John Lewis blames high costs as it axes build-to-rent venture
Retail giant John Lewis is to withdraw from its build-to-rent business in a shock U-turn on its diversification plans, after bemoaning high interest rates and a downturn in the London property market.
John Lewis Partnership (JLP), which also owns Waitrose, took on management of around 1,000 homes in Bromley, West Ealing and Reading as part of its build-to-rent property business but said it is now focussing solely on its retail offering.
The shadow business secretary, Andrew Griffith, said the decision is a “major blow” to the Government’s house building plans.
The group had been under fire over fears it would not meet its promises on affordable homes for its Ealing development.
JLP’s losses tripled in September, as loss before tax and exceptional items increased to £88m from £30m the year before.
Economic pressures push John Lewis to withdraw
John Lewis said the economic conditions are now fundamentally different to those that drove the retailer to begin its property venture in 2020.
A spokesperson 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.”
JLP said it stood by its decision to launch the venture despite its decision to walk away.
The spokesperson said: “We’re proud of what we’ve achieved in terms of progress with three planning applications and managing third party BTR homes for residents to a high standard.”
Top Tory Andrew Griffith told CityAM: “This is a major blow to the government’s housing plans. Higher employment and raw material costs and lower demand have killed the hopes of even a big firm like John Lewis investing in the sector.
“This government doesn’t understand business and it shows.”
Focus on ‘strengthening our balance sheet’
The group said this decision came as a part of a new strategy to focus on its core brands and improve the shopping experience for its consumers.
John Lewis is investing £800m as part of a several-year programme to improve its retail offering, which recently saw Topshop return to its stores.
JLP said: “The strategy is progressing well and involves modernising our stores, enhancing our digital platforms and improving our supply chain to provide the best possible quality, service and value to our customers.
“We remain committed land owners in our communities and continue to invest significantly in our property assets and retail offer.”
In 2023, the retailer’s Ealing development faced significant resident opposition, with 90 per cent of responses to a consultation responding negatively to the plans.
John Lewis had said it would be forced to scale back its commitment to 35 per cent affordable housing if it did not get council funding. The firm said it will fulfil its existing management contracts at each of its build-to-rent sites.
Brendan Geraghty, chief executive of the Association for Rental Living, said: “The withdrawal of JLP from its build-to-rent property business as announced today is deeply disappointing news and a real loss for consumers.
“When a brand as well-known and well-resourced as John Lewis concludes that the economics no longer work, ministers need to sit up and think very carefully about how they respond.”