John Lewis pulls out of housebuilding business

Retailer John Lewis is closing down its housebuilding business, scrapping plans to build 1,000 homes across three sites.

It cited higher borrowing and building costs than when it first started expanding into residential development in 2020.

It is also pulling out of property management, and will close that business when its contracts with four residential buildings end.

The employee-owned firm said it is instead focusing on its retail brands, John Lewis and Waitrose, to simplify its business and strengthen its balance sheet.

John Lewis began its push into housebuilding as a new way to bring in money but has struggled with what it said was 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 said other housebuilders were in a similar position, and added that housing development had "collapsed" in London.

Experts have pinned this on a combination of rising construction costs, lower demand for London flats, more regulation post-Grenfell, difficulty getting planning permission, and higher interest rates making it harder to build using debt and harder for people to buy.

John Lewis has also faced issues within its retail business over the last six years, including job cuts and shop closures amid the rise of online shopping.

John Lewis had permission to build above existing Waitrose shops in Bromley and Ealing and at a disused former industrial site in Reading.

It struggled to get permission at its Bromley site as its plans did not deliver the number of affordable homes initially promised. It also faced pushback from locals at its Reading site over concerns about overwhelming local services.

The BBC understands the Waitrose shops will now carry on operating as normal and the Reading site will likely be sold.

Meanwhile, John Lewis said it will fulfil its existing property management contracts for the four buildings operates in Leeds, Birmingham, Leicester, and Stratford "as part of a responsible transition out of the business".