John Lewis to honour Midlands contracts despite BTR exit

Retailer John Lewis Partnership says it will fulfil its existing management arrangements for rental blocks in Birmingham and Leicester, after announcing its planned exit from the UK property market.

In October 2024, the firm signed an agreement with asset management firm Abrdn to take over the management of 15-storey Landrow Place, on the edge of Birmingham’s Jewellery Quarter, a 259-home build to rent scheme completed in 2021.

That deal came on the heels of a similar arrangement, signed earlier in the year, which saw the firm take on management of 232 homes in the Queen Street Quarter in Leicester. JLP also has management arrangements in place for the Abrdn-owned Clarendon Quarter, a 326-home apartment building in Leeds, and 156-home Stratford Studios in East London.

Now, the firm says it will fulfil its commitments under those deals, as part of what it says is a “responsible transition” away from the BTR business, announced earlier this week.

In a widely circulated statement, John Lewis Partnership said a changing financial landscape was behind its decision to withdraw from the rental property market, which it says no longer meets its investment criteria, around four years after its UK launch.

A spokesperson for the company said: “The John Lewis Partnership has today announced its decision to withdraw from its ‘build-to-rent’ property business. 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.

“Unfortunately, the current climate – higher interest rates, inflationary pressures and a more cautious property market – has meant the model no longer meets the partnership’s investment criteria.

“We remain committed land owners in our communities and continue to invest significantly in our property assets and retail offer.”

In 2022, John Lewis Partnership announced a £500m joint venture with Abdrn to build almost 1,000 residential rental homes for rent in Bromley, Reading and West Ealing, part of ambitious plans to build up to 10,000 rental homes and generate up to 40% of the group’s profits from outside of its retail operations.

“We’re proud of what we’ve achieved in terms of progress with three planning applications and managing third-party BTR homes for residents to a high standard. We will fulfil our existing management contracts at four BTR sites as part of a responsible transition out of the business,” they added.

Brendan Geraghty, chief executive of rental sector group Association for Rental Living, said the firm’s decision to withdraw from the property business was “deeply disappointing news” and “a real loss for consumers.”

“Whatever people will say, the Partnership did not fail. It was ambitious, it was credible and it was doing the right thing,” he said.

“What has made this venture unworkable is a set of conditions entirely outside its control: borrowing costs that have roughly doubled since 2021, construction cost inflation that continues to outstrip general prices, an unwieldy planning system that has added years to delivery timescales, and the introduction of legislation – the BSA and particularly the Renters’ Rights Act – that has made it materially harder for investors to underwrite the predictable income growth that rental housing requires.”