In late 2020, John Lewis Partnership (JLP) announced its intention to create a UK build-to-rent (BTR) property portfolio to a fanfare of publicity.
The company wasn’t just going to dip its toe in the water – it had big ambitions for the new venture, as the group’s then chair Sharon White explained at the time.
“We’ve identified 20 sites we own that could be used to benefit local communities by providing quality and sustainable housing while providing a stable income for the partnership,” said White. “We’re a landlord already at three of our properties so this is an obvious extension for us. And we’re now talking to developers and investors who can help us achieve our ambitions.”
White added that entering the BTR market would enable the business to furnish its residential properties with John Lewis Home products and deliver Waitrose food to the premises. It sounded like an obvious pivot. However, earlier this week the company announced its intention to abandon its foray into the BTR sector.
So why didn’t the venture work out and what does JLP’s decision to abort the venture mean for the wider BTR sector?
On announcing the news of its withdrawal from the sector, JLP cited a fundamental shift in the economic conditions that underpinned the venture when it launched in 2020.
The world is a very different place to what it was six years ago. At the time, the Covid pandemic was still running rampant, Russia hadn’t invaded Ukraine, Boris Johnson was the prime minister of the UK and Donald Trump was in his first term as US president. Since then, the world has been turned upside down, with ‘black swan’ events becoming commonplace.
As a result, inflation has run rampant and the UK base rate has risen from 0.1% in December 2021 to 3.75% today, pushing developer costs to around 8-9%, according to Capital Economics.
Construction cost inflation stood at 4.4% as of October 2025, with labour costs up 7.1% year-on-year, according to BCIS, which forecasts building costs will rise by a further 15% by 2030.
Viability challenge
This combination of factors has made many property developments unviable and the BTR sector hasn’t been immune from the fallout. The impact of the recent market volatility has been particularly acute in London.
According to data from Molior and BPF/Savills, annual BTR absorption in London has fallen 72% since 2022, from 7,744 units to 2,190, and the forward-funding model – the traditional mechanism for financing large BTR schemes – has effectively ceased in the capital. In Q4 2025, not a single BTR home entering London’s pipeline was backed by a forward-funding deal.
The Renters’ Rights Act, which takes effect on 1 May 2026, has added a further layer of uncertainty for institutional investors seeking to underwrite predictable rental income growth.
The new Building Safety Gateway regulation system has also had an impact on the BTR sector. During 2024-25, Gateway delays added 12-18 months to project timescales, breaking fixed-price construction contracts and damaging relationships with funders.
Despite this challenging backdrop, JLP’s BTR team, which was led by Katherine Russell (pictured), managed to secure planning consents for approximately 1,000 homes across three sites in West Ealing, Bromley and Reading, as part of a £500m BTR joint venture with Aberdeen, which was agreed in 2022.
The team also took on the management of four Aberdeen-owned buildings in Leeds, Leicester, Birmingham and Stratford. On securing the contract to manage Aberdeen’s Stratford scheme last year, Aberdeen fund manager Robert McDonnell said that through its partnership with JLP the firm had seen “improvements in performance and customer service scores across Aberdeen’s wider JLP-operated residential portfolio”.
Customer satisfaction scores reportedly improved from -2 to +40, with residents staying in the buildings for longer, which in turn contributed directly to a 15% uplift in net operating income across the portfolio.
Despite these successes, JLP still decided to close the lid on its BTR venture. On announcing the news, a spokesperson for the company said: “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.”
They added: “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.”
There has been a mixed response to the news from senior industry figures, who have been assessing what the fallout from JLP’s decision might mean for the wider BTR sector.
“Whatever people will say, the partnership did not fail. It was ambitious, it was credible and it was doing the right thing.”
Brendan Geraghty, CEO of the Association for Rental Living (ARL), which in the aftermath of JLP’s announcement has called on the government to provide greater support to the UK BTR sector, says: “Whatever people will say, the partnership did not fail. It was ambitious, it was credible and it was doing the right thing. 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.
“Whilst BTR investors support the principle that a safe building is a sound investment, the teething problems of the BSR have negatively impacted investor sentiment and contributed to JLP’s challenges.”
Iain Murray, head of operational living at Bidwells, concurs with Geraghty’s assessment. “This was a hugely ambitious project in 2020, but today’s economic and legislative landscape has rendered it unviable. The mixture of regulatory and legislative barriers that currently exist find even the most compelling and necessary developments struggling to find investment,” he says.
“This was a hugely ambitious project in 2020, but today’s economic and legislative landscape has rendered it unviable.”
Despite the fact JLP decided to pull the plug on the venture, Debra Yudolph, founder and CEO of SAY Property Consultancy, believes the partnership should be proud of what its BTR division achieved in a relatively short period of time.
“The success of their operational business has clearly demonstrated the benefit that comes to customers from having a retail mindset and a genuinely service-driven DNA,” says Yudolph. “It proves that when you provide great service and drive up customer satisfaction, you enhance profitability, which in turn supports investor returns.”
She adds: “While this is very sad news, it is symptomatic of a macro environment that has made development of all kinds unviable, particularly in London.”
With the introduction of the Renters’ Rights Act looming large on the horizon and Gateway approvals subject to ongoing delays, the legislative landscape for residential developments isn’t going to get any easier any time soon, and although projected cuts to interest rates over the coming months by the Bank of England might provide some respite, viability remains tight and the UK’s still relatively nascent BTR sector looks to have reached a critical juncture.
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