Capital works and capital expenditure can cover a broad spectrum ofactivity in commercial real estate, from lifecycle maintenance toupgrades required to secure a lease. This blog explores how capitalworks are categorised in commercial buildings and how asset managersmake decisions around CapEx vs OpEx.
Capital expenditure (CapEx) in commercial property refers to moneyspent on the building as a capital asset - anything that improves itsvalue or extends its useful life. Because the building is theinfrastructure, most significant works that enhance or upgrade itfall under commercial property capital expenditure.
These works are usually capitalised and depreciated over time and mayinclude major plant upgrades, lift replacements, façade renewals,and large-scale refurbishments.
Operating expenditure (OpEx) is different. These are the costsrequired to keep the building running day-to-day - cleaning,compliance, repairs for general wear and tear, security,subscriptions and operational software.
A useful test often used in property management is simple:
Does this activity increase the asset's value or extend its life?
If yes, it is generally CapEx. If it simply returns the asset to itsoriginal state, it is OpEx.
For example, if someone damages a wall and you repair it, the work isconsidered OpEx because you’re restoring, not improving, the asset.
Buildings age, systems become outdated, and technology changes. Tomanage this, commercial landlords typically rely on a 10-year capitalworks plan, often prepared by a services consultant. This planoutlines the building’s major lifecycle maintenance costs such asHVAC replacements, fire system upgrades, roof renewals and any otherworks required to keep the building operational and compliant.
This type of CapEx, commonly referred to as Maintenance CapEx, helpsasset managers forecast expenditure across the building’slifecycle. It gives clarity on what needs to be spent, when, and why;ensuring capital works budgeting and forecasting are aligned withlong-term asset strategy.
When it comes to leasing, the focus shifts from lifecycle maintenanceto what needs to be invested to make a tenancy attractive. This iswhere Leasing CapEx comes in, particularly around shellconditions and on-floor amenity upgrades.
As a building ages, prospective tenants expect refreshed spaces withmodern lift lobbies, better technology, updated amenities andcontemporary finishes. To meet this demand, landlords often invest inlessor works, which fall into three common categories in Australiancommercial real estate:
We break these down in detail in our dedicated blog post on coldshells, warm shells and spec suites - worth a read if you want tounderstand how they influence leasing outcomes.
Instead of (or in addition to) physical works, a landlord may offer amonetary fitout contribution, such as $200,000 for tenant-specificworks. This is still classified as CapEx because it directly supportsthe tenant’s ability to occupy and add value to the building.
Where Maintenance CapEx is about keeping the building running,Development CapEx is about repositioning or materially enhancing theasset. These are building-wide works with long-term strategic impactand include lift lobby redevelopments, façade upgrades, additionalstoreys, full-building technology upgrades or major repositioningprojects designed to move the building into a new market class.
Development CapEx is typically the most complex and high-value tierof capital works in commercial buildings and often forms part ofbroader capital expenditure strategies used by asset managers, REITsand property owners across Australia.
Understanding how CapEx and OpEx work across maintenance, leasing anddevelopment is essential for accurate forecasting, depreciation,approvals and long-term asset planning. That's where Projx comes in.
Projx provides a single platform for capital works, enabling propertyteams to allocate the correct funding accounts, tag projects withcapital or asset codes, and ensure works are correctly capitalised.Because everything sits within one unified system, it becomes fareasier to manage depreciation schedules, align projects with budgets,and maintain visibility across an entire portfolio.
For landlords, asset managers and commercial property teams, thismeans clearer decision-making, better governance and more confidentcapital planning, from everyday maintenance CapEx to large-scaledevelopment ambitions.
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