The assumption
A distribution building is slab, tilt-wall and roof. Owners look at that and conclude a study cannot find anything. On the building alone, they are largely right — reclassification inside the envelope is modest.
The yard
Industrial sites carry enormous exterior cost. Heavy-duty concrete truck courts rated for tractor-trailer loading. Trailer parking. Auto parking and drive aisles. Perimeter fencing, gates and guard booths. High-mast yard lighting and site electrical. Storm systems sized for acres of impervious surface. Landscaping and berms. Rail spur improvements where owned.
On a build-to-suit distribution centre, site work commonly runs 15% to 25% of total project cost. All 15-year, all bonus eligible.
Building systems that serve the process
Inside, the question is always whether a system serves the building or the operation. Power feeding production or material-handling equipment, bus duct, compressed air distribution, process piping, dedicated exhaust, dock levelers, seals and shelters, battery charging stations, in-rack sprinkler enhancements, and task lighting tied to a work function.
Racking
Free-standing pallet racking is personal property. Rack-supported structures where the racking carries the roof are a different question entirely, and one that needs an engineer rather than an assumption.
Typical range
12% to 24%, the lowest of any property type — but on an $11.8 million building, 22% is $2.6 million of reclassified basis. Low percentage, large number.
Manufacturing is different again
Once production equipment enters the picture, the percentages rise sharply and the new section 168(n) qualified production property deduction may reach parts of the building itself. Those analyses should be run together.
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