Across the capital, sites with residential consent, or clear residential potential, are increasingly being repurposed for alternative uses or retained in their existing form. The reason is simple: in many locations, non‑residential uses now generate stronger, more certain returns than housing. Re-gearing income-producing assets is far less risky than residential development projects, and gives you a return on day one. 

Residential development economics have become increasingly stretched:

• Build costs remain elevated, particularly for flatted schemes
• Sites of scale often require extensive upfront costs
• The additional impact of affordable housing requirements can also tip the balance in favour of alternate uses
• Residential also carries a growing regulatory and tax burden, widening the gap with competing uses (i.e. Gateway 2 and 3, and higher corporation tax on residential than on all other use classes)
• Financing and investor appetite are more sensitive to delivery risk, review mechanisms and long build‑out periods

By contrast, sectors such as urban logistics, self‑storage and retail parks offer:

• Strong occupational demand
• Faster delivery, and a simpler build (industrial and logistics rather than complex housing fit-out)
• Simpler planning pathways
• Stronger risk‑adjusted returns

As a result, capital is increasingly flowing away from residential, even where homes are policy‑compliant and consented.

Our analysis identifies a minimum of 77 sites, totalling almost 30,000 homes, that are now unlikely to be delivered despite having a residential consent. 14% of these will be redeveloped for alternative non-residential uses, while the majority of landowners have shifted strategy and now intend to retain the existing use for the foreseeable future.

In addition, a further 25 sites at pre-planning stage, allocated for residential use in adopted local plans, are no longer expected to come forward – equating to a further 12,000 homes.

In total this represents the loss of at least 42,000 homes from the residential development pipeline, of which at least 12,000 are affordable. Anecdotally there could be as many as an additional 10,000 homes at risk. These are concentrated in the outer London boroughs, where residential values are lower and viability the most stretched.

This shift has been building for a couple of years, but the committed decisions and withdrawal from delivery of new-build homes has been exacerbated in the last 18 months.

What this looks like on the ground

There are numerous examples of sites across London. Here is a sample of those that are in the public domain:

1. Honey Monster site, Southall - The former Honey Monster site in Southall was acquired by CyrusOne and will be redeveloped as a data centre, despite an earlier residential permission for nearly 2,000 homes having lapsed.
2. Highway Trading Centre, Wapping - The cleared Highway Trading Centre site, with consent for 264 homes, was acquired by SEGRO after residential developers were unable to match industrial-led bids.
3. Dagenham Dock, Barking & Dagenham - A consented residential scheme for 380 homes was ultimately deemed unviable, with the site remaining in active self‑storage use despite planning permission being in place.
4. John Lewis has recently announced it is not progressing its residential sites, stating that the financial model no longer works in the current environment. Higher interest rates, construction cost inflation and a more cautious property market mean the schemes no longer meet the partnership’s investment criteria. Its London sites at Bromley South and West Ealing, both with planning permission, total 818 homes.

Beyond these headline cases, there are numerous retail parks and employment sites where residential consents have lapsed, been withdrawn, or are being deliberately left unimplemented, not because housing is undeliverable but simply because it is no longer financially viable.

This analysis only captures schemes where a change in strategy is known. There are likely many more, and anecdotal evidence suggests an additional c.25%, meaning total losses from the residential pipeline could exceed 50,000 homes. These decisions have been made in the last 12 months.

In addition, new entrants to housing delivery that emerged over the last 10 years are also retracting back to their core business, or taking more measured approaches to delivery.

Policy and taxation are reinforcing the trend

Industrial designations, alongside the London Plan’s emphasis on no net loss of industrial floorspace, are making residential‑led redevelopment harder to justify unless values are exceptional.

At the same time, residential development is becoming progressively more differentiated from other uses from a viability perspective. From viability reviews to the forthcoming Building Safety Levy (from October 2026), and higher CIL rates, housing carries cost and uncertainty that many competing commercial uses simply do not.

The result is a growing pool of sites where residential is technically deliverable, but commercially unattractive.

What this means for landowners and developers

For landowners, the challenge is understanding whether residential genuinely represents best value, not just best policy. They will need to look at how alternative uses compare on a risk‑adjusted basis; and whether mixed‑use solutions can help to bridge the viability gap.

For developers, the risk lies in progressing schemes too far down a single‑use route, only to discover that market conditions have moved faster than the planning process.

For policymakers, this trend underlines the importance of long-term, flexible policy frameworks that can adapt to changing financial conditions, including interest rates, inflation, and wider geopolitical and market movements.

While the emergency measures are welcome, temporary interventions alone are unlikely to resolve the underlying structural issues. Without greater certainty and resilience built into the system, the risk is that residential schemes continue to stall and sites increasingly switch to alternative uses that offer clearer delivery routes and lower risk, particularly while sales rates remain at historic lows.

A truly mixed-use approach

In a market where policy and politics seek higher levels of residential delivery, residential is no longer the default highest‑value use. Evidence‑led advice, as early on as possible, is critical.

The sites that succeed going forward will be those where use and value are looked at holistically, and project success and policy are aligned from day one.

Further information

Contact Katy Warrick or Sophie Rosier