For many of us, it can only be truly considered “nearly Christmas” when the annual John Lewis advert graces our screens for the first time. As we all face the prospect of a very different Christmas from the one we were hoping for, it is one of the few Christmas regulars we have to look forward to; it is a truly impressive piece of marketing.
But John Lewis’ business smarts don’t stop there. The company has recently been granted conditional planning permission to convert a massive 300,000 square feet of its flagship Oxford Street department store from retail to office space. It now has the option of creating what could be a highly valuable mixed-use building. With average office rents on Oxford Street at over £80 psf, this could bring in an annual rental income of over £25 million if the whole space is occupied. Capitalised at 4%, John Lewis could be looking at office space valued at more than £600 million.
This reflects a wider move around the retail sector, with Debenhams recently receiving similar planning permission for its London flagship store. This drastic change in direction for larger retailers is a novel way to adapt their property and income in a market that was already struggling to compete with online sales, and which has subsequently been decimated by COVID. Might it be enough to save them, or is a move from retail to office use just jumping from the frying pan into the fire? Despite the rumours of a mass move to working from home, a series of large office occupiers have indicated that they have no intention of giving up their office space. PwC is just one of these and recently stated that “if anything at the moment we need more space than ever because of social distancing.”
John Lewis is also in the process of reviewing up to 20 other stores for potential conversion (of part at least) to rented residential use. Such flats will be furnished with John Lewis products, and Waitrose food delivery options will be offered to tenants. Planning applications will be lodged in 2021 for two sites in Greater London.
As well as providing income, such repurposing of buildings has obvious sustainability benefits over new builds, while John Lewis will also be doing its bit towards achieving national and local targets for new housing. So there is financial upside, as well as big ticks in the ESG boxes: as Sharon White, the chairman of the John Lewis Partnership, said, they want to 'put excess space to good social use'.
Westminster's planning committee voted unanimously Tuesday to give John Lewis permission to turn around 300K SF of its 679K SF flagship Oxford Street department store from retail to offices.