John Lewis’s foray into the property sector has left the firm “beset from all sides” according to one expert after it was reported its build-to-rent (BTR) scheme in Ealing, West London, was likely to result in losses of £57m.
Analysis conducted by Quod, reported by The Sunday Telegraph, suggests the 428-home project will cost around £240m to build, but will only be worth around £187m.
However, the high street giant, which launched into the property sector following the appointment of Dame Sharon White as chairman in 2020, said it remained confident the project would be a financial success, pointing to the value of long-term profits generated from rent – which it claimed were not recognised in the Quod report – and improved store sales potential from the new Waitrose branch the flats would be built next to.
John Lewis is also reportedly facing problems in the sale of the upper floors of its Oxford Street flagship store for redevelopment into office space. Potential buyers were said to be ready to bid £150m when the plans were first announced; however, reports suggest declining property values and increasing interest rates have thwarted the deal, with John Lewis declining to comment.
“John Lewis seem beset from all sides at present, with retail performance – largely due to the under-performance of Waitrose – down, and now its various property developments being questioned over cost and viability,” said Jonathan De Mello, founder and chief executive of consultancy JDM Retail.
In June, three months after John Lewis Partnership reported an annual loss of £234m, Chris Harris, the property director who set up its BTR business, announced he would be leaving the firm in November.
“Its plan for about 400 flats above its West Ealing Waitrose will likely generate a negative return of minus £57m, according to Quod analysis, and its £150m sale of part of its Oxford Street flagship to convert this space into offices appears to be at risk given the current macroeconomic climate,” De Mello added.
“John Lewis sadly appears to be very far from its goal of generating two fifths of group profit via non-retail areas by 2030 with these latest developments. While creative thinking and diversification is generally a laudable approach, extensive due diligence needs to be undertaken prior to engaging in anything non-core such as this. John Lewis really does need to focus on getting the retailing basics right first – as the likes of M&S have successfully achieved recently under Stuart Machin.”
Earlier this summer, John Lewis submitted plans to Ealing Council for the 428 homes across four buildings of 19 storeys, 17 storeys, 15 storeys and 10 storeys.
The firm has since come under fire from residents demanding it keeps to its initial pre-application target of 35% affordable housing. The firm said it would deliver a minimum of 20% but had ambitions to hit that target of 35%.
“We want to make long-term commitments to our communities through our stores and building much-needed new homes,” a John Lewis spokesman said. “We can take a longer-term view and want to create as many affordable homes as we can for key workers such as nurses, teachers, the police and care providers.”
No comments yet