Warning to John Lewis – rental homes could destroy you …


Supermarket chains like John Lewis and banks like Lloyds – both entering the private rental sector as large-scale owners – could end up destroying their reputations.

This is the opinion of the consulting and tax firm Blick Rothenberg.

Heather Powell, partner at the firm and head of real estate, says, “Many retail groups that have invested in real estate have surplus assets and are thinking about what they can do with those properties.

“Transferring to a developer is a simple option, but building housing on surplus sites, which will generate a reliable future income stream, is very attractive and could secure the future of the business. Many retailers look at recent headlines and ask, “Is it time to own a home?” “”

She adds: “An increase in quality housing available for long-term rental is welcome. However, new owners should be aware of the challenges of renting homes.

“The law governing the rental of property in the UK has become increasingly complex. New entrants to the market should consider whether they employ an in-house team or outsource the management of their properties, and consider the costs of this work when considering ownership. It is not easy and it can go wrong.

Powell warns that if there isn’t enough investment in a competent property management team, reputations could be shattered, especially if tenant dissatisfaction reaches the media.

“Examples of this strategy are already in the public domain. John Lewis plans to build 10,000 rental units in partnership with developers established on sites vacated by their stores, parking lots or above Waitrose supermarkets. Lloyds Bank is said to be close to finalizing the purchase of a 50-apartment building in Peterborough that it will rent out, and it is expected that its portfolio could eventually include homes on sites vacated by branches that have now closed.

Powell concludes, “The struggle to acquire Morrisons appears to be fueled by ownership of the group’s vast real estate portfolio. One of their potential buyers, Fortress, has pledged not to sell the stores. This commitment does not stop the redevelopment of underperforming sites – and diversification into rental housing seems to be one of the best options.

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