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Warning to John Lewis - rental homes could destroy your reputation

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

That’s the view of tax and advisory firm Blick Rothenberg.

Heather Powell, a partner at the firm and head of property, says: “Many retail groups who have invested in property  have surplus property, and are considering what they can do with these properties.  

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“Disposal to a developer is  a simple option, but building homes on surplus sites, which will generate a reliable, future income stream, is very attractive, and could guarantee the future of the business.  Many Retailers are looking at recent headlines and asking, 'Is it time to become a landlord?'”

She adds: “An increase in quality homes available for long term rental is welcome.  However new landlords need to be aware of the challenges of renting homes.  

“The legislation governing the rental of UK properties has become increasingly complex. New entrants to the market need to consider whether they employ an in-house team or outsource the management of their properties, and factor in the costs of this work when considering whether to become a landlord. It is not simple, and it can go wrong.”

Powell warns that if there is insufficient investment in a competent property management team, reputations could be shattered, especially if tenant unhappiness reaches the media.

“Examples of this strategy are already in the public domain. John Lewis are planning to build 10,000 rental homes in partnership with established developers on sites vacated by their stores, car parks or above Waitrose supermarkets. Lloyds Bank are reported to be about to complete on the purchase of a block of 50 flats in Peterborough that they will rent out, and it is expected that their portfolio could eventually include homes on sites vacated by branches that have now closed.”

Powell concludes: “The fight to acquire Morrisons would appear to be fuelled by ownership of the group’s large property portfolio. One of their potential buyers, Fortress, have pledged that they will not sell of the stores. This pledge does not stop redevelopment of non-performing sites – and diversification into homes for rental would appear to be one of the best options.”

  • Mark Wilson

    Best post ever!

  • Matthew Payne

    Another advert, Im not sure what the story is. "Do a bad job and it could harm your reputation"?. Isnt that the case for any product or service provider up and down the land in any industry? I am sure the Board at JL who do have a reputation for providing quality products and services, and who may not themselves have the lettings expertise required, will have the acumen to bring it into the business and approach it the same way they do everything else.

  • Kristjan Byfield

    I'd imagine a massive corporation building 10k units might have the funds to put a good team/contract in place. Running a completely owned site is far easier than running a single unit within a development of multiple owners. This really is the most bizarre post and advice.

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    Kristjan you are very naive. Renting needs to be funded by the tenant, thats where the income is. Having resources means borrowed money, which costs a lot. The overheads are substantial for a big company. I see it as lambs to the slaughter. And unfortunately another sub prime type disaster coming up. No doubt the big American banks fuelling this will bbe long gone.

  • Roger  Mellie

    Alright, calm down everyone. Property is inelastic, which basically means it takes a long time to come to market, although new PDR means John Lewis could potentially knockdown and rebuild under prior approval. It's possible, that some of the sites may become mixed-use. Having done a quick scan of Nimbus Maps, own quite a lot of property and a few farms. Usually, if a business not used to development will jump in with a developer and split the profits. Ultimately though, who cares?

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    Roger, almost certainly it will end in a sub prime disaster,so ultimately we will all pay.
    Further Jenrcik is giving planning permission to gross overdevelopment on little sites, which will be slums very quickly. John Lewis s,acks of someone who is grasping at straws , they have managed to lose money during the pandemic whilst other compaanies, tesco, asda, have done quite well.
    LLoyds bank should be lending money to experienced developers who unnderstand the risk, and arre used to managing it. In esence LLoyds are competing witth its own customers in a business they dont know. The only way out of it is either charge a lot for the rental or get government subsidie as councils and housing associations get.

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    Typos - Jenrick and john lewis smacks of someone who is grasping at starws (incompetent managers are buying time with a good smokescreen.)

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    Unfortunately JL is run by a woman with no retail experience, so you get what you pay for i.e. job cuts for 1000 workers announced yesterday.

     
  • Theodor Cable

    They can do what they like except me to sell my house.
    As soon as they start that I will go back and live in it as a private dwelliing.

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