⚠ Owned Real Estate Is Also Capital That Cannot MoveLow threat

The mirror image of never paying rent is never being able to leave. A leased retailer that misjudges a catchment writes off some fit-out and walks at the break clause. Costco, owning the land and the building, has to sell a 147,000 square foot windowless box with a large car park in a market it has already concluded is not working — into a buyer pool of roughly nobody.

The exposure grows with demography rather than with competition. Costco's format assumes a catchment of car-owning households with storage space, which is a description of the American suburb of the last fifty years and not necessarily of the next fifty. Property and equipment stood at $34,293 million at the third quarter of fiscal 2026¹, the great majority of it single-purpose.

There is a partial hedge in the fact that the land is usually worth more than the building and is often at the edge of a growing metropolitan area, so a genuinely failed site can be sold for redevelopment. Costco also relocates rather than closes — three of 27 openings in fiscal 2025 and five of the up-to-35 planned for fiscal 2026 were relocations², which is the company moving a working warehouse to a better site while retaining the members.

The number that would signal trouble is closures rather than relocations. Costco does not close warehouses in any meaningful number, which is itself the evidence that the site selection has been good. A year with several genuine closures in mature markets would say the catchment assumption had started to fail, and the write-offs would be against owned assets rather than leases.