claims of foreign investment being nationalised or directly expropriated are rare. A more typical situation occurs indirectly, when legislative or administrative measures taken by a host state are tantamount to expropriation.

In one case against the Peruvian tax authority, an arbitration tribunal found in favour of Tza Yap-shum, a Hong Kong resident. Tza asserted that an audit taken after investors requested that certain sales taxes be refunded was arbitrarily

imposed. This, Tza argued successfully, had a severe impact on his business.

Investments in projects and contracts in the natural-resources sector raise the possibility that foreign investors could face unfair or arbitrary bidding processes. Those sorts of deals are also at risk of broken promises from local governments or politicians.

Trick or treaty? The second issue to consider is the way that investors are protected under international investment treaties. Out of 64 countries in the Belt and Road region, 56 have signed a bilateral investment treaty (BIT) with China. BITs with Brunei, Jordan and Turkey are in the works. This wide BIT network may not be sufficient. China, as the larger partner, typically has the upper hand, and the rules in 53 of the BITs were from an earlier iteration of China’s BIT programme, and are not well drafted.

In particular, a narrowly worded clause granted investors limited access to international arbitration.

Whether or not investors from Hong Kong and Macau are included within China’s international-investment legal framework remains a controversial issue. After the Singapore Court of Appeal held that the 1993 China-Laos BIT applies to Macau, a spokeswoman for China’s Foreign Ministry said the decision was “incorrect.”

She asserted that the investment agreements signed between the central government and foreign countries do not apply to Macau and Hong Kong, “unless otherwise decided by the central government.”

Q1 2017_MODUS A SI A 47

CPD booster Related content from RICS

RICS PROPERTY MEASUREMENT – OFFICES Tom Pugh (above) discusses the professional statement, principles of measurement and IPMS 1, 2 and 3. cpdfoundation.com/ webcasts/255 ››CPD hours: 1

FOR GOOD MEASURE PROFESSIONAL DEVELOPMENT IPMS: Office Buildings is now mandatory and all members should be familiar with it, whether you use the standard or not Standard practice The use of international property measurement standards for offices (IPMS: Office Buildings) has been mandatory for RICS members since January 2016. Although RICS has been promoting IPMS quite heavily, its use is perhaps not yet discussed widely enough within firms, or being used that extensively.

However, it is very important to have some knowledge of it, so that when you do come across a report that uses IPMS, you will know what it entails. If you are unfamiliar with the standard, you could be very confused as to why a building has suddenly got bigger.

Future relevance IPMS: Office Buildings may not be relevant to everyone right now, but it will in the future, so firms need to think about how it will affect their business and how they can implement it. It differs from what most surveyors in Asia are used to, and is probably more akin to the US standard, and closer CPD: ON DEMAND to what the rest of The CPD Foundation offers the world uses.

RICS members a convenient Do not forget that and comprehensive way to the new standard is, meet their CPD goals for one effectively, the seventh annual payment. Sign up at edition of the RICS Code cpdfoundation.com of Measuring Practice.

48 RICS.ORG/MODUS

Three-way split IPMS: Office Buildings is split into three categories. IPMS 1 relates to the gross external area and exterior extent of the building, on a floor-by-floor basis; 2 is the interior extent of the property; and 3 is the occupancy area. Remember, if you have a floor that is split in two, there will be two IPMS 3 figures for the floor – one for each occupier. In multi-let buildings, IPMS 3 would be different to that of a single-let building.

Note that the breakdown of areas has not changed – it is just a slight difference in definition, using a term that can be understood universally around the world.

New converts RICS is currently updating its IPMS converter tool to help surveyors in Hong Kong and Japan convert from the new IPMS standard back into local equivalents.

The tool is useful for comparing to historical figures, or building evidence for a valuation.

Although surveyors should be able to do the calculation themselves if they have all the information, it is a handy tool for those who do not usually perform such calculations.

Check ipmsconverter.rics.org for updates.

