Combining factors of production to achieve growth objectives
A Land Securities Group case study

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Page 4: Capital

In the context of factors of production, capital refers to the buildings, machinery, equipment (including vehicles) and tools that businesses use to create goods and services. In this context, capital does not mean 'money' but means the real assets that businesses purchase or hire, using money. Land Securities operates in the property market, where capital is a key factor of production. The company's 2,000 employees manage a portfolio of investment assets worth around £8 billion.

Businesses like Land Securities have to borrow large amounts of money because their activities depend so heavily on physical capital. This borrowing brings them responsibilities to the people or institutions who have helped to finance them through bank loans, bond sales and share issues. Land Securities is a public limited company so it has shareholders who expect a return on their investment. Land Securities' three divisions compete to see which can generate the best financial performance. The company's three main divisions are:

  • Central London - Its £8.7 billion investment portfolio includes more than 810,000 m2 of office space in London and substantial retail holdings in Oxford Street and Tottenham Court Road. The main driver is to recycle capital in a cyclical market, for example the selective acquisition of properties with active management opportunities rather than simple asset accumulation.
  • Retail - The Group owns 18 shopping centres and 25 retail parks located across the UK and its vision is to acquire or develop long-term assets. Land Securities has been selling high street retail, to enable it to drive higher returns through the active management of larger assets.
  • Property Outsourcing - This division manages properties on behalf of the clients who own them. It offers a complete buildings management and support service. This leaves the businesses who occupy the buildings to concentrate on what they are good at. They no longer have to deal with day-to-day problems such as caretaking, cleaning and buildings maintenance. Clients for this service include government departments, the BBC and BT.

In addition to this Land Securities have an Urban Community Development division, which is overseeing and master planning one of Europe's largest regeneration schemes in Kent Thameside. In such a capital-intensive business, the company has to ensure that it is managing risk and also working to achieve the best returns for all of its stakeholder groups.

Land Securities Group | Combining factors of production to achieve growth objectives