Real estate investment trusts, or REITs, have become a popular way for investors to invest in real estate, without having to deal with the hassle of managing the actual real estate property. REITs allow investors to gain exposure to a wide variety of real estate from commercial to hospitals, hotels and more.
While there are some risks involved in any real estate investment, REITs offer several benefits that can make them a solid choice for investors. In this guide, we’ll take a look at the best REITs in UK and answer the frequently asked questions that aspiring REIT investors should address before investing.
What are REITs?
REITs are companies that own, operate, or finance income-producing real estate, on behalf of their shareholders. In UK, REITs have to fulfil several requirements, some of which include:
- derives at least 75% of its profits from their property rental businesses
- distribute 90% of property income profits to shareholders
- maintain conservative gearing or financing cost to profit ratio of 1:1.25
- have a well-diversified ownership distribution of more than five major shareholders
Since the introduction of REITs in 2007, REITs have been a popular investment vehicle. With the relaxation of REIT conditions made in the Finance Act 2022 as well as the upcoming increase of UK corporation tax from 19% to 25% from April 2023 will likely increase the advantages of investing in UK REITs going forward.
At the point of writing, there are 56 UK REITs listed on the London Stock Exchange (LSE), with a combined market capitalisation of over $70b. They offer exposure to a wide range of property types including industrial, office, residential, retail, speciality, hotel and lodging real estate.
With so many options out there, which UK REITs should you invest your hard earned money in?
Well, let’s help you solve that problem by looking at the the best UK REITs:
Best REITs in UK
REITs are not built the same. The best ones tend to pay out sustainable and attractive dividend yields while growing. On top of that, your investment objective would influence your choice of the best REIT for your portfolio.
Hence, we share the best UK REITs by:
Best UK REITs by dividend yield
| UK REIT | Ticker | Dividend Yield | Distribution Per Unit | P/B (MRQ) | Type of REIT | Portfolio Value | EPS | Market |
|---|---|---|---|---|---|---|---|---|
| Regional REIT | RGL | 8.89% | 6.5 | 0.74 | Office | £906.1 M | 6.3 | MM |
| Real Estate Investors | RLE | 8.57% | 3.06 | 0.61 | Diversified | £190.8 M | 7.76 | AIM |
| Newriver REIT | NRR | 8.00% | 7.4 | 0.68 | Retail | £609.1 M | -0.49 | MM |
| AEW UK REIT | AEWU | 7.26% | 8 | 0.91 | Office, Industrial, Retail | £240.18 M | 0.14 | MM |
| Civitas Social Housing | CSH | 6.80% | 5.5 | 0.71 | Healthcare | £968.8 M | 0.06 | MM |
Although there’s much to be said about the risk of relying solely on dividend yield when selecting a REIT for your portfolio, it remains a key factor for REIT investors.
So, here’s a quick analysis of the best UK REITs by dividend yield:
1) Regional REIT (RGL): 8.89%
Regional REIT (RGL) aims to provide high dividends from its office properties located in UK. As of end 2021, RGL has 168 properties in its portfolio at a valuation of £906.1 million.
Prior to 2020 and the pandemic, RGL had been raising their dividend payout steadily every year. However, the pandemic has hit office REITs such as RGL hard. As a result, RGL’s income took a hit and they had to cut their dividend by 25% for the first time in 2020.
RGL managed to grow its portfolio value by about 24% and their Rent Roll by 12% since 2020.
That said, REITs are likely to suffer in the short term due to a myriad of macroeconomic factors. Hence, we would not be in a rush to enter.
2) Real Estate Investors (RLE): 8.57%
Real Estate Investors (RLE) brands itself as “UK’s only Midlands-focused Birmingham based” REIT. It’s portfolio of commercial properties is rather diverse with a good mix of office, retail, F&B and other properties, adding up to a total valuation of £190.8 m.
While the pandemic had dampen RLE’s income, they managed to sell off several properties and cleared off £11.9 m of debt. This should put them in a better position in a rising interest rate environment.
Historically, RLE took a major hit in 2007 and have never recovered since. You should do your own due diligence before considering RLE for your portfolio.
3) Newriver REIT (NRR): 8%
Newriver REIT aims to deliver good returns to shareholders through the management of its portfolio of retail parks and shopping centres across Europe. NRR had sold off its pub portfolio and its shares in Hawthorn Leisure REIT in 2021, and this has impacted its rental income YTD.
Due to its exposure to the retail markets, NRR took a hit during the pandemic and is in the midst of recovering.
4) AEW UK REIT (AEWU): 7.3%
AEW UK REIT focuses on commercial real estate in the United Kingdom with 36 properties in its portfolio at a valuation of £240.18 million. Its Weighted Average Unexpired Lease Term is at 5.78 years to expiry.
Although AEWU took a hit during 2019, it’ net income recovered quickly in 2020. It has managed to payout 0.08 dividend per share since 2018 and its current dividend yield is 7.3%.
So, if you’re looking for a UK-focused commercial REIT with sustainable dividend yield, AEW UK REIT may be worth considering.
