Colorado Real Estate Journal - February 18, 2015
Cities are in competition to bring the best companies to the area that will provide the most spendable dollars to their communities. Presently, they are able to offer city tax benefits as well as work with the state on different waivers that offer more incentives to move to the area. The more employees and the bigger the profit the company have mean improving the economy for the entire area, including improvement for local, second-line businesses that are in the supply chain. This benefits everyone in the area, including more revenue for schools and public services we all use every day. Are you starting to see why it is so important for cities to be able to offer large companies incentives to come to the area? Cities that adopt new commercial building standards are able to offer federal tax benefits to desired prospects in addition to those noted above. This is because of new technology that allows commercial real estate to be 70% to 90% reconfigurable and reusable. What does this actually mean? Reconfigurable and reusable? We hear all the time about recycle but reusable? This change benefits almost every area of commercial real estate; from the architect who designs the building to the contractor who builds it. And in addition, cites themselves will benefit by not having landfills continue to fill with hazardous and toxic waste. With this new technology, the parts of the building that are now reconfigurable and reusable are most of the interior. The interior I am referring to consists of the interior doors you walk through, the windows you peer into to see if someone is behind the desk, the electrical and plumbing that connects the computers and sinks, and all the drywall and frames that that connect everything (and that hide all of this from public view). These are the construction materials that are demolished and replaced with new materials approximately every five years in medical and commercial office buildings, malls and other commercial real estate. According to the National Association of Home Builders, 26% of construction landfill by weight is drywall. Drywall in landfills produce hydrogen sulfide gas, which pollutes water tables and is listed as hazardous and toxic waste by the EPA. Businessweek informed us that 1% of all energy in U.S. industry makes drywall and equivalent amount of emissions. In other words, demolition of these spaces every five years is one of our biggest polluters to the environment. The one area of construction that changes all of these areas to reusable is removable, or demountable, drywall joint tape. Until the drywall tape goes on, everything can be disassembled, reused and relocated. The drywall tape, once finished (mud and paint), makes the interior of the wall inaccessible to anything except by demolition. An award-winning, former top Gensler architect and Construction Technology Professor at Texas A&M has pioneered Green-Zip demountable drywall tape that “is the game changer for commercial real estate,” according to the EVP of Hines, a premier developer. In addition to the benefits of the awards and approval by the EPA and AIA, in 2008 the highest federal tax courts approved tax benefits of this new technology, transforming everything associated with all nonloadbearing walls (drywall, studs, headrails, interior doors and windows, utilities, etc.) to personal property under the IRS Witco rules. This tax category change from the IRS allows companies investing in buildings to add an additional 8.1% Return on Equity, according to Real Estate Review. That is, 8.1% in addition to the regular return. Or, according to McGladrey and EKS&H, the tax benefits are equivalent to saving $3 to $10 per square foot in construction cost for a profitable corporate offices. Many Fortune 500 companies have taken advantage of both the reusable benefits and tax benefits, along with hospitals, hotels, banks, apartments and government entities, which are now building reconfigurable buildings and enjoying the tax benefits. In addition to the tax benefits, this new technology will make their buildings 70% to 90% reusable, according to a LEED Case Study. Every five years, when they reconfigure their space using the same materials, they will save $110 per lineal foot ($1,100 every 10 feet) in 2013 dollars, according to a Turner Construction Case Study. The reuse benefits go up every year with the increase in construction materials. A city, using the new building standard, can now attract major companies and their millennial employees to the area with federal tax benefits and protect their environment at the same time. Another goal of our officials in economic development is meeting the concerns of the millennials, our future workforce. Cities are being designed differently to accommodate their concerns for the environment as well as their lifestyle. This is a change that is good for everyone. Providing more spreadable income to the city residents by providing federal tax benefits to attractive companies while protecting the environment with reusable buildings.