CAPEX (Capital Expenditure)

Building CAPEX planning typically uses a 10-20 year capital replacement reserve study. Industry benchmarks suggest annual CAPEX reserves of 1-3% of building replacement cost. CAPEX items are distinguished from OPEX by their nature (extending asset life vs maintaining current function), accounting treatment (capitalised and depreciated vs expensed), and magnitude. Property condition assessments (ASTM E2018) produce CAPEX projections as their primary deliverable.

Inadequate CAPEX planning leads to deferred maintenance, system failures, and declining building value. During due diligence, understanding the CAPEX profile (what needs replacing, when, at what cost) directly affects purchase price negotiations and financial projections. Underestimating CAPEX is one of the most common errors in building investment analysis.