Balancing CAPEX Realities with OPEX Savings

It’s a simple concept. Capital expenditures, on average, comprise only 10% of total building costs while lifecycle operating costs make up the remaining 90%. Therefore, it’s more sensible – if not more financially advantageous – to balance fiscal decisions by taking both aspects into account.

CAPEX and OPEX are not mutually exclusive. They each impact the balance sheet and total cost of ownership (TCO). Problem is, certain elements of building lifecycle costs – taxes, incentives, energy, maintenance and replacement – are very difficult to predict or analyze upfront (pre-build) with any high degree of confidence or accuracy. At least, not until now.

Total cost of ownership calculations include:

Initial Construction Costs

Long-Term Energy / Operating Costs

Maintenance / Replacement Costs

Rebates, Deductions & Incentives

Retrofit Strategies

Project Financing / Cost of Capital

Inflation / Energy Price Escalation

Equipment Life / Cost Segregation




By determining construction & operating cost savings for a 400,000 ft2 distribution center roof-retrofit solution that featured LED and daylighting systems, SmartView revealed:

$138,000/year savings


$1,080,000 tax deductions

$50,000 energy rebate



When considering a 480,000 ft2 distribution center expansion, SmartView analyzed the operating/maintenance cost savings and energy tax rebates/incentives resulting from specified wall/insulation systems, LED controls, and roof daylighting. Cost segregation of depreciated assets was included in the final SmartView calculation:


(Cost Segregation Year 1 Cash)

$1.82MM savings

(Over 1st five years)


(energy savings)

EPAct $345K

(additional cash still pending)

What these case studies emphasize is that initial construction costs (CAPEX) typically pale in comparison – and are greatly offset by – lifecycle operating cost savings (OPEX).

The future of construction planning and decision-making is here now, and at its core is detailed TCO data.

“Today, TCO analysis supports acquisition and planning decisions for a wide range of assets. These include especially those that bring large maintenance and operating costs across a long ownership life. Total cost of ownership is therefore center stage when leaders face purchase or planning decisions…”Building the Business Case Analysis by Solution Matrix Ltd.

The ultimate advantage in balancing CAPEX realities with OPEX savings is uncovering the hidden (less obvious) cost savings, which can be easily overlooked. Of course, having more information is always preferable for the most astute and perceptive business executives.

To learn more, contact Castle Black Construction at:

901-443-0151 or 

Finding New Buildings in the Dust of Old

With the continued and growing emphasis on sustainability in construction we could be on the verge of a radical shift in how we think about the current stock of buildings. The time may be coming when we stop planning for building replacement, and instead plan for building reuse. That in turn would significantly change the roles of designers and builders.

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How To Build A Construction Plan

Learn how to market your contractor business professionally. In depth knowledge of attracting clients with online marketing strategies and deep thinking about who you want your clients to be.

The housing industry has proceeded at a red-hot pace for several years running. An all-time record was set in 1998, when 886,000 new-site single family homes were sold. That represented a 10% gain from the robust total of 804,000 homes sold in 1997, and an 8.1% rise from the prior record of 819,000 units in 1977. Single-family housing construction accounted for $48 million of the total $125 million generated in the industry.

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