John Lewis is pulling the plug on the build-to-rent business amid a retail reset

The John Lewis Partnership has abandoned its ambitions to build houses to rent, scrapping a high-profile property diversification strategy as the group returns to its core retail business.

The employee-owned retailer has confirmed that it will withdraw from the rental housing program first championed by its former chairman, Sharon White, who wanted to reduce reliance on retail by generating 40 per cent profit on non-retail businesses by 2030. That target was later withdrawn.

The build-to-rent campaign, launched in partnership with Aberdeen, aims to deliver around 1,000 rental homes across sites in Ealing and Bromley in London and Reading in Berkshire. Aberdeen has committed to raising £500m from institutional investors to fund these developments.

However, John Lewis said the funds were never made available due to fluctuating macroeconomic conditions.

“Our desire for a rental property was based on a very different financial situation: with stable investment returns, low borrowing costs and affordable construction costs,” the spokesperson said. “The current climate, high interest rates, inflationary pressures and a very cautious property market, means that the model no longer meets our investment criteria.”

The decision marks a significant restructuring under Jason Tarry (pictured), a former Tesco executive who became chairman in 2024. Tarry wants to return the partnership’s focus to store operations after several years of financial problems and the withdrawal of employee bonuses.

The group is now pursuing an £800m investment plan aimed at reviving department stores, as well as a £1bn investment in its 320-store Waitrose portfolio. Recent efforts include a high-profile partnership to bring Topshop deals to John Lewis stores as it tries to win over younger customers.

The build-to-let strategy was originally pitched as a way to unlock value from Waitrose’s surplus space and car parks while creating a stable, long-term income stream that is not exposed to retail volatility.

However, these proposals were controversial from the start. Local communities and planning authorities have raised concerns about building height, density and the amount of affordable housing. Although a few projects eventually received planning approval, in some cases after complaints and intervention by government inspectors, the projects required significant early investment.

Although John Lewis has not revealed how much money has been spent so far, it is understood that several million pounds were invested in design, planning and legal costs before the scheme was put on hold.

The withdrawal underscores the pressure facing traders who are diversifying into assets during a period of low interest rates. High borrowing costs have eroded returns on residential development, while construction inflation has increased project risk.

For John Lewis, the move marks a return to basics after what some critics inside and outside the partnership saw as a disruption to its core business.

As the cost of living crisis suppresses consumer spending and competition grows across fashion and grocery, the partnership is betting that a renewed focus on retail, rather than the whims of the landlord, offers a clear way to restore profitability and rebuild confidence among its owner-occupiers.