TOM PUGH MRICS is a senior associate at Malcolm Hollis malcolmhollis.com and was a member of the working group on RICS Property Measurement, incorporating IPMS: Office Buildings: rics.org/propertymeasurement

ASSESSING RESIDENTIAL DEVELOPMENT VIABILITY Robert Fourt FRICS (above), partner at Gerald Eve, discusses how occupiers, investors and developers must understand the planning process. cpdfoundation. com/webcasts/240 ››CPD hours: 1

COMMERCIAL PROPERTY RENT REVIEWS Anna Ralston (above) and Jennifer Rickard from law firm Nabarro cover some of the key aspects and tactics around commercial rent reviews. cpdfoundation.com/ webcasts/239 ››CPD hours: 1

Foundations

SURVEYED Is there a book, website or app you couldn’t be without? Email editor@ricsmodus.com

SOFTWARE

DAYS OF TWENTY Proven to bring better time and cost predictability to a project, and also save carbon emissions by cutting out wasteful processes, the construction world is becoming ever more reliant on BIM. Moreover,

EVENTS

Book RICS events online rics.org/events For inquiries, call +852 2537 7117

HONG KONG

››International Heritage Conservation Conference 2 March, Happy Valley Racecourse The theme of this year’s conference will be “Sustainable social and economic benefits in built-heritage conservation”.

Take part in high-level discussions on conservation and planning policy, economic feasibility, design and architectural elements and post-completion operational management. Case studies include the conservation of Diaolou and villages in Kaiping, China, and revitalising Hong Kong’s Central Police Station. Half-day tours of some of the sites discussed at the conference are also planned. rics.org/heritage2017

as of April 2016, firms tendering for work from the UK government are now mandated to work in BIM Level 2, which means models must be created in a collaborative 3D environment in the bids you submit to get a chance of securing the work.

Graphisoft’s Archicad is just one of a variety of powerful BIM software programmes on the market. Its latest version, Archicad 20, includes updates such as allowing users to store all relevant project information within a BIM model, including data that was not created in CAD or BIM tools, for example from Excel spreadsheets.

Furthermore, the software features a pre-installed BIMx licence, which lets users communicate and share projects with clients via a desktop, tablet and smartphone app. archicad.com/en/archicad-20/

››RICS Awards and Annual Dinner 17 March, Grand Hyatt Hong Kong Unite, catch up, and celebrate with fellow professionals. The awards recognise achievement, excellence, professionalism and overall contribution to projects, teams and development of our built environment, and are open to everyone working within the property profession. rics.org/hkdinner ››RICS Hong Kong Annual Conference 2017 19 May, Grand Hyatt Hong Kong The financial and real estate markets are the two pillars supporting the economy of Hong Kong over recent decades. With advancement in technologies, the increasing connectivity of Hong Kong to adjacent regions and the changing investment atmosphere, now it is time to redefine the driving forces for sustainable growth and prosperity. The RICS Hong Kong Annual Conference 2017 will explore various growth potentials and deterrents with views and case studies shared by experts across a broad range of industries. rics.org/hkconference

ALSO THIS ISSUE

››Keep track of your hours worked with the Hours Time Tracking app.

It can be synced to a smartwatch so you can quickly see your time spent on clients, projects and individual tasks. hourstimetracking.com ››In Architecture that’s built to heal, architect Michael Murphy discusses how a holistic approach to architecture and building design can produce beautiful places that can also help heal communities. bit.ly/builttoheal ››Nabil Abou-Rahme of Mott MacDonald presents six reasons why the infrastructure sector is ripe for disruptive innovation, and how smart infrastructure will help us get more from existing assets.

Visit bit.ly/mottmac6ways.

CHINA

››RICS World Built Environment Forum Annual Summit 27-28 March, Shanghai Join decision makers, practitioners and thought leaders to discuss the future of the built environment. With an opening keynote address by Dr Wang Wen of the Chongyang Institute, the Summit will explore the impact of One Belt, One Road in China and beyond. www.wbefshanghai2017.com

TAIWAN

››RICS Taiwan Annual Conference 2017 April, Taipei A signature occasion for Taiwan’s built environment, this debut conference will explore key issues and challenges that affect the global property market, and come up with strategies for local practitioners. ››RICS Taiwan Annual Dinner 2017 April, Taipei This gala dinner will be a special evening for professionals of Taiwan’s real estate sector to unite and celebrate their achievements.

