Are UK Reits the most unloved asset?
Recent updates from UK Reits are looking more positive, but the market remains entirely unimpressed


After Covid struck five years ago, several UK real-estate investment trusts (Reits) suspended or slashed their dividends.
There were dire predictions that demand for offices and shops would be so much weaker after the pandemic that payouts would never fully recover. But while real estate has been affected by changes in work and leisure, most Reits have seen their income hold up much better than feared.
The two big diversified Reits sum up the highs and lows. Land Securities paid out 45.55p per share in 2018/19, falling to 23.2p in 2019-2020. It should pay 40.5p this year. British Land fell from 31.47p to 15.04p; it’s now back to 23p.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Yet share prices are mostly back to where they were in 2020 or even lower. This isn’t just true for the office sector, where one can understand why many investors remain cautious. It applies almost across the board, and the reasons why are clear.
UK Reits: are investors too bearish?
Higher interest rates since 2022 have pushed up the cost of debt used to fund most property deals and also increased the returns that investors can get elsewhere (eg, from government bonds). Hence commercial-property values have fallen, which means Reits are regularly announcing valuation write-downs. That never makes for good headlines, even if rents keep rolling in.
For a double whammy, higher yields elsewhere make the Reits’ own payouts look less compelling. Pre-Covid, Land Securities yielded about 4.5%, now it yields 7.5%. Over the same period, the 10-year gilt has gone from about 0.75% to 4.75%.
Still, look at recent updates and you wonder if investors are too bearish. Shaftesbury, which owns large swathes of London’s West End, reported a 7% net asset value total return for 2024. The shares are down 8% over 12 months. London office specialist Derwent reported stable values and solid leasing trends. It’s off 13% over the year. Logistics firms such as Segro, Tritax Big Box and LondonMetric – which were market darlings until early 2022 – reported okay results, yet the shares remain in the red. And so on. Tailwinds may be picking up, but they’ve yet to be noticed.
Except perhaps within the sector, where Reits are snapping each other up or being bought out by private equity. In the past month, KKR has bid for healthcare facilities group Assura, and Blackstone has bid for Warehouse Reit. Specialists clearly see some value in UK property, at least selectively.
Of course, they may be wrong – real estate is cyclical and in every cycle, experienced investors get big calls wrong. Indeed, the news that Land Securities now plans to sell £2 billion of offices to invest in residential property is hard to understand – selling cash-generating assets near a likely market-bottom to fund ambitious new developments for a completely different type of tenant under a government that is very keen to intervene in the housing sector feels like a bold move, and not necessarily what shareholders want. Still, at these levels and with news improving, the iShares UK Property ETF (LSE: IUKP) sector tracker looks like a promising contrarian play.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.
Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.
He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.
-
Review: Puerto Rico – embrace the spirit of Boricua
Travel Natasha Langan discovers why the indigenous name for Puerto Rico has come to define this Caribbean island’s vibrant culture
-
RICS: Property market confidence falls further as Autumn Budget looms
Property experts claim buyer confidence dropped for a second month in August, with several citing Budget speculation as a headwind
-
'Where to find the world’s hidden gems offering durable growth and value'
Opinion Joe Bauernfreund, chief executive officer and chief investment officer, AVI Global Trust, highlights three businesses where he'd put his money
-
What are wealth taxes and would they work in Britain?
The Treasury is short of cash and mulling over how it can get its hands on more money to plug the gap. Could wealth taxes do the trick?
-
UK bank stocks are no bargain – here's a safer alternative
Opinion Britain's banking sector faces severe political risks. Switch into this global financials trust instead, says Max King
-
Gold mining stocks outperform gold – can it last?
Opinion Gold miners are shining brighter than the yellow metal for the first time in this cycle. Enjoy the ride while it lasts, says Cris Sholto Heaton
-
The AI barons call time on the bubble
Opinion OpenAI's Sam Altman and other tech giants are warning that the AI boom is reaching dangerous territory. They may end up as the authors of their own demise
-
Three small companies with big potential
Opinion Nish Patel, portfolio manager of The Global Smaller Companies Trust, picks three small companies where he'd put his money
-
Automatic Data Processing is making big profits from organising offices – should you invest?
Automatic Data Processing has established itself as a one-stop shop for managing the workplace. Is it a sound long-term investment?
-
Crypto mogul Do Kwon pleads guilty to fraud
South Korean entrepreneur Do Kwon, who used to call critics cockroaches, faces a long spell in jail after pleading guilty to fraud relating to the collapse of two digital coins