The John Lewis Partnership has abandoned its ambitious plan to construct 10,000 rental homes across the United Kingdom, citing a “fundamental shift in the economic conditions” that have made the project financially unviable. The decision, announced on Wednesday , marks a significant retreat from a diversification strategy launched in 2020 under former chair Dame Sharon White.
The partnership, which owns the John Lewis department stores and Waitrose supermarkets, initially envisioned a £500 million joint venture with Aberdeen Investments to build homes for rent in Bromley, Reading, and West Ealing, among other locations. The project aimed to generate 40% of profits from outside of retail, a response to increasing competition in both the physical and online retail sectors. However, a confluence of factors, including rising interest rates, persistent inflation, and a more cautious property market, have undermined the financial rationale for the venture.
“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,” the partnership stated. This assessment reflects the challenging economic climate that has emerged since the project’s inception, making it difficult for Aberdeen to secure the necessary funding.
The withdrawal from the build-to-rent market represents a strategic shift under Jason Tarry, who succeeded Dame Sharon White. Tarry has prioritized a return to the partnership’s core retail businesses, initiating an £800 million upgrade of John Lewis department stores and a £1 billion revamp of Waitrose food stores. The move also signals an effort to restore morale among employees, known as partners, who have not received an annual bonus in four years.
The initial plan involved building homes adjacent to or on top of existing John Lewis stores and distribution centers. The partnership had taken over four buildings owned by Aberdeen Investments as part of the joint venture. While the project aimed to address the UK’s housing shortage, it also faced criticism from local residents and politicians who raised concerns about the size and affordability of the proposed developments.
Aberdeen Investments acknowledged the difficulties in securing funding, stating that they “reflect the realities of the environment” and a “challenging UK market” between and . Despite this setback, the firm remains committed to increasing its presence in the UK’s build-to-rent sector through existing partnerships. “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.”
The decision by John Lewis Partnership comes at a time when developers across the UK are facing increasing headwinds. Rising construction costs, coupled with stricter regulations implemented following the Grenfell Tower disaster, are forcing companies to reassess the viability of their projects. The upcoming Renters’ Rights Act, scheduled to take effect in May, is also expected to strengthen tenant protections and prohibit rental bidding wars, potentially impacting investment returns.
Brendan Geraghty, chief executive of the Association for Rental Living, expressed disappointment with the decision, noting 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.”
The partnership will continue to manage the four sites under existing contracts with Aberdeen until , ensuring a smooth transition. The withdrawal underscores the sensitivity of large-scale property developments to macroeconomic conditions and the challenges faced by companies seeking to diversify beyond their core businesses in a volatile economic environment. The move signals a renewed focus on strengthening the John Lewis Partnership’s retail foundations and navigating the evolving landscape of the UK consumer market.
The broader implications of this decision extend to the government’s target of building 1.5 million new homes by . With developers facing increased obstacles, achieving this ambitious goal will require addressing the underlying issues of cost, regulation, and market uncertainty.
