'Modular' and 'relocatable' can mean many things. Usually, they conjure a sense of the temporary or transient, and maybe a sense that something is lesser quality. It’s time to re-frame how we think about this and how it relates to the types of interiors that can benefit from it most. As businesses in New Zealand continue to seek ways to operate more efficiently while maintaining or improving their standards of product and delivery, it’s worth examining the way a nimbler accommodation solution can support that efficiency.
Author: Alasdair Hood, Principal - Head of Design, Context Architects
Outline
- What "modular" and "relocatable" actually mean
- Where value gets trapped in a fixed fitout
- How a relocatable approach shifts four financial levers
- The limits modular fitouts
- Consent, seismic and compliance: what changes
- Why the method of fixing impacts the outcome
- Questions to ask your design and fitout partners
- Practical next steps before you commit
Key Takeaways
A relocatable, modular approach to fitout can change the financial and operational profile of your workplace — through faster depreciation on qualifying elements, lower make-good exposure, and shorter build times — but the outcomes are project-specific and depend on design and tax advice.
- Modular means demountable and reusable, not merely prefabricated
- Commercial fitout remains depreciable; non-residential buildings sit at zero
- Design detail determines tax treatment
- Most interior office alterations already sit outside building consent
- Consent exemption is not Building Code exemption
- Partitions and ceilings still need specific seismic restraint design
- New Zealand evidence on prefabrication savings is mixed
Introduction
In a traditional fitout, much of what makes an office - the internal walls, built-in joinery etc - is constructed permanently on site and effectively becomes part of the building. Once it is built, it remains. A modular or relocatable fit-out replaces much of that fixed construction with freestanding, engineered elements: demountable partition walls, standalone acoustic pods, and moveable joinery, including a kitchen, that can be unbolted, reconfigured and taken with you when you move.
A well-designed modular office can look very similar to a traditional one. But additional appeal lies in how those elements are classified, owned and treated. When elements qualify as separately depreciable fitout or chattels rather than fixed building fabric, they can return value faster through depreciation, materially reduce the make-good liability at lease end, and shorten build programmes because much of the work is fabricated off-site.
This guide covers what a modular approach can and cannot do,
What "modular" and "relocatable" actually mean
The word "modular" is used loosely enough to be almost meaningless. It’s often used as a substitute for other terms described below:
- Prefabricated means a component is made off-site and installed on-site. Almost every fitout in New Zealand already includes prefabricated elements — joinery, frames, glazing units. Prefabrication alone changes your programme. It doesn’t change the tax treatment or much, if any of the exit liability.
- Demountable means the component can be taken apart without being destroyed. A demountable partition unbolts. A stud wall that has been framed, lined, stopped and painted can’t.
- Relocatable means the component can be removed, transported, reinstalled elsewhere, and remain functional. This enables it to be classed as furniture, fittings or equipment rather than building fabric.
The traditional fixed fitout: where value gets trapped
A conventional fitout trap value in three areas, with one compounding the impact on the others.
The first is tax. The question is not simply what the fitout costs, but how much of that spend is a separately identifiable asset and how much disappears into building fabric that under revised tax law, now depreciates at zero.
The second is exit. The more integrated the fitout you install, the more you will likely have to strip out and reinstate when the lease ends. That liability is created at the design stage.
The third is residual value. A demolished partition is worth nothing, and will attract further cost to remove. On a two to five year lease, a business can effectively pay for the same element three times: once to build, once in unclaimed depreciation, and once to demolish.
How a relocatable approach changes the four levers
- Depreciation. Components that are freestanding are more likely to be identified as separate items of depreciable property rather than part of the building. This is a technical determination based on how the asset is constructed and fixed.
- Make-good. Elements that unbolt and lift out reduce the scope of physical reinstatement. Less permanent work installed means less to remove.
- Programme. Work fabricated off-site and installed or assembled on-site carry a different risk profile to wet trades and structural alterations. The BRANZ study on prefabrication impacts in the New Zealand construction industry sets out where those efficiencies do and don’t materialise locally.
