What type of expenditures include replacing HVAC systems?

Replacing HVAC systems falls under the category of Maintenance CapEx, which refers to capital expenditures that are necessary to maintain or improve an asset's operational efficiency and extend its useful life. These expenses are typically larger and less frequent than operating expenses, and they contribute to the long-term value of the property.

Maintenance CapEx includes repairs or replacements that enhance the property's functionality, such as updating aging systems, which is essential for ensuring tenant comfort and meeting regulatory standards. Unlike operational expenses, which cover day-to-day running costs, Maintenance CapEx investments are significant and often budgeted separately.

In this context, while operational expenses cover maintenance that is routine and periodic, and fixed costs are related to expenses that do not vary with occupancy, Maintenance CapEx is specifically focused on significant upgrades or replacements that contribute to the property’s durability and efficiency.