Considering "Tax Friendly" Commercial Real Estate - ELB Consulting

If you could implement minor changes that will not impact construction cost or architectural design, yet deliver significant tax incentives, would you?

Commercial Real Estate assets are investments. As in any business investment, all aspects of the value proposition should be considered from initial planning to the future occupying, leasing  or selling of the commercial asset.

The spectrum of details across a construction project; whether a $750K medical office condo, a $40M+ multifamily development, or a $1B+ manufacturing or fabrication plant is vast. Architects, project managers, the development team and construction companies are experts at handling the details for on-time and on budget delivery. That’s their business.

In our business we’ve found that in the typical design and planning process, specific and unique ‘tax friendly’ aspects of a commercial real estate asset may not be considered upfront. In many cases cost segregation and energy tax incentives are considered upfront, though not specifically analyzed for benefits until after project completion. By consulting with experts regarding specific strategies for components and details that have accelerated year depreciation treatment or meet energy standards, the tax friendly status for the owner or investor group can be magnified.

Our pre-construction cost segregation consulting service enables the designer and developer to include minimal revisions that can maximize the tax friendly status and advantages of the commercial asset. We do not change the design; we only make suggestions regarding various construction techniques and materials that will maximize allowable federal tax deductions based on the guidelines they have established. It’s not uncommon to receive an additional 15% or more on top of the normal cost segregation benefits and energy tax benefits by considering these before breaking ground.

A few general examples or areas of the building where we may recommend certain modifications or construction approaches (which do not cost any more or change the architects design):

  • Interior partitioned wall systems
  • Exterior detail assembly/construction
  • Flooring types
  • Electrical systems
    • Interior lighting systems
    • HVAC (heating, ventilation and air conditioning) systems
    • Building envelope (defined as the outer shell used to protect the indoor environment as well as to facilitate its climate control)

    Energy aspects to meet EPAct 2005 tax incentives (expire 12/31/16, may be extended…again)

So I ask again, if you could maximize the tax friendly status of a new construction project, would you?

Font Resize