Modular Office Walls vs. Traditional Buildout | Calculating ROI

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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?

Either way, your floor plate is a carte blanche opportunity to cultivate a workspace all your own. For example, let’s say you need a workspace with open plan workstations, five private offices, and a training room.

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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.

Outlining the Project

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In this scenario, you need 117.5 LF for the offices and 37 LF for the training room (154.4 LF total). Next, up are additional features to consider, such as entrances, power and options for configuration. Each of these offices needs a door while still letting natural light from exterior windows. The training room needs to be fully partitioned, with less visibility than the offices. It also needs a large entryway for large sessions or events.

Budgeting the Buildout

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Once you’ve measured linear footage, estimate the cost of adding doors, windows & other desired features. Adjust the linear footage as necessary. Caveat – comparing “apples to apples” is easiest. The cost of installing permanent glass fixtures varies by locale and provider. So, for the sake of comparability, start with your base model – 136.5 LF of solid partitions with six 36″ door frames.

Drywall Buildout

Traditional drywall buildout requires roughly eight steps with a multitude of components. Metal studs must be framed before gypsum board is hung. Once gypsum board is hung, joints are taped and multiple coats of joint compound are applied and sanded. After drywall is erected, it needs to be primed, painted and have the base applied. Finally, you can expect to spend $200-$300 on material & installation of each door frame.

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With materials and labor, the initial investment for traditional buildout rings in somewhere around $17K before tax. You can also expect to tack on an additional 15-23% if a general contractor will supervise the buildout.

Modular Office Walls

Installing modular office walls entails a considerably shorter process than traditional buildout. Ceiling and floor channels are first installed to create a “track” for the modular panels. Modular office wall panels arrive fully fabricated, so the panels are simply mounted on the “track” (including door frame construction and electrical access). Once panels sit level, modular office walls are connected with brackets. Finally, panel connections and base are mounted, completing the installation of solid panels and doors.

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 With materials and labor, the total investment for modular office walls rings in somewhere around $46K. Since modular office walls are almost always installed by manufacturer-licensed dealers, supervision and waste disposal will be included in the installation cost.

Conduct Cost-Benefit & Calculating ROI

Now, you have numbers for the initial investment. They’re different. It’s ok. Let’s look at the other costs associated with a capital investment project.

Let’s revisit the scope of each construction method – drywall requires an estimated 254 hours, and modular walls require an estimated 136 hours. While the disparity between the two numbers is already large, the nature of traditional construction skews the time it will take to finish the drywall. The steps in modular office wall installation run concurrently, meaning that 136 hours of installation can be completed in three to four weeks. Drywall construction has additional downtime (i.e. site prep, paint drying, etc.) between steps. Your project schedule with drywall is already more than six weeks, and the gap between steps will likely stretch it to eight weeks (being generous again). That’s double the downtime with drywall.

Project Schedule & Downtime

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 twelve hundred dollars a day to this project.

Depreciation Schedule

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. Modular office walls fall into the same category as office furniture (tangible personal property), meaning that they are eligible for modified accelerated cost recovery system (“MACRS”) depreciation schedule. Using a 7-year depreciation schedule, you will have depreciated your modular walls by 56.27% by the third year. In this scenario, that’s roughly $26K that won’t be subject to taxation over the first three years following your purchase.

“You Can’t Take It With You When You Go”

That is, unless you’re moving to a different office space. Then you can, in fact, take modular office walls with you when you go. 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. That means a new floor plan can be achieved with minimal investment by maximizing reuse of components. Let’s say that, ten years down the road, you’re moving to another commercial office space. And, 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.

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Want to Learn More About Modular Office Walls’ Ability To Build Your Triple Bottom Line?

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.

You’ve had a chance to run the numbers and weigh the benefits of each avenue. If you’d care to learn more about modular office walls, we’ve put together a selection of products available through Office Furniture Warehouse that have a proven return-on-investment – and look pretty damn sharp. Click the button to take a look!