BOMA advantages and disadvantages

Finding a balance of interests between building owners and tenants is an inherently eternal process. While the former want to earn as much money as possible without making major investments, the latter seek maximum preferences at a minimum rental rate. Sometimes this leads to extremely difficult negotiations, or even stalemate situations. In this context, the use of the BOMA standard may be a solution. The standard itself originated in 1916 in the United States of America. And today it is actively used in commercial real estate markets both in the United States and in many developed countries around the world. Initially, 6 standards were developed for different types of buildings. The BOMA standard came to Ukraine in the 2000s, along with European and American tenants. But even though so many years have passed, today not all market players in Ukraine fully possess sufficient knowledge of these standards. This leads to misinterpretations of the provisions specified in the standards and, as a result, the mismatch of the calculated coefficients with the real parameters of the building. This can lead to problems for the building owner in the future, at least financial ones. Therefore, global practice shows that calculations are usually carried out by third-party experts. For Ukraine, transparency as it exists in Western markets is still only a goal, a direction of right movement. At the same time, the changes are being actively resisted by market players characterized by a conservative approach. Many critical judgments and questions are being raised, and the very feasibility of applying this or that new standard is being questioned. Why do we need it if everything is working? We have been working for 5 or 10 years, why not continue? Therefore, in order to avoid unnecessary questions, we need to form a correct understanding of the essence of the standards and analyze their features. To understand what disadvantages it has and what advantages it has for both owners of retail space and companies that lease this space.

Key advantages of BOMA for owners

From the perspective of owners, BOMA is characterized by a number of advantages:

• The standard has been more than successfully tested "in practice" over decades of work in the United States and other countries.
• The term "leasable area" refers not only to the premises occupied by tenants, but also to the general area of the building, including the entrance group on a pro rata basis, as well as partially technical premises used for tenant maintenance. Accordingly, the landlord can increase traffic and profitability of the facility.
• If you make calculations at the time of design in accordance with BOMA standards, you can achieve a deeper and more comprehensive assessment of the facility, getting the opportunity to make adjustments if necessary and increase the final profitability.
• Western companies will be more willing to work with a facility that has been designed in accordance with BOMA standards.

What are the disadvantages of the standard from the owner's point of view?

Unfortunately, the standard is not yet able to become a full-fledged replacement for the BTI methods currently used in Ukraine. To perform calculations in accordance with this standard, special knowledge and competencies are required, otherwise the calculations are likely to be performed incorrectly, which automatically means financial and at least image losses for the owner.

How the BOMA standard can be useful for tenants

Before choosing a premise, the tenant looks at the location, layout, technical features and, of course, the cost of renting a meter. At the same time, it has become commonplace for tenants to demand the services of independent experts. Sometimes it is said that the standard is beneficial only for owners. However, this is not the case and here's why:

• The BOMA standard is characterized by transparency for the tenant, when a full technical description of the space, including floor plans, is part of the contract.
• Based on the calculations in accordance with the BOMA standard, the area of the facility increases, but the owner reduces the rate per 1 meter.
• The tenant can compare the conditions provided by the owners of other premises built using BOMA.
• According to the BOMA, the tenant may use not only the premises that he or she directly occupies, but also the total area based on the proportional principle, and the same applies to the entrance group. If a new tenant enters the facility and rents part of the common areas, this directly affects the building's coefficient downward, which means a corresponding change in rent for existing tenants.
• Practice shows that the BOMA standard is used in buildings with modern and technological infrastructure.

As for the disadvantages, first of all, it is worth mentioning errors in measurements according to the BOMA standard, and there are cases when owners, aiming to increase the profitability of an object, used the standard for this purpose. However, this resulted in incorrect calculations, with coefficients that were not appropriate for the area. Therefore, when the owner announces a rate increase, arguing that the building has been independently calculated according to the BOMA standard, he must present the tenant with the relevant calculations. If this does not happen, the tenant can turn to third-party experts to verify the accuracy of the calculations.