John Lewis drops ambition to build a property empire

Residents of the 362 apartments at The Clarendon Quarter, Leeds, live in a scene from a John Lewis ad. Their rented homes are furnished with the department store’s signature neutrals; downstairs, a lounge features sofas and coffee tables straight from its showroom. A gym and a communal roof garden are equally tasteful.

The building has been managed by John Lewis since 2023, part of a £500m partnership with the investor Aberdeen, which saw the department store take over the management of four of Aberdeen’s blocks of rental homes; the investor would then finance the construction of three more. But last week, John Lewis pulled the plug on the project, saying a “fundamental shift in economic conditions” meant it was no longer viable. It was a sign of just how perilous things are for UK housebuilders.

John Lewis first announced plans to build 10,000 rental homes in 2021. Dame Sharon White, its then chairman, called it an “obvious extension” of the company’s strategy: it could, she suggested, “furnish properties using John Lewis Home products and deliver Waitrose food”.

The announcement raised some eyebrows in the sector (“John Lewis’ entry into the market is more remarkable than its exit from it,” a senior person at a major build-to-rent operator told me), but many welcomed it. “I thought, great,” said James Pargeter, a senior advisor at the rental consultancy GAA Living. “People will know they’re going to provide quality without being top-end luxury. Who wouldn’t want that?”

It’s easy to see why White was enthusiastic. By the end of 2020, housebuilders were whipping themselves into a frenzy. In her position as non-executive director at Barratt Homes, White witnessed first-hand how developers were positioning themselves to cash in on a combination of cheap borrowing and soaring demand.

Meanwhile, as new rules drove one-man-band landlords out of the market, build-to-rent was being hailed as the next big thing. Goldman Sachs had announced its intention to build rental homes in 2020.

John Lewis’s foray into build-to-rent started encouragingly. It appointed its head of real estate, Katherine Russell, to lead the project – she ended maternity leave early to take on the role, she told a podcast. Russell, whose first job was at Waitrose, is well-respected in the market – but was arguably inexperienced in residential property. “She went on a massive learning curve,” said another senior person in the build-to-rent sector. “But she had a very experienced team. There’s no reason she couldn’t have made it work.”

In late 2023, Russell’s team took on the management of four blocks owned by Aberdeen – in Birmingham, Leicester, Leeds and Stratford. The results were promising. The company launched a programme of activities for residents: seasonal celebrations for Easter, Halloween, Diwali and Christmas; crafting workshops; themed food nights and beauty events with brands including Charlotte Tilbury and Clarins. Customer satisfaction showed “a significant improvement”, an Aberdeen spokesperson said.

A John Lewis Partnership spokesperson said Russell had “built the operational business from a standing start to manage 1,000 homes and considerably improved service levels and operating income”.

But its attempts to build its own housing were less successful. In June 2023, it submitted two planning applications for homes above Waitrose supermarkets: one in Bromley and one, a 19-storey tower, in Ealing. In 2024, it added an application to redevelop the site of its old delivery depot in Reading.

The process was grindingly slow. In Bromley, consent was given over a year after its application, and only after counsellors grilled Russell for an hour. In Ealing, locals complained that the tower was too high, and that it had not committed to the borough’s 35% affordable homes requirement. A council leader complained of “bullying”; a pressure group was formed. John Lewis eventually won consent, but not until May last year.

Market insiders suggest those delays were probably a major factor in its decision to pull out of the market. During the two years it waited for consent in Ealing, construction costs had soared: since 2020, the cost of labour and materials have risen 20%.

Helen Gordon, chief executive of Grainger, the UK’s biggest build-to-rent operator, said councils often struggle to grasp what’s on offer. “It takes a while for a local authority to get its head around what build-to-rent is. It means a company has a bigger stake in the community than a build-to-sell operator,” Pargeter agreed. “People are so anxious about change in their area that they fail to see the potential benefits.”

Those soaring build costs meant affordable housing also became a challenge, eroding already-tight margins. Interest rates have climbed from 0.1% in 2020 to 3.75%, raising borrowing costs. The effect on housebuilders has been brutal: the number of new homes built in the third quarter of last year was more than 27% lower than the same period in 2019. “Housebuilders are really struggling with it at the moment,” said Gordon. “It’s just not workable.”

For now, John Lewis’s landlord ambitions are over, but its contract with Aberdeen lasts until 2027, meaning Clarendon Quarter residents will continue to enjoy their benefits. Meanwhile, reports suggest it hopes to sell the planning consents at Ealing and Bromley to other developers, so those homes may still be built.

Really, John Lewis’s decision shows the perilous state of UK housebuilding – and the capital’s housebuilding sector in particular. In a city desperate for rental homes, a bad situation is becoming desperate: in 2025, build-to-rent developers in London started construction on just 613 new homes, down 80% from the year before.

“It’s a layering of burdens,” said Pargeter. “Each problem may not be too severe, but you pile them on top of each other, and there’s that final-straw moment where you wonder whether this is going to work.”

Photograph courtesy John Lewis Partnership