Floor areas in property development can often cause a fair bit of confusion, when do you use gross internal area, when does the net apply and what about gross external area? Areas are the foundation of a development appraisal, and using the wrong area can cause significant changes in the profitability of a scheme.
As a successful property developer, you will know the definition of the different types of areas and most importantly, how to apply them to your project.
Within this article I will take you through:
- RICS definitions
- Gross External Area
- Gross Internal Area
- Net Internal Area
- Net Saleable Area
After reading through this article you will know the differences between the types of areas and when to use them.
Lets get stuck in…
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Introduction – RICS Definitions:
The best and only place to start with when talking about areas is the source of the definitions.
In the UK, the areas are defined by the RICS and clearly set out within the RICS Property Measurement (1st Edition). This is the bible of areas and what architects, estate agents and all other industry professional will use to define what they are measuring.
I have this document as a PDF on my desktop!
Its that useful…
My advice would be to download this document and read it in detail. It covers all the different property use classes and sets out quite clearly which area definition is applicable and what is included/excluded for each area type.
Knowing this will ensure that you know which area is the correct type to use for each use class you may be developing and what you can and cannot include within your area calculation.
This will also allow you to double check your consultants and sales agents to make sure the information you are receiving is correct. There have been so many examples in my career when I’ve been sent incorrect areas for a site. This can sometimes happen with agents who may knowingly send you the wrong areas hoping this is never noticed..!
Sounds bad… but it happens..!
Now lets take a look at the 3 most common area definitions you will use and how you should apply them.
Gross External Area (GEA):
So what does that really mean..? Quite simply, its the measurement of the entire building taken from the external face of the perimeter walls.
The guidance document provides an comprehensive list of what is included and excluded, but i’ll pick out some of the common items.
- Perimeter wall thickness and external projections
- Areas occupied by internal partitions and walls
- Columns, piers, chimney breasts, stairwells, lift-wells, and the like
- Outbuildings which share at least one wall with the main building
- Areas with a headroom of less than 1.5m (important for residential buildings)
- Conservatories, pavement vaults and garages.
- Open vehicle parking areas, roof terraces, and the like
- External open-sided balconies, covered ways and fire escapes
When should you use GEA..?
The RICS guidance then goes on to define where the GEA should be applied. The document does this for all the area definitions and in some cases the application is very strict, however, in some cases they are not.
Don’t worry though… I will guide you through this.
So when do we use GEA:
1. Town Planning: The GEA is the accepted and used area type for planning applications and approvals.
2. Rating & Council Tax:
3. Build Cost Estimation: GEA is the preferred measurement used for build costs, but it is not the most used or commonly used. Every builder and developer likes to use a different measurement and I’ve worked with developers in the past who have used the Net, Gross internal area and GEA for build costs. So be careful here and when you are using £/sq.ft assumptions on build costs, know which area you are using.
In case the RICS document hasn’t given enough information relating to the area definitions, they then also provide some floor plan drawings highlighting exactly what is included in the GEA.
Its such a great document…
Now onto the next area:
Gross Internal Area (GIA):
Fairly straight forward, but lets start with defining what the internal face is.
The internal face for use with the gross internal area means the brick/block work or plaster coat applied to the brick/block work, not the surface of internal linings installed by the occupier
Again, the guidance provides examples of what is included and excluded from the gross internal area, and in simple form, the gross internal area includes everything the GEA does, with the following exclusions:
Gross Internal Area excludes:
- Perimeter wall thickness and external projections
- External side-open balconies
So you can see that the difference between the Gross External Area and the Gross Internal Area is fairly small. Generally just the area occupied by the perimeter wall.
Where is the Gross Internal Area used?
The gross internal area is commonly used for the following:
1. Build Cost Estimates: The gross internal area is a recognised area used for build costs estimates, and as mentioned above, the other areas can also be used.
2. Estate Agency & Valuations: Gross Internal Area is a basis of measurement for the marketing and valuation of industrial buildings (including ancillary offices), warehouses, department stores, variety stores and food superstores.
3. Property Management: Gross internal area is a basis of measurement for the calculation of service charges for apportionment of occupiers’ liabilities.
4. Residential homes valuation: a modified version of Gross internal area is an accepted basis of measurement for the valuation and marketing of residential dwellings, particularly in new developments (See NSA below). This is important, especially as most new developers start in residential.
Net Internal Area (NIA):
So what is the key differentiation here..? The NIA is the Usable space in a building.
Again, the NIA includes everything that the gross internal area does, but excludes the following:
- Those parts of entrance halls, atria, landings and balconies used in common
- Toilets, toilet lobbies, bathrooms, cleaners’ rooms, and the like
- Lift rooms, plant rooms, tank rooms (other than those of a trade process nature), fuel stores, and the like
- Stairwells, lift-wells and permanent lift lobbies
- Corridors and other circulation areas where used in common with other occupiers
- Permanent circulation areas, corridors and thresholds/recesses associated with access, but not those parts that are usable areas
- Areas under the control of service or other external authorities including meter cupboards and statutory service supply points
- Internal structural walls, walls enclosing excluded areas, columns, piers, chimney breasts, other projections, vertical ducts, walls separating tenancies and the like.
So you can see here, that the NIA really strips the building down to the core usable floor space within a building. If you can use the space sensibly, i.e. put furniture in the area, then it should be excluded.
When is the NIA used?
The NIA is generally used on the following:
1. Estate agency and valuation: NIA is the basis of measurement for the valuation and marketing of the following types of buildings Shops and supermarkets, offices and business use.
2. Property management: NIA is a basis of measurement for the calculation of service charges for apportionment of occupiers’ liability
- Areas with headroom less than 1.5m where the dwelling does not have usable space vertically above
- Conservatories (state separately)
- External open-sided balconies
- Greenhouses, garden stores, fuel stores and the like in residential property
It is stunning how many estate agents and people generally do not know which is the actual correct area to use for houses and residential dwellings, i.e. the NSA of a property.
But armed with the information in this article and the RICS guidance you will know exactly what the areas are what you should be using.
Knowing your areas is as fundamental for a property developer as knowing how to value a site or knowing what an architect does.
Its so important, yet so many people do not understand it and have not taken the time to learn the differences. Not being smart about areas will lose you money at some point..!
Think about it…
Someone says to you the build cost is £175/sq.ft and doesn’t qualify what area is being used and you are building a bock of flats which is 6,000 sq.ft NSA, 9,500 sq.ft GIA and 10,000 sq.ft GEA. Your build budget range if you do not know the area being used correctly is £1.05m – £1.75m..!
That is a huge difference, and if you get your area wrong here, you will be assessing the site incorrectly.
Hopefully this article has given you some insight to the importance of areas and also how easy it is to learn them. In a later article I will go into detail on area ratios and common mistakes.
All the best,