John Lewis Ends Housebuilding Venture
Retailer John Lewis is closing its housebuilding business and abandoning plans to construct 1,000 homes across three sites. The decision comes amid rising borrowing and construction costs compared to when the company began expanding into residential development in 2020.
In addition to exiting housebuilding, John Lewis is withdrawing from property management and will close that segment once its contracts with four residential buildings conclude.
The employee-owned company stated it will now concentrate on its core retail brands, John Lewis and Waitrose, aiming to simplify operations and strengthen its financial position.
Background and Economic Challenges
John Lewis initially entered the housebuilding sector as a new revenue stream but has encountered difficulties due to what it described as a "fundamental shift in the economic conditions that underpinned the venture when it launched."
"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," a spokesperson said.
The retailer noted that other housebuilders face similar challenges and observed that housing development has "collapsed" in London.
Experts attribute this downturn to a combination of factors including rising construction costs, decreased demand for London flats, increased regulation following the Grenfell tragedy, difficulties obtaining planning permission, and higher interest rates. These factors have made debt-financed construction more difficult and reduced buyers' ability to purchase homes.
John Lewis has also experienced challenges within its retail operations over the past six years, including job reductions and store closures, influenced by the growth of online shopping.
Planning Permissions and Local Responses
John Lewis had secured permission to build above existing Waitrose stores in Bromley and Ealing, as well as at a disused former industrial site in Reading.
The company encountered difficulties obtaining approval at the Bromley location due to its failure to deliver the initially promised number of affordable homes. Additionally, it faced opposition from local residents at the Reading site, who expressed concerns about the potential strain on local services.
The BBC understands that the Waitrose shops at these sites will continue normal operations and that the Reading site is likely to be sold.
Property Management Transition
John Lewis confirmed it will honor existing property management contracts for four buildings located in Leeds, Birmingham, Leicester, and Stratford, describing this as part of a "responsible transition out of the business."
