Obviously because they think their return on cash/equity in their core business is higher than the rental yield.
Peter Thiel for example has argued along the same line of logic that large tech companies such as Google, Apple, Facebook have run out of tech innovation ideas and that’s why they sit upon an enormous amount of cash reserve. Only Amazon seems to continue to have an unlimited streams of ideas on where to invest in their core technology business.
There is also the secondary issue that REITs are locking up land close the populated areas so that to actually get land that a company can own, it has to be a distance from populated areas. One can see an example of that in General Atomic’s property at Scripps Poway Parkway and General Atomics Way. There is BAEs property, which was originally General Dynamics up in RB (GD had also bought some of the other land around that area at the same time). Another (old) one is Cubic’s building at Balboa and Ruffin which was bought in the 1950s – hardly anything else was around. In both cases, not much infrastructure went out to those locations when they were first purchased (water, sewer, roads). Establishing such infrastructure costs and municipalities like to play a waiting game to see if they can get someone else to pay (which does make me question where some of our tax money is really going).
To be effective owning their own buildings as a company, the company almost has to have a ‘real-estate’ arm to their management as well as some connections to city planning. Leasing is an easy way out, and helps make your return on capital look better because a large block money is not tied up on the buildings and leasing costs tend to be corporate tax deductible. I does reduce book value though.
Perhaps it also is that these large companies are in a competitive market, unlike utilities or government where they are more likely to be owners of the buildings. I’ve heard McDonalds owns their properties which has been a really good thing for them over time. Walmart I think also owns it’s properties though I’m not sure. If owning a home is a good idea for individuals, then why not for business.
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