Meet your new landlord, John Lewis

By Alice Wilkinson

Iconic British retailer, John Lewis, made headlines this week with the announcement that it plans to build 10,000 rental homes over the next decade.

The properties, ranging from compact studio flats to four-bedroom houses, will be built on sites owned by the chain, on land next to the company’s distribution centres, or above Waitrose supermarkets. Tenants will have the option of renting homes fully furnished by John Lewis (Carrie Symonds will not be amongst the tenants, we can confirm) or using their own furniture, whilst some developments will also include a concierge service and new Waitrose store.

The move into property is intended to combat the retailer’s recent falling profits. John Lewis has struggled under lockdown, with losses of £517 million announced for 2020. And in March the news broke that several of its stores would not be reopening once Covid restrictions were lifted.

In fact, John Lewis was already under pressure before the pandemic hit. Alongside many of its peers, the brand has been fighting the good fight against online shopping for some time. To that end, it was recently given the green light to convert almost half of its London flagship store on Oxford Street into office space, opening it up to a new customer base.

Covid-19 and successive lockdowns have pushed even more consumers online, with online shopping sales in the UK rising by 48% to £113bn during the pandemic, according to Ofcom. Consequently, several retail brands including Debenhams, Oasis, Warehouse and Topshop have disappeared from the high street altogether. Meanwhile, like John Lewis, Marks & Spencer has announced a radical strategy to try and turn its business around.

But John Lewis’ latest foray into property (it also owns most of Leckford, a village in Hampshire) is interesting: residential development on this scale is not going deliver a quick cash injection for the retailer. As a landlord, it will receive a steady income but not for years to come, and not before significant outlay.

Still, John Lewis is certainly not the first retailer to turn its hand to property in the search for profits.

Indeed, Tesco and Weston Homes recently received the go-ahead for their Lorimer Village scheme in Goodmayes, which will see the transformation of a 10.4-acre Tesco store and carpark site into a new mixed-use urban village. Similarly, Morrisons partnered with St George to turn its Camden Goods Yard supermarket and petrol station site into a mixed-use scheme, comprising new homes, a new Morrisons store, office space, affordable workspace, community facilities, and new public spaces.

In the past, when retailers have turned developer, it is in response to shifting consumer behaviour. For instance, in 2016, when Morrisons, Sainsbury’s and Tesco announced plans to develop the airspace above their respective stores, it was in part a reaction to the growing success – and threat - of the discount supermarkets.

Clearly, property is seen by retailers as the strong and stable solution to challenges to the status quo - and consequent wavering profit margins.

Well, now would seem to be an opportune moment to enter the residential market. In trading updates on Wednesday, housebuilders Redrow and Vistry Group stated that demand for new homes was stronger than expected in the first half of 2021, with both selling homes faster than in the previous two years. The boom in sales was triggered by the government’s Stamp Duty holiday but has been sustained by a growing trend of house-hunters looking for more space or relocating as a result of the pandemic.

So, for John Lewis, it is a case of the Covid-19 pandemic closing one door and opening another. Rather than resisting change, it is clear the retailer is trying to adapt to fit our new, post-pandemic world. It will be interesting to see where this new path takes John Lewis – and similar retailers - next. It is clearly not ready to surrender the fight!