5) Civitas Social Housing (CSH): 6.8%
Civitas Social Housing is a healthcare REIT that manages a portfolio of social housing in the United Kingdom. It aim to deliver returns in line with inflation over the long-term through its large portfolio of specialist supported housing.
CSH has been increasing its dividend consistently since its IPO in 2016. Its payout ratio was conservative at 76 in FY2021. As of its latest annual report, CSH has raised its dividend target from 5.55 pence per share to 5.7 pence per share for YE 31 March 2023.
Overall, Civitas Social Housing is a strong performer in the social housing sector, with a diversified portfolio of properties and a long history of dividend growth.
Given the current markets, high dividend yields could be due to the drop in REIT prices. Hence, you should do your own qualitative analysis before investing in any REITs.
Here’s a list of UK REITs and their dividend yields as of the time of writing for your reference:
What UK REITs have the highest yield?
| UK REIT | Ticker | Dividend Yield | Market Cap (£) |
|---|---|---|---|
| Regional REIT | RGL | 8.89% | 377,000,000.00 |
| Real Estate Investors | RLE | 8.57% | 64,280,000.00 |
| Newriver REIT | NRR | 8.00% | 285,710,000.00 |
| AEW UK REIT | AEWU | 7.26% | 173,950,325.00 |
| Civitas Social Housing | CSH | 6.80% | 493,000,000.00 |
| Alternative Income REIT | AIRE | 6.47% | 64,000,000.00 |
| Ground Rents Income Fund | GRIO | 6.41% | 56,000,000.00 |
| Schroder European REIT | SERE | 6.16% | 132,000,000.00 |
| Ediston Property Investment | EPIC | 6.13% | 156,000,000.00 |
| Target Healthcare REIT | THRL | 5.97% | 703,000,000.00 |
| Triple Point Social Housing REIT | SOHO | 5.65% | 372,176,949.00 |
| Schroder REIT | SREI | 5.63% | 258,000,000.00 |
| Impact Healthcare REIT | IHR | 5.50% | 473,574,231.00 |
| Land Securities | LAND | 5.42% | 5,003,632,462.00 |
| Highcroft Investments | HCFT | 5.24% | 54,550,000.00 |
| Residential Secure Income | RESI | 4.94% | 190,736,616.00 |
| Custodian REIT | CREI | 4.87% | 460,000,000.00 |
| British Land | BLND | 4.80% | 4,223,176,369.00 |
| Supermarket Income REIT | SUPR | 4.80% | 1,537,000,000.00 |
| Palace Capital | PCA | 4.76% | 122,620,000.00 |
| Urban Logistics REIT | SHED | 4.69% | 764,600,000.00 |
| abrdn Property Income Trust Limited | API | 4.68% | 301,000,000.00 |
| CT Property Trust Limited | CTPT | 4.51% | 188,000,000.00 |
| Primary Health Properties | PHP | 4.44% | 1,846,332,038.00 |
| Assura | AGR | 4.40% | 2,010,000,000.00 |
| Warehouse REIT | WHR | 4.36% | 605,002,892.00 |
| LXI REIT | LXI | 4.04% | 2,496,000,000.00 |
| Londonmetric Property | LMP | 3.90% | 2,326,205,426.00 |
| Picton Property Income | PCTN | 3.88% | 485,070,000.00 |
| BMO Commercial Property Trust | BCPT | 3.78% | 808,000,000.00 |
| PRS REIT | PRSR | 3.68% | 601,979,635.00 |
| Tritax Big Box REIT | BBOX | 3.60% | 3,485,000,000.00 |
| UK Commercial Property REIT | UKCM | 3.51% | 973,259,607.00 |
| Industrials REIT | MLI | 3.50% | 9,372,475,766.00 |
| Big Yellow | BYG | 3.10% | 2,516,087,897.00 |
| Derwent London | DLN | 2.80% | 3,090,000,000.00 |
| Workspace Group | WKP | 2.62% | 1,060,000,000.00 |
| Safestore | SAFE | 2.26% | 2,270,440,537.00 |
| Home REIT | HOME | 2.20% | 909,155,960.00 |
| Great Portland Estates | GPE | 2.12% | 1,510,000,000.00 |
| Town Centre Securities | TOWN | 2.05% | 89,830,000.00 |
| Hammerson | HMSO | 1.93% | 920,354,444.00 |
| Unite Group | UTG | 1.93% | 4,616,972,822.00 |
| Segro | SGRO | 1.70% | 12,399,217,950.00 |
| Shaftesbury | SHB | 1.24% | 1,946,048,468.00 |
| Capital & Counties Properties | CAPC | 1.03% | 1,227,450,312.00 |
| Empiric Student Property | ESP | 0.69% | 542,930,000.00 |
| Alina | ALNA | 0.00% | 4,270,000.00 |
| Capital & Regional | CAL | 0.00% | 94,940,000.00 |
| KCR Residential REIT | KCR | 0.00% | 5,420,000.00 |
| Life Science REIT | LABS | 0.00% | 324,397,000.00 |
Best UK real estate investment trusts by market capitalisation
| REIT | Ticker | Market Cap | Portfolio Value | Dividend Yield |
|---|---|---|---|---|
| Segro | SGRO | 12,399,217,950.00 | £18.4bn | 1.70% |
| Industrials REIT | MLI | 9,372,475,766.00 | £685.8m | 3.50% |
| Land Securities | LAND | 5,003,632,462.00 | £12.0bn | 5.42% |
| Unite Group | UTG | 4,616,972,822.00 | £5,287 million | 1.93% |
| British Land | BLND | 4,223,176,369.00 | £10,467m | 4.80% |
The top 5 biggest UK REITs are:
1) Segro (SGRO)
The largest UK REIT is Segro (SGRO) with a market cap of £12.4b. It offers exposure to a portfolio of Urban and Big box warehouses in Europe with a combined value of £18.4b.