- Residual value. Components that can be uninstalled and reused stay on your asset register instead of becoming a demolition line item. That matters environmentally too. The Ministry for the Environment's construction and demolition waste baseline work notes that construction and demolition activity has long been estimated to account for around half of New Zealand's landfill waste.
What modular can’t promise
Relocatable systems frequently cost more per square metre up front. This makes compiling and balancing your relocation budget through the lens of whole-of-life cost absolutely critical.
Local evidence on prefabrication savings is mixed. New Zealand research has found cases where prefabricated approaches did not deliver a better economic outcome than on-site construction, partly because our market does not always achieve the production scale that drives overseas results.
Acoustic performance is an important factor in workplace design and while there are now many stand-alone meeting pods that are acoustically secure, they’re not always a substitute for the feel of a traditionally built meeting space. Elements like these are where the ratio of traditional to modular design can be dialled up or down depending on specific requirements and preferences.
Finally, reuse is only of benefit if it happens. A relocatable wall earns its premium if your next tenancy can accommodate it. Shorter lease terms mean a greater degree of nimbleness and a modular, demountable approach aligns well with nimbleness. If you’re intending to sign a lease over a longer term the economics may point to a more traditional approach.
Compliance, seismic and consent: what changes and what does not
Under Exemption 10 of Schedule 1 of the Building Act 2004, interior alterations to an existing non-residential building generally do not require a building consent, provided the work does not modify or affect the primary structure, does not modify or affect any specified system, does not involve a fire separation wall or a masonry wall, and doesn’t include sanitary plumbing. MBIE's guidance on building work that does not require a building consent sets out the conditions and worked examples.
Building consent exemption is not unique to modular systems. A conventional fitout that stays within those boundaries is equally exempt. What a relocatable approach can do is reduce the amount of scope that crosses those lines in the first place.
More importantly, an exemption from consent is not an exemption from the Building Code. Non-structural elements including partitions and suspended ceilings still require seismic restraint. As MBIE's practice advisory on earthquake performance of non-structural elements makes clear, these elements need specific design in accordance with NZS 1170.5, and suspended ceilings in particular, require restraints that are specifically designed and detailed.
The questions to ask a designer or fitout partner
- What proportion of this fitout could be freestanding, relocatable or classed as equipment rather than fixed leasehold improvement?
- How is each element fixed to the structure, and can it be removed without damage?
- Which parts of this design trigger building consent, and why?
- Who has engineered the seismic restraint for the partitions, pods and ceilings, and against which standard?
- What is the estimated residual value of these components at lease end, and what would it cost to relocate them?
- Has a comparable approach been taken in a comparable New Zealand tenancy, and can we speak to that tenant?
Jump to the other blogs in this series here:
Part 1: Your Office Lease Is Expiring: A 12-Month Planning Guide for New Zealand SMEs - Context NZ
Part 2: The Real Cost of an Office Fitout: A CFO’s Guide to Whole-of-Lease Thinking
Part 5: After the Move: How to Make Your New Workplace Keep Paying Off - Context NZ
Next Steps
If you’d like to explore a different approach to creating your next workplace, ask the first question outlined above and seek out partners who can demonstrate a clear understanding of how to deliver it.
Our previous guide set out the whole-of-lease cost model that sits underneath all of this. [Internal link to Blog 2]
In our next piece, we look at how to choose a workplace partner who can deliver this well, and introduce how we approach it at Context. [Internal link to Blog 4]
You can also browse our workplace projects or read more of our thinking in Context Insights.
About the Author:
Alasdair Hood, Principal - Head of Design, Context Architects
Alasdair Hood is a Design Principal at Context Architects, where he leads commercial workplace design across the practice's New Zealand studios. An award-winning designer, Alasdair has spent more than two decades helping organisations rethink how their physical space supports the way people actually work.
Alasdair specialises in translating a company's culture, headcount and growth plans into workplaces that are flexible, cost-efficient and built for change, drawing on Context's Adaptive Modular Design approach to reduce fitout cost, cut make-good liability and keep options open.
He writes regularly on the future of work and the evolving New Zealand workplace. Connect with Alasdair on LinkedIn, or explore Context Architects' workplace thinking through their Insights.