British retail giant John Lewis has signed a £500m deal to build the first phase of its 10,000-home target.

It has reached an agreement with Scottish investment firm Abrdn to deliver 1,000 homes in and around John Lewis Partnerships’ existing estate in West Ealing and Bromley in London and Mill Lane in Reading.

The two parties entered a joint venture to deliver this early phase, covering 10 per cent of its ultimate goal of providing 10,000 homes – with half on its own estate.

John Lewis, which owns the Waitrose brand of stores, has plans to knock down the existing Waitrose shop in West Ealing and rebuild with homes above and around a new temporary shop.

The second build-to-rent housing development will be in Bromley, with new homes around the existing car park. In Mill Lane, a vacant warehouse will be replaced with a new block of housing.

John Lewis Partnership executive director for strategy and commercial development Nina Bhatia said  the deal signalled the diversification of its business.

“The move underlines our commitment to build on the strength of our brands to diversify beyond retail into areas where trust really matters,” she said.

She added that the homes would be furnished by the brand’s furniture.

John Lewis, which posted a £99m loss in its half-year results, said its entry into the property market could provide a stable source of income.

“We want to create homes that will provide a stable income for the partnership, and moving into housing aligns with our purpose to make a positive difference for our partners, customers and communities,” it said in a statement.

A public consultation on the Mill Lane project is expected in 2023. Planning applications for the West Ealing and Bromley sites will be submitted next year.