Segro has a history of paying dividends and has increased its dividend payout since 2017 while keeping its payout ratio conservative. The company’s dividend yield was 1.7% at the point of writing.
Looking forward, Segro is well-positioned to continue benefiting from the growing e-commerce sector.
2) Industrials REIT (MLI)
Industrials REIT manages multi-let industrial properties in the United Kingdom. It makes an income by leasing out their space to small and medium sized businesses across a diverse range of sectors.
As of 2022, MLI has a portfolio value of £685.8m and an occupancy rate of 94%. Its largest tenant, Thames Water only accounts for 2% of its rental income.
As it serves SMEs, investors may be worried about MLI’s ability to retain tenants in the current tough economy. It has experienced strong selling pressure since April 2022.
3) Land Securities (LAND)
Land Securities (LAND) is a diversified UK REIT that owns a portfolio of offices, retail and urban properties.
As of 2022, 65% of LAND’s portfolio consists of offices in Central London with an occupancy rate of 91%.
Land Securities suffered a drop in income and had to cut their dividends payout during the pandemic in 2019. Their dividend payout has been recovering since, and at the point of writing, their dividend yield is about 5.42%.
4) Unite Group (UTG)
Unite Group offers exposure to the student accommodation market. The company has 172 properties across 25 university towns and cities in the United Kingdom, with a total of about 74,000 beds.
As the world came to a halt during the pandemic, it was little wonder that Unite Group’s income took a hit in 2019 and 2020 when students were no longer staying in accommodations. They cut dividend distributions in the same years, but have recovered their dividends per share by 2021 to close to pre-pandemic levels. Currrently, UTG offers a dividend yield of ~1.93%.
Looking forward, Unite Group seems to be on the road to recovery as the world open up.
5) British Land (BLND)
British Land manages a portfolio of office campuses (64%), retail (33%) and logistics (3%) real estate with a total valuation of £10,467m in the UK.
Recovering from the pandemic, BLND had reported a +24.9% growth in their underlying profit in 31 Mar 2022, as compared to 2021.
At the point of writing, BLND has a dividend yield of 4.8%.
Curious about these big UK REITs? You may like our article on the 4 blue chip UK REITs to buy.
How to pick the best UK REIT?
When looking for the best REITs to invest in, investors should consider a number of factors on top of dividend yield and market capitalisation.
Some of the common factors you can use to pick the best UK REIT include:
- Dividend growth
- Historical stock price performance
- Type of real estate that the REIT focuses on
- Geographical diversity of the REIT’s real estate portfolio
- Debt Level
- Rising Interest rates
How to invest in UK REITs?
You can buy and sell REITs in the same way as any shares, via the stock exchange.
To invest in UK REITs, you simply need to create an account with any stock broker that gives you access to REITs listed on the London Stock Exchange (LSE).
There are UK REITs listed on both LSE’s Main Market and Alternative Investment Market (AIM). The AIM is a specialised unit of the LSE that lists smaller (usually more risky) companies.
Frequently Asked Questions
What are the Benefits of investing in REITs?
REITs offer an affordable and liquid vehicle manner for investors who want exposure to larger property projects.
On top of that, REITs also allow investors to enjoy the benefit of both:
– Steady and regular stream of dividend income and
– Capital gains from the gradual appreciation of the REIT’s property portfolio.
In the UK, REITs are also more attractive as they are exempt from Capital Gains Tax and are required to pay out at least 90% of their profits to shareholders.
What are the Risks of investing in REITs?
Like all investments, there are risks associated with investing in REITs. Some of the common risks you should be aware of include:
– Dependence on a small number of tenants for rental income
– Sensitivity to changes in interest rates
– Lack of geographical diversification
– Dividend cuts during economic downturns
– Leverage risk
How many UK REITs are there?
At the point of writing, there are 56 REITs listed on the London Stock Exchange, of which 9 are undergoing major business restructures.
Are REITs exempt from CGT?
Yes.
Under UK’s Capital Gains Tax (CGT), gains made on assets will be taxed when they are sold or disposed off. However, property rental businesses which includes REITs are exempt from CGT as it is classified as a non-chargeable gains under the Corporate Tax Act (CAT2010/S535).
However, as a shareholder, you’re liable to pay capital gains tax on your shares, if you sell them for a profit. This is charged at 10% or 20%, depending on your income tax band.