John Lewis Partnership has announced plans to scrap its housebuilding plans due to a “fundamental shift in economic conditions”
The Group had initially planned to deliver around 1,000 homes across three sites, all in the Build-to-Rent sector, having secured planning to build above existing Waitrose stores in Bromley and West Ealing, as well as on a former industrial site in Reading.
The Group’s BtR plans were initially announced in 2020 when facing challenging retail conditions, but it now says that the original model had been significantly impacted by a rise in build costs, borrowing costs and weaker investor appetite. It had been working with investment manager, abrdn, on the venture, and at the time said that it intended to build 10,000 rental homes, 7,000 of which would be delivered on sites within in existing property portfolio.
The West Ealing scheme would have deliver 428 flats across four high-rise blocks, 353 rental flats in a 24-storey block were planned for Bromley, and the Reading scheme would have delivered 170 flats as part of a £70million development.
John Lewis Partnership will now consider plans for the future of the sites, which could see their sale to other developers, and will finalise negotiations with the relevant local authorities.
A spokesperson for the Group said: “Our rental property ambition was based on a very different financial environment: one with more stable investment returns, lower borrowing costs and more affordable costs to build homes.”
“Unfortunately, the current climate – higher interest rates, inflationary pressures and a more cautious property market – has meant the model no longer meets the partnership’s investment criteria.”
“Since we embarked on the rental property plans in 2020, we have made significant progress with our core retail strategy. This has seen us invest heavily in our customer offer for our unique brands, John Lewis and Waitrose, simplifying our business and strengthening our balance sheet.”
John Lewis Partnership also announced that it will cease property management, closing that aspect of the business once four residential building contracts have come to an end.
The decision represents a step back from John Lewis’ long-term diversification plans, which was intended to generate additional revenue from airspace above stores and surplus land. However, the Group will now refocus on its core retail operations.
