Asset or Liability?
Most businesses need property from which to operate. For this reason, property is often perceived as functional and secondary to the main business. Consequently, one of the main problems with corporate property ownership is that property is often viewed as a liability, since it rarely contributes directly to the perfromance of the business.
Conversely, in certain markets, property can provide an investment return higher than that of the core business of the enterprise. The constant dilemma for management is the question of whether capital should be used in the core business, or deployed in property as an investment.
One might have heard the expression in the offices of your council:" We are not in the real estate business".The reality is that occupational property exerts pressure on the financial resources of the enterprise.If capital growth is important and capable of being realised it may be an important factor in deciding to take a freehold interst in property. The key here, is that it must be "capable of being realised".
The ownership of property provides protection against rising rental costs, however the capital tied up in the asset may mean that capital needs elsewhere must be financed externally at a cost. There is an "opportunity cost "to this capital.
