John Lewis Partnership teams up with Abrdn to develop 1,000 homes amidst move to reduce reliance on retail sales
- John Lewis hopes to make 40% of its profits from non-retail sources by 2030
- The new developments will be situated in Bromley, West Ealing and Reading
- Demand for rental homes has shot up in the past year amidst interest rate hikes
The John Lewis Partnership has joined forces with investment group Abrdn to build a large volume of build-to-rent homes, as part of its move to diversify away from the retail sector.
The department store operator hopes to capitalise on the surging demand for rental properties, as part of its plan to make around 40 per cent of its profits from non-retail sources by 2030.
It said the £500million joint venture would build 1,000 houses, meeting 10 per cent of its target to deliver 10,000 residences over the coming decade.
New homes: John Lewis hopes to capitalise on surging demand for rental properties on the way to making around 40 per cent 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 situated on the site of Waitrose supermarkets in Bromley and West Ealing and a vacant warehouse in Reading, Berkshire.
John Lewis said these locations, which were initially announced back in June, have been chosen on account of their ‘central location’ and closeness to transport links.
They will also help improve the significant shortage of rental properties in the UK, particularly in London, where the company said there is a shortfall of 75,000 alone.
Demand for rental homes has shot up in the past year amidst rising house prices and interest rate hikes driving up the cost of mortgages.
A controversial ‘mini-Budget’ from former Chancellor of the Exchequer Kwasi Kwarteng in late September encouraged even more Britons to remain as renters.
At the same time, there has been an exodus of landlords from the buy-to-let market, many put off by the prospect of stricter regulation and the abolition of mortgage interest deductions on taxes, as well as the introduction of a new 3 per cent stamp duty surcharge, several years ago.
Housing supply problems are also set to worsen when the Help to Buy scheme, which allows prospective homeowners to get a mortgage with a 5 per cent deposit, fully ends in March 2023.
Neil Slater, the head of real assets at Abrdn, said: ‘The critical lack of quality rental accommodation in the UK needs to be addressed, so we are delighted to partner with the John Lewis Partnership to provide the required institutional investment.
‘The ambitions and responsible ethos of our brands both strongly align, and our partnership should offer investors long-term returns and give residents confidence in a top-quality living experience.’
Abrdn shares were up 0.9 per cent to 202.2p on Friday morning but have declined by 16 per cent over the past 12 months.
In its latest half-year results, the fund manager reported slumping to a £289million loss from a £102million profit the previous year as rising economic uncertainty caused more people to avoid riskier investments.