The following article is sponsored by KI Wall.
A tenant improvement is typically designed around one question: What does this tenant need today?
For commercial real estate owners, developers and advisors, there may be another question worth asking: What happens to that investment when the tenant’s needs change, or a new tenant has different needs?
Change is inevitable. Organizations grow, contract and reorganize. Workplace strategies evolve. Leases turn over. Yet much of the interior is still constructed as though the first floor plan will be the last.
That creates a familiar cycle: build, occupy, demolish and rebuild.
As commercial real estate professionals look more closely at asset performance, speed to occupancy and long-term value, there is an opportunity to rethink that cycle. Interior construction can be planned not only for the initial build-out, but for what may happen throughout the life of the space.
Designing Beyond the First Tenant
Planning for adaptability does not require predicting exactly what a workplace will look like five or ten years from now. Instead, it means considering likely scenarios before construction starts.
Could a private office become a meeting room? Could a department expand? Could a future tenant occupy the floor with different space requirements? Which areas are most likely to change first?
Those questions can influence how an interior is built.
Demountable architectural walls offer one approach. Unlike conventional drywall, these systems are designed to be removed, relocated and reconfigured as needs change. Rather than demolishing an interior and starting over, portions of the original investment can potentially remain in use.
That distinction becomes increasingly meaningful over multiple renovations and tenant transitions.
From One Build-Out to the Next
At Mesirow’s Chicago headquarters, the value of adaptability became visible over more than a decade. The financial services firm originally installed KI Wall architectural walls in 2009. When Mesirow later consolidated its workplace from six floors to four as part of a post-pandemic strategy, a large portion of those original panels were reused in the redesigned space.
Instead of treating the previous interior solely as something to remove, an existing asset became part of the next workplace.
The concept can also extend across a real estate portfolio. One national commercial real estate owner has worked with KI Wall on more than 90 projects across eight locations since 2020. While most projects initially involved new installations, recent work has increasingly focused on reconfiguring and updating existing systems as workplace requirements change.
For owners managing multiple properties and tenant transitions, that introduces another way of thinking about interior improvements: What portions of today’s investment could continue creating value tomorrow?
Looking at the Full Financial Picture
Reuse is only one part of the equation.
Qualifying demountable wall systems may also receive different tax treatment than permanent construction. Conventional drywall is generally recovered as part of a building over a 39-year period. Depending on the specific project, installation and use, qualifying demountable walls may instead be classified as tangible personal property, potentially allowing a seven-year recovery period and eligibility for Section 179 expensing or bonus depreciation.
Tax treatment is project-specific, and owners and tenants should work with their tax advisors to determine eligibility.
But depreciation illustrates a larger point: the way an interior is constructed can affect its economics well beyond initial project cost.
Future renovation requirements, demolition, disruption, material waste, reuse and the speed at which a space can be prepared for changing needs can all influence long-term value.
Treating Adaptability as an Asset Strategy
For owners, developers, brokers and the professionals advising them, this creates an opportunity to broaden the conversation around tenant improvements.
Initial cost will always matter. But it does not have to be the only measure of value.
Before the next build-out, consider asking:
- How likely is this floor plan to change?
- What happens to these materials when it does?
- Could portions of the interior be reused for another layout or tenant?
- How much disruption would reconfiguration require?
- Are there tax implications worth evaluating before construction begins?
No one can predict exactly what the next tenant will need.
The opportunity is to create interiors that don’t require us to.
The more useful question may not be, “What will this space become?” but, “How easily can it become something else?”
Author:
Malandra Heuglin
KI Wall National Sales Manager
