John Lewis pulls plug on build-to-rent business which had aimed to build 10,000 homes

John Lewis is pulling out of its build-to-rent business, citing a “fundamental shift” in the economic conditions that had underpinned the venture.

The partnership, which is owned by its employees, launched the property arm in 2020 as part of an effort to diversify its business away from retail. 

In 2021, it said it was expecting 40% of its profit to come from non-retail activities including housing over the following 10 years, and in the same year it announced plans to build 10,000 homes, of which 7,000 would be on its own sites.

A total of 20 John Lewis and Waitrose sites were initially identified as having potential for housing, and in 2022 it announced a £500m joint venture with investment company Aberdeen to deliver 1,000 homes across three such sites in Bromley, West Ealing and Reading.

However, the firm is now looking to refocus on its core retail brands, the department store John Lewis and supermarket chain Waitrose, with an investment strategy focused on modernising stores, enhancing digital platforms and improving supply chains. 

A spokesperson said that its ambitions in the rental market were based on a financial environment 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,” the firm 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.”

The partnership is currently finalising the details of planning consents in Ealing, Bromley and Reading with the respective local authorities.

Once this is complete, the group will explore options to facilitate the delivery of these schemes - for instance by selling the consent to another business to deliver.

The £70m Reading scheme, designed by Carey Jones Chapman Tolcher, would see 170 apartments built on a vacant John Lewis warehouse site in Mill Lane. 

Its proposals in Ealing would see an existing Waitrose store demolished and rebuilt alongside 428 build-to-rent homes in four blocks of up to 20 storeys, including 83 affordable homes.

The Lifschutz Davidson Sandilands-designed plans were given approval by the planning inspectorate in May last year, after John Lewis referred the case to them over the local council’s “failure to decide” on the matter.

In Bromley, the business’ plans were also for an over-shop development on a Waitrose site. Assael’s designs for 340 homes across three residential buildings secured planning approval in July 2024.

A spokesperson for Aberdeen said John Lewis’ decision reflected “the realities of the environment”. 

“We have high conviction in build to rent in the UK and globally, but we agree with the analysis of the challenging UK market environment between 2022 – 2025,” they said.

The business also manages build-to-rent properties at four sites in Leeds, Leicester, Birmingham and Stratford on behalf of Aberdeen. It is contracted to keep managing these until 2027.

“We will fulfil our existing management contracts at four BTR sites as part of a responsible transition out of the business,” a spokesperson said, explaining that John Lewis would seek another party to take over management of the sites.

Aberdeen’s spokesperson said it was “strongly committed to ensuring that [John Lewis] maintain the high standards customers have come to expect as we work with them on an orderly handover”.