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Cost Segregation for Office Buildings & Office Condos
Office buildings hide most of their short-life value in the build-out. Tenant improvements, low-voltage cabling, decorative lighting and supplemental cooling are routinely capitalized into the 39-year shell, when much of it belongs in 5- and 15-year lives.
Where the value is in office property
Offices are among the asset types where our engineering team has deep experience.
- Office buildings
- Office condos
Tenant improvements are the lever
Every re-tenanting adds carpet, ceilings, millwork, glazed partitions and finishes. Interior, non-structural improvements made after the building was placed in service are generally qualified improvement property, which is 15-year and bonus eligible, and the personal property inside them is generally 5-year.
Technology infrastructure is personal property
Structured data and communications cabling, security and access control, AV systems, and the dedicated power and supplemental cooling serving a server or IDF room are tied to the equipment they serve rather than to the building.
Office condos are interior-heavy
An office condo owner holds the unit and an interest in the common elements, so the study concentrates on the interior build-out, finishes and dedicated systems. Office buildings add surface parking, site lighting and landscaping as 15-year land improvements.
Commonly reclassified components
Representative of what an engineered study identifies in this asset class. Actual components and recovery periods depend on the property and are documented individually in your report.
What would a study find on your property?
Send the property details. Engineering prepares the estimate, and you receive a written, fixed-fee proposal within 24 to 48 hours.
Office cost segregation questions
Still have a question? Ask Engineering.
Does a multi-tenant office building work better than single-tenant?
Multi-tenant buildings usually carry more build-out per square foot: more demising walls, more finishes, more separate electrical and data runs. Single-tenant buildings still work well, particularly when the tenant is technology, medical or lab-adjacent.
We paid a tenant improvement allowance. Whose deduction is it?
It depends on who owns the improvements under the lease and who bore the economic burden. If the landlord funds and owns the improvements, the landlord depreciates them, and that is the population a study segregates. We review the lease language as part of the engagement.
Is qualified improvement property worth identifying separately?
Yes. QIP carries a 15-year recovery period and is bonus eligible, so correctly identifying it moves a large block of interior spend out of a 39-year life even when it is not 5-year personal property. See renovations and tenant improvements.
Can I study an office condo I own?
Yes. The study covers your unit's build-out, finishes and dedicated systems, along with your share of any common-element costs that are part of your basis. A medical office condo follows the same approach with more dedicated plumbing and equipment power.
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