With the stroke of a key, Westminster Council’s planning committee has given department store retailer John Lewis the potential to create a £600M office scheme that could provide a boost to its struggling finances.

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.

John Lewis has not committed to converting the space from retail to offices, but it now has the option of radically reducing the retail space at the store — and creating a potentially highly valuable office asset.

Average office rents in the Oxford Street area are around £85 per SF for grade A space, according to data from broker Devono Cresa. Hitting that level would mean annual rent of £25.5M for John Lewis. Capitalise that at the 4% yield at which offices in the area trade, and you have an office worth more than £600M.

The store would generate £19M of rent if it was just used for retail, according to Altus.

John Lewis made a £635M loss in the first half of 2020, and wrote down the value of its store portfolio by £470M, as what was once the most profitable department store company in the UK succumbed to the impact of the coronavirus and the broader shift of consumer spending away from large department stores.

In response, it is looking to diversify the uses to which it puts its real estate. As well as the potential for offices on Oxford Street, it said 20 of its stores have the potential for conversion to rented residential use.