John Lewis Partnership has deserted its build-to-rent housing ambitions, retreating from a high-profile property diversification technique because the group pivots again in the direction of its core retail enterprise.
The worker-owned retailer confirmed it will withdraw from the rental housing scheme first championed by its former chair, Sharon White, who had sought to scale back reliance on retail by producing 40 per cent of earnings from non-retail ventures by 2030. That focus on was later scrapped.
The build-to-rent initiative, launched in partnership with Aberdeen, aimed to ship round 1,000 rental houses throughout websites in Ealing and Bromley in London and Studying in Berkshire. Aberdeen had pledged to lift £500m from institutional traders to fund the developments.
Nevertheless, John Lewis mentioned that the funds had been by no means secured as a result of shifting macroeconomic situations.
“Our rental property ambition was primarily based on a really completely different monetary setting: one with extra secure funding returns, decrease borrowing prices and extra reasonably priced development prices,” a spokesman mentioned. “The present local weather, greater rates of interest, inflationary pressures and a extra cautious property market, means the mannequin not meets our funding standards.”
The choice marks a big strategic reset below Jason Tarry (pictured), the previous Tesco govt who turned chair in 2024. Tarry has sought to revive the partnership’s concentrate on retail efficiency after a number of years of monetary pressure and cancelled workers bonuses.
The group is now pursuing an £800m funding programme aimed toward revitalising its department shops, alongside a £1bn funding in its Waitrose property of 320 retailers. Current initiatives embody a high-profile partnership to deliver Topshop concessions into John Lewis shops because it seeks to win again youthful prospects.
The build-to-rent technique had initially been positioned as a method to unlock worth from surplus Waitrose land and automobile parks whereas making a extra secure, long-term earnings stream much less uncovered to retail volatility.
Nevertheless, the proposals had been controversial from the outset. Native communities and planning authorities raised considerations over constructing heights, density and the proportion of reasonably priced housing. Though a number of schemes in the end secured planning approval, in some instances after appeals and intervention by authorities inspectors, the initiatives required important upfront funding.
Whereas John Lewis has not disclosed how a lot has been spent so far, it’s understood that a number of million kilos had been invested in design, planning and authorized prices earlier than the scheme was halted.
The withdrawal underlines the strain going through retailers that diversified into property through the period of low rates of interest. Increased borrowing prices have eroded returns on residential improvement, whereas development inflation has elevated challenge threat.
For John Lewis, the transfer indicators a return to fundamentals after what some critics inside and outdoors the partnership seen as a distraction from its core enterprise.
With the cost-of-living disaster squeezing client spending and competitors intensifying throughout each style and grocery, the partnership is betting that renewed concentrate on shopkeeping, moderately than landlord ambitions, provides a clearer path to restoring profitability and rebuilding confidence amongst its employee-owners.
