7 Great CapEx Projects for Commercial Properties
As the end the year approaches, many commercial properties will explore begin exploring CapEx projects. This is especially true for properties that have excessive money in their budget and risk losing unspent funds. For any property managers unfamiliar, CapEx projects for commercial properties are major investments that meet at least one of the following criteria:
- Extend the useful life of the property or asset
- Restore the property to a like new condition
- Upgrade a property’s physical assets
- Increase the market value of the property
- Reduce future operating and maintenance costs
In addition to the criteria, CapEx projects are reported on a property’s balance sheet and depreciated over time. While there are a wide range of projects that qualify as capital expenditures, here are some of the top CapEx projects for commercial properties.
1. Commercial Roof Replacement
In general, a commercial property’s roof is one of its most important and expensive assets. Thus, one of the most common and popular CapEx projects for commercial properties is replacing the roof. This is because it meets most of the criteria of a CapEx project outlined above while also playing a major role in protecting a property’s assets, tenants and residents.
2. Elevator Modernization
Since most commercial elevators have a useful life of 20 to 30 years, elevator modernization is a popular CapEx project for older properties. The modernization process restores the elevator’s lifts, motors and mechanical equipment to a like new condition. While expensive, modernizing an elevator should extend its useful life another 20 to 30 years. Click here to read more about elevator modernization.
3. LED Lighting Retrofits
Even though there are many ways to pay for an LED lighting retrofit, they are still a great CapEx project. This is because LED lighting retrofits can dramatically increase property values. Since they lower utility costs, LED lighting retrofits also increase a property’s net operating income. As a result, they qualify as a capital improvement. In one example, Amerikana Green Energy saw a client’s property value increase by $426,000 from an LED retrofit.
4. HVAC Equipment Upgrades
While there are numerous HVAC related CapEx projects, they should all reduce operational costs through increased energy efficiency. Whether or not a project meets the other criteria depends on the nature of the project. For example, replacing an entire system obviously upgrades a property’s physical assets. Meanwhile installing variable frequency drives on cooling towers will extend their useful life and reduce maintenance costs.
5. Appliance and Fixture Upgrades
Upgrading the physical assets, including appliances and fixtures, inside a property is another type of CapEx project for commercial properties. This is because this type of project can also lower consumption of both electricity and water when energy star appliances and plumbing fixtures are used.
For example, in-unit laundry is the apartment amenity properties most often fail to provide. As a result, installing in-unit washers and dryers (or updating old ones) would qualify as a CapEx project. It must be noted that replacing the appliances or fixtures in a single unit would not qualify as a CapEx project. This is because it would not apply to the majority of the units in a property.
6. Major Renovations or Remodels
Investing in a major renovation or remodel is another great CapEx project for commercial properties. This is because they can significantly upgrade the physical assets of the property and increase market value. Unlike other projects on this list, these vary greatly by property type. For example, a condo or apartment community to construct a pool area or clubhouse with workout facilities. Meanwhile, an office building could convert vacant space into a work share set up. Despite these being very different projects, both would count as examples of CapEx projects for commercial properties.
7. Exterior Building Restoration
Last on our list of CapEx projects for commercial properties are exterior restorations. While these projects vary greatly by property based on the type of building materials, they should all qualify as CapEx projects. For example, atnan older brick building this could mean replacing the mortar and repairing or replacing deteriorating bricks. At a multifamily property this could mean replacing the vinyl siding or upgrading to energy efficient fiber cement siding. Even though these projects use very different building materials, both are examples of CapEx projects.
Find Contractors Using BidSource
While there are many ways to find contractors for CapEx projects, property managers can use BidSource to have the Property Manager Insider team connect you with a local contractor.