John Lewis Pulls £500m Housing Deal Amid Property Market Uncertainty
The John Lewis Partnership is reversing course on a major diversification strategy, abandoning a £500 million plan to build nearly 1,000 rental homes across the UK. The decision, announced on , reflects a significant shift in economic conditions and difficulties securing funding for the project.
The retailer, which operates both John Lewis department stores and Waitrose supermarkets, initially unveiled the ambitious build-to-rent scheme in 2020, aiming to generate revenue from a new asset class. The planned developments were slated for Bromley, Reading, and West Ealing, leveraging sites already owned by the partnership. The project represented a bold attempt to move beyond traditional retail, with a longer-term goal of deriving 40% of profits from sources outside of its core business by 2030.
However, the venture has been hampered by a deteriorating economic climate. John Lewis cited “a fundamental shift in the economic conditions” as the primary driver behind the withdrawal. Specifically, the company’s financial partner, Aberdeen, encountered challenges in raising the necessary capital. Aberdeen attributed these difficulties to the realities of the UK market between 2022 and 2025, characterizing it as “challenging.”
The decision underscores the increasing headwinds facing the UK property market. Rising borrowing costs and inflationary pressures have made large-scale development projects more financially precarious. Experts have pointed to a broader slowdown in housing development, particularly in London, driven by factors including increased construction costs, stricter regulations following the Grenfell Tower tragedy, and difficulties obtaining planning permission.
This marks a significant departure from the strategy championed by former John Lewis Partnership chair Sharon White, who was replaced by Jason Tarry, a former Tesco executive, in September 2024. White had envisioned a broader role for the partnership beyond retail, and the rental housing project was a key component of that vision. Tarry’s appointment signaled a potential shift back towards the core retail business, a move now demonstrably underway.
The initial agreement with Aberdeen, struck in December 2022, involved redeveloping Waitrose stores in Bromley and West Ealing, as well as a vacant John Lewis warehouse in Reading. The locations were strategically chosen for their proximity to transport links and central locations, aiming to attract a broad range of renters. The partnership had secured headline consent for all three projects and was in the process of finalizing negotiations with local authorities regarding the details.
While the build-to-rent project is being shelved, John Lewis will continue to fulfill existing contracts to manage homes at four sites owned by parties linked to Aberdeen, located in Birmingham, Leeds, Leicester, and Stratford. These contracts will gradually expire over the course of this year and next.
A John Lewis Partnership spokesperson explained that the original rental property ambition was predicated on a more stable financial environment, characterized by more predictable investment returns, lower borrowing costs, and more affordable construction expenses. “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 spokesperson stated.
The company emphasized that it has made substantial progress in strengthening its core retail strategy since 2020, investing heavily in its John Lewis and Waitrose brands and simplifying its business operations. This refocus on retail is intended to bolster the partnership’s balance sheet and improve its financial performance.
The cancellation of the project is a disappointment for the build-to-rent sector, according to Brendan Geraghty, chief executive of the Association for Rental Living. He noted that John Lewis “brought something genuinely different to rental living – a trusted consumer brand, a service-first culture and a long-term commitment to quality that institutional investors and residents alike responded to.”
The future of the sites originally earmarked for the rental homes remains uncertain. John Lewis indicated that it will consider various options, including selling the properties to other property developers. This could provide a much-needed boost to the housing supply, but would also represent a retreat from the partnership’s ambitious diversification plans.
Aberdeen, despite the setback, remains committed to the UK build-to-rent market. The investment firm stated that it plans to expand its presence in UK homes through existing partnerships, emphasizing the importance of collaboration in addressing the UK housing crisis. “We have high conviction in build-to-rent in the UK and globally,” a spokesperson said. “Collaboration is vital to address the UK housing crisis and build-to-rent should be a healthy part of the property mix.”