Glossary
CAPEX
Plain-Language Definition
Capital Expenditure — spending on major building improvements, replacements, or upgrades that extend the asset's useful life or add new capability. Distinguished from OPEX (operating expenditure) which covers day-to-day running costs.
Technical Context
Building CAPEX examples: chiller replacement, roof replacement, lift modernisation, fire system upgrade, facade renovation, structural remediation. CAPEX is typically budgeted using a long-term capital plan (10-25 years) based on equipment remaining useful life (RUL) and condition assessments. Industry benchmark: annual CAPEX reserve of 1-3% of building replacement cost.
Why It Matters
Underfunded CAPEX leads to deferred maintenance, equipment running past useful life, increasing reactive costs, and declining building quality. A CAPEX plan is essential for building valuation, investor reporting, and maintaining asset quality. MNC tenants review CAPEX plans during due diligence.
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