John Lewis Exits Housebuilding Business
Retailer John Lewis is discontinuing its foray into housebuilding, abandoning plans to construct 1,000 homes across three designated sites. The decision comes as the company faces significantly increased borrowing and building costs compared to when it began its residential expansion in 2020.
Key Highlights of the Exit from Housebuilding
– Closure of Housebuilding and Property Management:
– John Lewis will also exit property management, winding down operations as existing contracts for four residential buildings come to an end.
– Focus on Retail Brands:
– The employee-owned firm is redirecting its efforts toward its core retail businesses, John Lewis and Waitrose, aiming to simplify operations and bolster its financial stability.
– Initial Ambitions vs. Current Realities:
– John Lewis initially embarked on housebuilding as a strategy to generate additional revenue. However, the company now cites a “fundamental shift in the economic conditions” since the venture’s inception.
– A spokesperson noted, “Our rental property ambition was based on a very different financial environment—with more stable investment returns, lower borrowing costs, and more affordable construction costs.”
– Industry Context:
– Other housebuilders share similar challenges, with housing development reportedly “collapsing” in London. Experts attribute this decline to:
– Rising construction costs
– Decreasing demand for flats in London
– Stricter regulations following the Grenfell tragedy
– Increased difficulty obtaining planning permissions
– Higher interest rates complicating borrowing for both builders and buyers
Planning Permission and Community Response
John Lewis had secured permission to build above existing Waitrose locations in Bromley and Ealing, as well as on a disused industrial site in Reading. However:
– Bromley Site Challenges:
– The plans faced hurdles due to failing to deliver the anticipated number of affordable homes.
– Community Pushback:
– The Reading development encountered resistance from local residents concerned about the potential strain on community services.
Following this decision, the Waitrose locations will continue regular operations, while the Reading site is likely to be sold.
Responsible Transition
John Lewis has committed to honoring its existing property management agreements for the four buildings it operates in Leeds, Birmingham, Leicester, and Stratford as part of a seamless transition out of the housebuilding sector.
Conclusion
As John Lewis exits the housebuilding business, the focus will shift back to strengthening its retail operations amidst an evolving economic landscape. The decision underscores the challenges faced not just by John Lewis, but by the broader housing market, reflecting a shift that affects many stakeholders involved in property development.