Is your Building an Intangible Asset?

Is your Building an Intangible Asset?

On Tuesday, March 22, 2016, the Wall Street Journal ran a story on page B1 (Business and Technology) titled “Accounting’s 21st Century Problem”. The gist is that the “value of corporate assets like brands, user data and algorithms remain a blind spot” to generally accepted methods of valuing a company’s worth. “Assigning a value to a physical asset like a store…”is relatively easy, but “How do you attach a price to something you can’t see or touch?” What is the value of intangible assets?

What’s the value of a well-designed building? Quite a lot.

I have often thought about the difference between a building we design and other buildings. Is there a difference? If there is no difference, why hire us? My answer has been: Well, we can take the same $500,000 worth of lumber, nails and labor and make a better building. It will be more energy efficient, your customers will be happier, your employees more productive. People will smile when they come into the building.

When you look at a well-designed building versus a poorly designed building, there may be no difference from an accounting point of view. It’s still $500,000 worth of building. What seems to be happening is that a well-designed building, like a well-developed brand, has intangible value. People recognize the building, so it is more visible. People enjoy being in the building, so they stay there longer, or at least do not think of excuses to stay away. Employees may be more productive, or take fewer sick days.

These intangible assets are what accrue from good design. They can be quantified. One can come up with metrics to measure employee sick days. But they do not often end up on balance sheets. According to Leonard Nakamura of the Philadelphia Federal Reserve, quote in the WSJ article, “companies in the US could have more than $8 trillion in intangible assets…nearly half of the combined $17.9 trillion market capitalization of the S &P 500 index.”

What’s the value of a well-designed building? Quite a lot.

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Principal at Sealander Architects, Ellsworth Maine. Revit guru. Married with 3 children. Avid gardener. Lived in San Francisco for nine years. Master in Architecture from Columbia University Bachelor of arts in religious studies, Wesleyan University. Graduated Staples High School, Westport CT. Hope to spend some time in Hokkaido before all is said and done.