First scenario: you're a tenant moving into a commercial office space. Your landlord grants you a buildout budget. You want the ideal workspace to accommodate your business, but you're also aware that the lease has an expiration date. And, here's hoping, you may have outgrown that space by then. So, how do you leverage those buildout dollars toward the future while cultivating a workspace that meets your needs now?
Second scenario: you're a business owner, and the proud new owner of some office space. The space is going to be occupied with your employees and/or tenants. You need to outfit work areas soon, and you know growing pains in your cash flow are to be expected with large capital investments. So, you need a quick turnaround on a high-quality workspace while doing everything possible to pad the bottom line. What's the best investment?
To find the best investment, examine your options for outfitting a new office space - comparing a traditional office buildout with the process of installing modular office walls. Using this example workspace, you'll be able to weigh the costs, benefits & caveats of each option and make a more informed decision for your own project.
Plot-twist! These are stylized plans of our own office, where we decided on a mix of modular office walls and traditional construction. Office Furniture Warehouse is essentially the second scenario, and we'll admit: a higher initial investment is a tough pill to swallow. However, taking a heavy hit early can make life easier in the future.
Want to learn more about modular walls capability to improve the ROI from your workspace? Tell us about your project at http://ofwllc.com!
Ride the Storm: Navigating Through Unstable Periods / Katerina Rudko (Belka G...
What's the Real Cost of a New Buildout? Comparing Modular Walls vs. Traditional Construction
1.
2. INTRO
• Welcome to Office Furniture
Warehouse!
• John Jerman (JJ)
• President & Founder of OFW
• Architect by Trade
• 25yrs+ in Office Solutions
3. FIRST SCENARIO
• A tenant moves into a commercial office space.
• Landlord grants them a buildout budget.
• They want the ideal workspace to accommodate the business, but
they’re also aware that the lease has an expiration date.
• And, here’s hoping, they may have outgrown that space by then.
• So, how do you leverage those buildout dollars toward the
future while cultivating a workspace that meets their needs now?
4. SECOND SCENARIO
• A client acquires commercial real estate.
• Space is going to be occupied with employees and/or tenants.
• They need to outfit work areas soon, and know growing pains in
cash flow are to be expected with large capital investments.
• So, they need a quick turnaround on a high-quality workspace
while doing everything possible to pad the bottom line. What’s the
best investment?
5. PARTITIONING NEW OFFICE SPACE
• To find the best investment, examine your options for outfitting a new
office space
• For example, let’s say an open workspace needs 5 private offices and a
training room.
• We’ll compare a traditional drywall buildout with the process of
installing modular office walls.
• Using this example workspace, you’ll be able to weigh the costs,
benefits & caveats of each option and make a more informed decision
for your own project.
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11. CONDUCT CBA / CALCULATE ROI
• The cost of downtime is equal to the sum of lost productivity
& lost revenue.
• Let’s say ten employees on a $50K salary are affected in this
scenario.
• If the disruption is causing each of those ten employees working
at only 80% productivity (which is generous), you’re losing $1200
daily to this project.
12. CONDUCT CBA / CALCULATE ROI
• Recap – drywall requires an estimated 254 hours, and modular walls
require an estimated 136 hours.
• Steps in modular office wall installation run concurrently
• Drywall construction has additional downtime (i.e. site prep, paint
drying, etc.) between steps.
• Project schedule with drywall is already ≥6 weeks, and gaps between
steps will likely stretch it to 8 weeks (being generous again).
13. CONDUCT CBA / CALCULATE ROI
• On paper, depreciation reduces profits – which are subject to tax.
• At the corporate tax rate, every $100 of depreciation can reduce
income taxes by $39.
• New drywall construction is classified as tangible real property, which
is depreciated over the span of 39 years – 2.56% annually.
• That’s a depreciable amount of $435 to keep track of for four
decades.
14. CONDUCT CBA / CALCULATE ROI
• Modular office walls fall into the same category as office furniture,
which depreciates 5 times faster than drywall
• Using a 7-year depreciation schedule, you will have
depreciated your modular walls by 56.27% by the third year.
• Due to new tax legislation, up to $250K can be depreciated
immediately.
15. CONDUCT CBA / CALCULATE ROI
• A major cost-benefit to modular office walls is reusability.
• Drywall is static, with 0-10% reusability.
• If your organization anticipates significant change or churn and
still chooses drywall, then another major capital investment is
likely on the horizon.
• Modular office walls can be easily reconfigured, and retain useful
life even after being fully depreciated.
16. CONDUCT CBA / CALCULATE ROI
• Let’s say that, ten years down the road, you’re moving to another
commercial office space.
• To make it easy, you need the exact same configuration of partitions.
• With modular office walls, the only expenses incurred will be
installation labor and downtime.
• By using drywall construction, you’ll face the same capital investment
as ten years before.
17. CONDUCT CBA / CALCULATE ROI
• By year 10, modular walls will be 100% depreciated, saving
approximately $18k on income tax expense.
• The cost savings per linear foot are over $135, almost $40k total
over traditional drywall construction.
18. THANK YOU!
• We hope this was valuable!
• Surprise! This is a rough drawing
of our workspace, where we
opted for a combination of
drywall and architectural walls.
• Project on the horizon, or just on
the brain? Let us be your
resource!
19. SOURCES & DISCLAIMER
• Unit pricing data based on major building supply retailers' 2017 online pricing,
labor pricing calculated with Homewyse cost estimator.
• Total cost based on ideal site conditions, cost of basic tools, supervision,
insulation and electrical access not included.
• ModularWalls Explanation & Disclaimer: pricing based on 2017Trendway® sell
price from Office FurnitureWarehouse, LLC, cost of basic tools not included,
• Cost savings based on 7-year MACRS depreciation schedule, not to be construed
as tax advice.