The John Lewis Partnership has struck a deal with insurance service powerhouse Abrdn for the first phase of an eventual 10,000 home development project over the course of the next decade. Like many others, the retail giant was hit hard by the cost-of-living crisis following on directly from a 24-month pandemic, with the company reporting a suspected £100m in losses across the first two quarters of 2022.  

It is therefore of little surprise to see them, like many others, make the jump into a more stable industry, especially when considering the UK government’s commitment to up-and-coming large infrastructure projects across the remainder of the decade, in the hope of getting a piece of it for themselves. 

With the UK’s chronic housing shortage being one of the largest challenges facing the country, this venture has generally been met with open arms, yet the emergence of new multinationals such as John Lewis has left many contractors concerned about what the future of the industry may hold for them.  

To provide an insight into what lies ahead for these companies, here are a few thoughts on the potential impact of the diversification of these multinationals on the construction and property development industries. 

Diversification into the residential property industry 

At the beginning of the century, it would be highly unlikely that larger retailers, such as the John Lewis Partnership, would consider even going near these industries, but with the significant growth in demand for both online shopping and home deliveries, retailers no longer need the same number of brick-and-mortar stores they once did. Whether the retailers lead the developments themselves, or the opportunities are outsourced to external occupiers, it nonetheless provides a great way of diversifying their portfolio – something which John Lewis has placed a great importance upon. 

This isn’t the first time that a major retailer has entered the construction and housing industries either. Marks and Spencer, for example, have already put into place a number of similar schemes, whilst the vast majority of the largest supermarket chains often convert their excess real estate into housing. From selling the rights to build homes above their stores, to building homes for their staff to combat the lack of affordable housing, to renovating old sites, and more, diversification strategies such as these not only helps to maximise the value of the retailer’s property portfolio, but also creates jobs, and plays a significant role in meeting the growing needs of the housing market. 

The role John Lewis can hold in the achievement of a sustainable planet.

Tackling carbon emissions is a huge challenge for the construction industry. In fact, this sector alone already generates an estimated 25% of the UK’s total greenhouse gas emissions – a figure rising to as high as 40% when taking other relevant emitters, such as surface transport, into account. Yet, with the UK government wanting all businesses to become ‘net-zero’ by 2050, partnered with an increased demand for sustainable home-building from consumers and local authorities alike, pressure to deliver a greener environment is mounting. 

In achieving this, everyone across the industry has to do their part, and John Lewis have pledged nothing short of this. With the aim of becoming an entirely net-zero business by 2035, this long-term venture into the property industry also includes commitments to both affordable housing and sustainability targets according to the John Lewis Partnership, primarily including sustainably sourced raw materials, recycling schemes through the implementation of ‘buy back’ offers, and renewable energy sources.  

What could it mean for the availability of future projects? 

Whilst the demand for the construction of new homes far exceeds the supply of available labour within the industry, the emergence of new multinationals, such as John Lewis, will have still left many contractors concerned about what the future may hold for their business. In particular, one question that will likely remain on the minds of many is how big of a push will these multinationals make into the industry, and whether existing companies will have new rivals to contend with for projects, or whether there will be enough work for everyone. 

For the near future at least, these concerns can be put to rest, as the scope of investments by John Lewis and its retail counterparts remain solely on a single project, which in and of itself is on a massive scale, however, only time will tell exactly what the overall objectives of these companies are.

John Lewis, for example, have set the objective of making residential development account for 40% of their future profits, and one-off projects such as this partnership with Abrdn will likely not account for this full figure; how far they choose to diversify into the industry, therefore, and the size of the projects they look to develop, still remains up in arms. The answers to these questions will shape the future of the industry, yet, for the time being, smaller property and construction contractors alike can continue to operate without worry amongst the looming threat of these major retailers. 

Sarah Kauter is managing director of Construction PR.