Depreciation as Design Strategy

Depreciation is essentially an accounting recognition of time. When an organization makes a capital investment, qualifying costs are generally recovered over a prescribed period based on how the asset is classified.

Conventional interior construction is typically closely associated with the building itself. Walls constructed from studs and drywall, for example, become part of the physical property. When conventional interior construction is classified as nonresidential real property, it may be subject to a 39-year depreciation period in the U.S., although certain types of improvements and uses may qualify for different treatment.

Now consider modular interior architecture. Rather than being permanently constructed in place, modular components are designed to be installed, disassembled, reconfigured, relocated, and potentially reused. A wall can continue to serve an organization even after the floor plan around it changes.

Physically, this is what makes modular architecture adaptable. Financially, the same characteristics may also contribute to a different conversation about how the investment is classified, since certain modular architectural systems may qualify as personal property rather than being treated as part of the building itself. At Haworth Architectural Solutions, clients are routinely modeling our modular solutions using an immediate depreciation period, reflecting the potential treatment of qualifying systems as personal property qualifying for immediate expensing for tax purposes under the One Big Beautiful Bill Act of 2025 rather than nonresidential real property. In this way, the organization is still making a capital investment while the potential timetable over which that investment can be recognized for tax depreciation purposes is dramatically reduced.  Actual classification and recovery periods will depend on the project and installation and organizations should consult their tax and financial advisors to determine the appropriate treatment.

For organizations evaluating capital projects, that distinction can matter. The ability to recognize tax depreciation deductions sooner may improve the economics of an investment compared with recovering those deductions over several decades.

Now, something that appears to be an accounting detail becomes part of a much larger design decision.

There is an interesting alignment between the physical and financial characteristics of modular architecture.

Conventional construction is designed to become part of the building. When requirements change, much of that construction may need to be demolished and rebuilt. Modular architecture is designed around a different premise. Components can remain useful as the organization changes. Walls can move. Rooms can be reconfigured. Materials can be redeployed rather than discarded.

This suggests another way to think about the investment. Instead of treating interior architecture solely as a construction expense attached to one configuration, modularity creates the possibility of thinking about architectural components as assets with continuing utility. Their physical value can move forward, and potentially, their financial treatment can look different as well.

None of this means depreciation should determine an architectural solution. Nor does it mean that every modular installation will receive the same tax treatment. Classification depends on the specific project, ownership structure, applicable tax rules, and other circumstances. But depreciation deserves a place alongside the other questions organizations ask when evaluating space. How much will it cost? How quickly can it be delivered? How well will it support people? How easily can it change? How much of the original investment can be reused? How will the investment behave financially once it’s built?

Taken together, these questions expand what architecture costs to consider how long it creates value, how easily that value can be carried forward, and how the investment itself behaves over time.