Property developer Harworth Group is significantly reducing its involvement in the housing market to focus on industrial and logistics projects, particularly data centers, a move that could impact Labour's ambitious housebuilding targets.
The FTSE 250 company announced it will "accelerate the reallocation of capital to higher returning opportunities," citing a "challenging macro-economic backdrop" characterized by subdued housing demand and elevated interest rates.
This strategic shift comes as Labour aims to build 1.5 million homes during the current parliamentary term. Harworth's decision reflects broader industry pressures, including rising construction costs, additional policy expenses, increased taxes, and various levies that have diminished the financial viability of many residential projects.
In the six months leading up to June 30, Harworth reported revenue of £41.3 million, swinging to a loss of £31.4 million from a £7.4 million profit in the prior year. The company noted a £16.9 million decrease in the valuation of its residential land.
In contrast, Harworth's industrial portfolio, which constitutes 71 percent of its holdings, has delivered an average annual return of 24.5 percent over the past five years. The firm has identified data centers as a key growth area, progressing a land sale for a data center in Leeds to Microsoft and holding discussions for a second site, with four additional plots identified.
Harworth had previously outlined plans, announced in 2024, to shift its portfolio composition to 85 percent industrial land and 15 percent residential by 2029. The UK government has introduced reforms aimed at simplifying the construction of homes and data centers on brownfield sites as part of its objective to facilitate the building of 1,000 new homes daily.
Furthermore, Harworth is experiencing strong demand from logistics firms and retailers seeking to expand within the "Golden Triangle" region, an area between London, Oxford, and Cambridge where the company possesses several sites.
Chief executive Lynda Shillaw expressed confidence, stating that the group is "well positioned to take full advantage of the compelling opportunities that lie ahead." The company also reiterated its rejection of a takeover bid from Peel Holdings, owned by John Whittaker, arguing that the 172.5 pence per share offer "fundamentally undervalues" the company, estimating its potential value at 297.4 pence per share. Harworth's shares were trading at 175 pence following this announcement.