Last month retailer John Lewis shocked the residential development sector by abandoning its high-profile plans – announced in 2021 – to build 10,000 build-to-rent homes on sites across the country.

Now, while the purveyor of the nation’s curtains is engaged in an ongoing return to its core business under new chair Jason Tarry, it nevertheless blamed the resi sector itself for the U-turn, aiming a hefty broadside at the fundamentals of the market it was leaving.

In a statement John Lewis – which has since 2021 achieved three major planning consents – said there had since been a “fundamental shift” in the economic conditions underpinning the venture. “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,” the statement said.

Certainly, there is no doubt that the build-to-rent sector is facing a significant challenge. Development volumes have been on a steep downward trajectory ever since the time of the 2022 Truss-Kwarteng mini-Budget, with a variety of factors compounding to make it harder to get schemes away. 

Starts in the sector are now running at less than a third of the level that they were at the end of 2022, and the pipeline of schemes is dwindling.

This is not just a problem for the affected projects, their developers, and housing numbers overall. It also has big implications where build-to-rent (BTR), as is usually the case, forms part of broader regeneration plans, often as an important initial market-making investment. 

As part of Building’s Regen Connect series, here we look at the wider ramifications of the travails facing this part of the market over recent years. John Lewis’ decision has cast a light on the issues facing the sector, and raises significant questions about how big regeneration schemes can find solutions where BTR is no longer a viable option.

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