Fixed Assets or Sunk Costs? An Examination of Retailers' Land and Property Investment in the United Kingdom

C M Guy
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C M Guy: Department of City and Regional Planning, University of Wales College of Cardiff, PO Box 906, Cardiff CF1 3YN, Wales

Environment and Planning A, 1997, vol. 29, issue 8, 1449-1464

Abstract: In this paper I examine the policies of leading multiple retailers in the UK with regards to property development, ownership, and investment. The discussion is set in the context of recent work by Clark and Wrigley in which they seek to relate locational decisions and other elements of corporate strategy to the economic concept of sunk costs. This concept is shown to be relevant to the recent experience of some British retailers which have incurred irrecoverable costs through overpayment for ‘premium’ sites for grocery store development. More generally, property development and ownership have in recent years become important activities for leading retail firms. Policies to separate property ownership and management from the mainstream retail trading function appear to have been successful, but some companies have lost money through overambitious programmes of property development. The conclusion is that, though retail development inevitably incurs sunk costs both at entry and exit, these are for most companies outweighed by the long-term growth of land and property values in the United Kingdom. Sunk costs may therefore be of less significance than in other types of private enterprise.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:sae:envira:v:29:y:1997:i:8:p:1449-1464

DOI: 10.1068/a291449

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