John Lewis Partnership has abandoned its ambitions to build rental housing and backed away from a high-profile property diversification strategy as the group returns to its core retail business.
The employee-run retailer confirmed it would withdraw from the rental housing scheme, initially championed by its former chairwoman Sharon White, who had sought to reduce reliance on retail by making 40 per cent of profits come from non-retail businesses by 2030. This goal was later abandoned.
The Build to Rent initiative, launched in partnership with Aberdeen, aimed to build around 1,000 rental homes at sites in Ealing and Bromley in London and Reading in Berkshire. Aberdeen had pledged to raise £500m from institutional investors to fund the developments.
However, John Lewis said the funds were never secured due to changing macroeconomic conditions.
“Our rental property ambitions were based on a very different financial environment: one with more stable investment returns, lower borrowing costs and more affordable construction costs,” a spokesman said. “The current climate, higher interest rates, inflationary pressures and a more cautious real estate market mean that the model no longer meets our investment criteria.”
The decision represents a significant strategic reset under Jason Tarry (pictured), the former Tesco executive who became chairman in 2024. Tarry has sought to refocus the partnership on retail performance after several years of financial strain and canceled employee bonuses.
The group is currently pursuing an £800m investment program to revitalize its department stores, as well as a £1bn investment in its 320-store Waitrose estate. Recent initiatives include a high-profile partnership to bring Topshop concessions to John Lewis stores in a bid to win back younger customers.
The build-to-rent strategy was originally designed to unlock value from excess land and parking space in Waitrose while creating a more stable, long-term revenue stream less exposed to retail volatility.
However, the proposals were controversial from the start. Local communities and planning authorities expressed concerns about building height, density and the proportion of affordable housing. Although several projects ultimately received construction permits, in some cases the projects required significant upfront investments following objections and interventions by state inspectors.
Although John Lewis has not revealed how much has been spent so far, it is understood that several million pounds were invested in design, planning and legal costs before the project was halted.
The pullback underscores the pressure facing retailers who have diversified into real estate amid low interest rates. Higher borrowing costs have reduced returns from residential development, while construction inflation has increased project risk.
For John Lewis, the move signals a return to basics after some critics inside and outside the partnership saw it as a distraction from its core business.
As the cost of living crisis depresses consumer spending and competition intensifies in both the fashion and grocery industries, the partnership is betting that a renewed focus on store management rather than landlord ambitions offers a clearer path to restoring profitability and rebuilding trust among employees and owners.
