By Pam Brenner
The facility objectives that emerge from the process will drive the interior fit-out plan. Modular solutions expedite renovation and project completion. With thorough planning and design, and off-site manufacturing of architectural elements, the construction phase is much like a sophisticated assembly project. Unlike traditional construction methods, this approach minimizes the time involved in on-site renovation. Major phases are completed in quality-controlled, cost-efficient factories.
Financial implications play a key role. Traditionally, building owners have evaluated many criteria to choose one of two building investment strategies: first costs or life-cycle costs. Those who focus on first costs are seeking the lowest initial purchase price to free cash for other initiatives. Those who focus on life-cycle costs focus on the lowest cost over the life of an investment, considering maintenance, reconfiguration, and depreciation rates.
While modular interior solutions are competitive with the first costs of traditional constructions, the most significant benefits and savings are realized over the life of the installation. Because of U.S. tax codes, flexible and modular solutions have clear advantages over traditional interior build-out construction approaches.
Movable architectural elements, such as raised floors, are considered personal property instead of capital improvements under the tax code, with a seven-year depreciation schedule instead of a 39-year timetable. In a major renovation, improvements to the site, structure, and skin are considered capital improvements. For example, new roads, building additions, new skylights and doors, and a new façade will still require a 39-year depreciation cycle. Some improvements to services, such as new chillers and new plumbing, are also capital improvements.
But in the interior fit-out phase, many improvements to services and the space plan can be accomplished with modular elements that qualify as movable personal property. If designed to be installed, moved, and reinstalled elsewhere, the floor, lights, electrical wiring, and network cabling can be fully depreciated in just seven years. And if a business relocates, all the movable elements can go along.
In addition, personal property is typically assessed at a much lower rate than capital property, if it is taxed at all. Codes and circumstances vary, but in almost every state of the United States, the ability to eliminate major portions of interior architecture from the property assessment and annual tax bill can be a tremendous financial advantage.
Pam Brenner is manager of Workplace Knowledge and Services at Steelcase Inc., Grand Rapids, MI. For more information, visit (www.steelcase.com).