Commercial · 39-year property
Cost Segregation for Retail and Strip Centers
Retail is one of the strongest property types for cost segregation, and the reason is simple: a strip center is mostly parking, and parking is a 15-year land improvement.
Site work drives the result
A neighborhood retail center commonly devotes two to three times more square footage to paving than to building. Every bit of that — asphalt, base, curb, wheel stops, striping, storm inlets, pole lighting, pylon sign foundations, landscape islands and irrigation — is a land improvement recovered over 15 years rather than 39. On a center where site work is 25% of total cost, that reclassification alone changes the first-year deduction dramatically.
Tenant improvements and QIP
Interior work matters too. Storefront systems, decorative lighting, flooring, millwork, specialty electrical serving tenant equipment and signage all move to a 5-year life. And where you have made interior improvements to the building after it was first placed in service, those improvements may qualify as qualified improvement property with a 15-year recovery period and full bonus eligibility. Landlords who have re-tenanted a space and paid for the build-out are often sitting on QIP they have been depreciating over 39 years by default.
Component takeoff
What we pull out of retail & strip centers
Grouped by the recovery period each component lands on. This is representative, not exhaustive — the takeoff on your building will be longer.
- 5Storefront glazing systems and entry doors serving tenant space
- 5Decorative interior and exterior lighting, track and display lighting
- 5Floor coverings — VCT, carpet, luxury vinyl, sealed decorative finishes
- 5Display fixtures, counters, shelving and non-structural millwork
- 5Dedicated electrical for coolers, POS, kitchen or salon equipment
- 5Tenant signage, awnings, canopies and menu boards
- 5Security systems, alarms and cameras
- 5Specialty plumbing serving tenant equipment
- 7Loose fixtures, furniture and equipment retained by the landlord
- 7Certain communications and music/paging equipment
- 15Parking lot paving, sub-base, sealcoat and striping
- 15Concrete curbing, sidewalks, ADA ramps and wheel stops
- 15Pylon and monument sign foundations and site electrical
- 15Parking lot pole lighting and bollards
- 15Landscaping, islands, irrigation and site walls
- 15Storm drainage, catch basins and detention ponds
- 15Trash enclosures, fencing, bike racks and cart corrals
- 15Qualified improvement property from post-occupancy interior work
- 39Foundations, structural frame, demising walls and roof
- 39Exterior masonry, EIFS and structural glazing
- 39Rooftop HVAC units serving the building generally
- 39Fire sprinkler mains, base electrical service and utilities
Questions
How much of the basis usually reclassifies on this property type?
Studies on retail & strip centers typically move 20% to 32% of depreciable basis into 5, 7 and 15-year classes. That is a planning range from comparable buildings, not a promise — the number that ends up on your return comes from the actual takeoff.
What documents do you need?
The closing statement, the current depreciation schedule and the property address at minimum. Construction records, drawings, pay applications and change orders make the work more precise and often cheaper.
I bought this several years ago. Is it too late?
No. As long as you still own it and placed it in service after 1986, a look-back study captures every missed deduction and brings it forward on the current return via Form 3115. No amended returns.
The study is one piece. We can handle the rest of the return.
Deprecio is part of the Shurek Accounting & Tax family of brands. If you want the study and the tax work under one roof — the return, the Form 3115, entity structure, quarterly estimates, multi-state filings — that is a single engagement, not a hand-off between two firms.
No-cost feasibility review
Find out what your building is hiding.
A feasibility review is free and takes about twenty minutes. Bring the closing statement and the depreciation schedule; we will tell you plainly whether a study pays for itself.