Harworth Group has announced it is quitting the residential housing market to focus on data centres and industrial sites.
The FTSE 250 property developer said it will accelerate the reallocation of capital to higher returning opportunities, including industrial and logistics projects, following a challenging macroeconomic backdrop that has depressed demand and pushed interest rates higher across the property sector. Harworth is listed on the FTSE 250 index, which tracks mid-sized companies on the London Stock Exchange.
The strategic shift deals a setback to the Labour government, which has set a national target to build 1.5 million new homes during the current parliament. Harworth, a specialist in regenerating brownfield land across the UK, previously played a key role in bringing forward large mixed-use sites for housebuilding.
Financial results released for the six months to June 30 show Harworth revenue fell to £41.3 million, with the company swinging to a loss of £31.4 million after securing a £7.4 million profit in the same period last year. The decline reflected a £16.9 million drop in the valuation of its residential land holdings.
Harworth said that rising construction costs, additional policy costs, higher taxes and a growing array of levies had eroded the viability of many residential projects, leading directly to lower site valuations.
By contrast, the company highlighted strong returns from its industrial portfolio, which currently accounts for 71 per cent of its holdings. Over the past five years, these industrial assets produced an average annual return of 24.5 per cent.
Data centre growth and brownfield development
Demand for data centre locations has surged to unprecedented levels as technology companies expand cloud computing and digital infrastructure across Britain. Harworth announced it has progressed the sale of land in Leeds to Microsoft for a new data centre, while negotiations remain underway for a second site. The developer has also identified four additional plots for potential data centre development.
Harworth specialises in brownfield land regeneration, transforming former coalfield, industrial, and commercial sites into modern logistics parks and commercial hubs. Brownfield sites refer to previously developed land that is currently vacant or underutilised, often requiring environmental remediation before new construction can take place.
In 2024, Harworth outlined plans to adjust its portfolio mix to 85 per cent industrial land and 15 per cent residential by 2029. However, the developer is now scaling back its exposure to the residential market entirely in favour of industrial and digital infrastructure opportunities.
The company strategic pivot comes as ministers attempt to accelerate development nationwide. The UK government announced planning reforms designed to make it easier to build both homes and data centres on brownfield sites, as ministers aim to meet a broader housing target of 1,000 new homes a day.
Harworth also reported robust demand from logistics operators and retail firms expanding within the Golden Triangle, the premier distribution region situated between London, Oxford and Cambridge where the developer holds several strategic sites. The area is highly prized by logistics companies for its transport connectivity to major population centres.
Takeover bid rejection and market valuation
Commenting on the results and future strategy, chief executive Lynda Shillaw said the group was "well positioned to take full advantage of the compelling opportunities that lie ahead."
In its financial statement, Harworth also reiterated its decision to reject a takeover offer from Peel Holdings, the infrastructure and real estate group owned by Manchester billionaire John Whittaker. Peel Holdings currently holds a 30 per cent stake in Harworth.
Peel Holdings submitted a bid of 172.5p per share, which Harworth rejected on the grounds that it "fundamentally undervalues" the business. Harworth estimated its own potential value at 297.4p per share.
Shares in Harworth fell by 0.9 per cent, or 1.6p, to close at 175p yesterday following the announcement.
