John Lewis Partnership partners with Abrdn to develop 1,000 homes during a move to reduce reliance on retail
- John Lewis hopes to generate 40% of its profits from non-retail sources by 2030
- The new developments will be located in Bromley, West Ealing and Reading
- The demand for rental properties has increased explosively in the past year due to the rise in interest rates
The John Lewis Partnership has joined forces with investment group Abrdn to build a large number of owner-occupied homes, as part of its move to diversify outside the retail sector.
The department store operator hopes to capitalize on rising demand for rental properties as part of its plan to generate about 40 percent of its profits from non-retail sources by 2030.
It said the £500m joint venture would build 1,000 homes, meeting 10 per cent of the target of delivering 10,000 homes over the next decade.
New homes: John Lewis hopes to capitalize on rising demand for rental properties, on track to derive around 40 percent of its profits from non-retail sources by 2030
Edinburgh-based Abrdn, formerly known as Standard Life Aberdeen, will provide the investment for the new homes, while John Lewis will develop and manage them.
New developments will be sited on the site of Waitrose supermarkets in Bromley and West Ealing and a vacant warehouse in Reading, Berkshire.
John Lewis said these locations, initially announced in June, were chosen for their “central location” and proximity to transport links.
They will also help improve the UK’s significant shortage of rental properties, particularly in London, where the company said there is a shortage of 75,000 alone.
The demand for rental properties has exploded in the past year due to rising house prices and interest rate hikes that push up mortgage costs.
A controversial ‘mini-budget’ from former Finance Minister Kwasi Kwarteng in late September encouraged even more Britons to remain tenants.
At the same time, there has been an exodus of landlords from the owner-occupied housing market, many put off by the prospect of stricter regulation and the elimination of mortgage interest deductions on taxes, as well as the introduction of a new 3 per cent stamp duty surcharge several years ago.
Housing stock problems will also worsen when the Help to Buy scheme, which allows prospective homeowners to get a mortgage with a 5 percent down payment, expires in full in March 2023.
Neil Slater, Head of Property at Abrdn, said: ‘The critical lack of quality rental properties in the UK needs to be addressed, so we are delighted to be working with the John Lewis Partnership to provide the required institutional investment.
“The aspirations and responsible ethos of our brands are both closely aligned, and our partnership should provide long-term returns to investors and give residents confidence in a top-quality living experience.”
Abrdn shares were up 0.9 percent on Friday morning to 202.2 pence, but are down 16 percent over the past 12 months.
In its latest half-year results, the fund manager reported a pullback to a loss of £289m from a gain of £102m last year as rising economic uncertainty caused more people to avoid riskier investments.
