A Business Case for Shipping Containers in Land Development
April 4, 2017
Developing real estate is vital to the infrastructure and economic development of growing cities. Developers are not only responsible for creating the physical space for commercial or residential use, but also managing lease holders, tenants, and creating an attractive area that draws commerce. While the formula for success hasn’t changed in a while, the growing pressure and competition associated with attracting and keeping profitable retail tenants has made a dent in the industry.
The rules are changing for developers, and the ones that see future success, will be the companies willing to pivot to new construction methods and ideology. As the industry matures, shipping container and kinetic architecture is looking extremely attractive to these developers. Here are the reasons why developers are choosing the speed, mobility, tax benefits, and alluring nature of shipping container architecture over old-school brick and mortar.
Speed to Market
Boxman Studio’s build timeframes allow for construction to be completed 30%-50% faster when compared to traditional stick-built construction. These projects are built to necessary building codes at the same (if not better) quality without sacrificing build times. This is made possible with the utilization of Boxman’s modular construction process that allows for floors, walls, ceilings, electrical, and plumbing to be installed simultaneously.
We take into consideration that there may be a need to move or change the retail, restaurant, or community space at some point (even if it is a permanent structure). Boxman’s units are built to be mobile and moved easily without sacrificing the unit’s structural integrity, finishes (internally and externally), and equipment. Rather than having to construct a new building, units can be moved from one site to another.
By utilizing Boxman Studios’ product, our clients can receive tax benefits. Based on IRS Publication 946, container structures are categorized as 7-year tax life property. Specifically, the code states, “Any property that does not have a class life and has not been designated by law as being in any other class.” This means that modular units are not called out in the IRS Publication 946, therefore it defaults to a 7-year property, which allows you depreciate the units over a 7-year tax life. Commercial traditional stick built construction in IRS Publication 4562 is classified as nonresidential real property, which has a depreciation period of 39 years.
Our projects are aesthetically versatile and offer flexible, modular layouts. They can be constructed to have the appearance of a modular unit, traditional stick build construction, or a combination of both. To achieve this range of designs and styles, we employ both de-commissioned (used) shipping containers that are modified and structurally reinforced, or purpose built structures that are erected from shipping container parts, to fit certain specifications.
Our job is to translate the developer and tenant’s vision into a customized structure that maintains the highest safety standards, moves easily from our facility to sites across the state or the country, aligns with the budget, and delivers a unique and immersive brand experience for a tenant’s clientele.
Finding the Higher and Better Use with Market Testing
Is there another way to look at nonperforming assets to generate revenue? Vacancies and stagnant properties are a huge burden on a developer’s portfolio. To determine the highest and best use of a property, developers must conduct property, constraint and market analysis. For burgeoning, under considered and underutilized property, we can offer a quick justification, market validation, and potential revenue centers in the form of temporary or semi-permanent construction.
These units are extremely flexible. They can be moved at will, tie into municipality power and water, or run off generator and water tanks. If the developer cannot validate a market for the property, mobility is a huge benefit. Instead of investing in a permanent property, developers can make cautious, informed decisions based on real data.
Attracting desirable tenants
Tenants are the driving force in a developer’s business model. The physical layout and aesthetic design of the development influence the caliber and quantity of tenants, and those details are extremely important when determining if the project can be financed. Will the financial institutions be able to reasonably assume that the company will generate enough revenue in leases, sponsorships, and events? Developers are held accountable to financial institutions, and to their tenants. Developing spaces that attracted the right partnerships in both is extremely important for moving projects forward. Our solution helps to justify the project to all parties involved including tenants, financial institutions, and shareholders.
The benefits to using kinetic architecture over traditional stick-built methods are immeasurable. We offer a unique solution for speed to market, mobility, customization, and financial justification that is completely new to land use development. For more information, read this blog post Kinetic Architecture or Modular Construction or give us a call to discuss your idea 704-333-3733.