Q1 2017_MODUS A SI A 49

Mind map

HOW DO WE “MAINSTREAM” DISASTER RISK REDUCTION? Dilanthi Amaratunga FRICS Professor of disaster risk reduction and management; head, Global Disaster Resilience Centre, University of Huddersfield, UK

In the past decade, more than a billion people have been affected by disasters totalling more than $1tn.

Growing populations are being exposed to more man-made and natural hazards. Effective mitigation and preparedness in the form of pre-disaster planning can greatly reduce the hazards before they impact on a community.

The protective nature of built assets can reduce the risk posed by hazards. Collaborative Action towards Disaster Resilience Education (CADRE) will identify mechanisms to make disaster resilience part of the construction process.

At the Global Disaster Resilience Centre, we’re trying to get governments, businesses, communities and individuals working together to create a society that is able to withstand unforeseen events.

ILLUSTRATION STUART PATIENCE

One of our aims is to develop a doctoral programme that integrates academic and professional knowledge throughout the construction industry, to increase resilience to disasters.

50

RICS.ORG/MODUS

Hong Kong Annual Conference 2017 Asia’s global metropolis: Leading Hong Kong to a new horizon

Friday 19 May 2017 0900-1700 Grand Ballroom, Level 1, Grand Hyatt Hong Kong, 1 Harbour Road, Wanchai

Registration now opens

7

HOURS

Highlights of conference • Provide insights on evolving factors affecting the economy and financial market of Hong Kong, with insights on how to leverage Hong Kong’s unique competitive advantages as the international financial hub of Asia.

• Explore new financial opportunities and investment strategies amidst technological advancements and trends in the FM industry.

• Discover financial developments of the pan-Asia region, including the 13th five-year plan, One Belt One Road strategies, the impact of emerging technologies and related regulations.

• Identify new ways to manage construction costs and cash flow based on the latest technologies impacting workflow and expenses.

rics.org/hkconference

Confirmed speakers include: Dr Wang Wen Executive Dean, Chongyang Institute for Financial Studies, Renmin University of China

Zhang Bing

World Built Environment Forum

Chief Planner, China Academy of Urban Planning and Design (CAUPD)

Amanda Clack President, RICS and Partner, EY

Stéphan Deville Project Development Director, IKEA China

Cao Jiaming

ANNUAL SUMMIT

Chairman of the Board, Architectural Society of Shanghai

SHANGHAI

Hongbin Jiang

27 - 28 March 2017

Director of Capital Projects & Infrastructure (CP&I), Corporate Finance, PwC China

Wu Zuo Min General Secretary, China Engineering Cost Association (CECA)

Fang Qiuchen Chairman, China International Contractors Association, CHINCA

Rafi Rich CEO, S.U.iT.S

Wang Tao Senior Director of Asset Management, Alibaba

Sean Tompkins CEO, RICS

Ivan Wang Engagement Manager, McKinsey

The Annual Summit of the World Built Environment Forum, 27-28 March in Shanghai, is a unique meeting place for leading figures in the built environment from across the globe.

Leading decision makers, practitioners and thought leaders from real estate, infrastructure and construction will gather together to discuss the most pressing challenges and identify valuable solutions from a holistic point of view.

Attend this Summit to be part of the leading discussion on global challenges in the built environment arena.

Signature sponsor:

Platinum sponsor:

Supporting partners:

Main topics include: • Strategies to mitigate disruptive change, create vibrant real estate markets and fund the infrastructure projects our future cities need • How can the regions that line the One Belt One Road benefit the most from this international initiative?

• What lessons can be learned from the world’s leading gateway cities? How can Chinese cities attract sustainable investment?

Register your place today to be part of this agenda-setting Summit:WBEFShanghai2017.com