The Best UK REITs (Real Estate Investment Trusts) - Financial Expert™ (2024)

A Real Estate Investment Trust, commonly abbreviated to REIT is an easy and effective way to tap into returns from UK commercial property, residential property and property development profits. The best UK REITs invest their capital into a diverse array of property assets and projects and pay a handsome income yield to investors to reward them for the risk.

In this article, we rank and pick our favourite REITs.

This is not financial advice, and we expect that you will perform your own research before buying shares. Consider finding an independent financial adviser if you need support in building your investment portfolio.

What is a REIT?

A REIT is an investment trust (read more about the best UK investment trusts) that specialises in property investment.

In a nutshell, to be able to use the REIT brand name, a property investment trust must:

• Be listed on a recognised stock exchange with at least 35% of the quoted shares held by the wider public, and not a closed group of 5 or fewer individuals.

• Distribute 90% of its tax-exempt property income profit each year as a dividend

• Be diversified across at least three properties with each representing less than 40% of the total trusts’ assets

• Invest 75% of gross assets into property rental assets (this can include buy-to-rent property projects)

In return for abiding by these rules, REITs are offered generous tax advantages compared to ordinary investment companies. These centre around the way that profits are taxed inside the trust.

How to invest in a REIT

Because REITs are publicly traded companies, you can buy shares in a REIT the same way you would buy the shares of any listed company; through a stockbroker. Here’s our shortlist of the best stockbrokers from our comparison of 85 UK stockbrokers.

Best stockbrokers for REITs

What is the advantage of investing in a REIT?

For a general reminder of how investments are taxed, read our brief guide. Ordinary company profits are initially subject to corporation tax (e.g. 19%) before they’re distributed as dividends and taxed as dividend income for the individual investor. This is a form of double taxation, and it makes earning rent via a trust or company very inefficient compared to directly investing in property as an individual.

A REIT receives a corporate tax exemption for rental income, subject to the rules above. This allows net rental income to pass through to an investor without incurring the ‘double tax’. With the same underlying property investments, a REIT would provide a higher shareholder return than a standard investment trust. It’s not difficult to appreciate why UK REITs are such a popular vehicle for investing in property.

How many UK REITs are there?

Over 50 investment trusts have gained REIT status since the regime was launched in 2007.

Here is a full list of every UK REIT listed on the London Stock Exchange at the date of writing, listed in alphabetical order.

• AEW UK Long Lease REIT Plc
• AEW UK REIT Plc
• Assura Plc
• Big Yellow Group Plc
• BMO Real Estate Investments Limited
• British Land Company Plc
• Capital & Regional Plc
• Civitas Social Housing Plc
• Custodian REIT Plc
• Derwent London Plc
• Drum Income Plus REIT Plc
• Ediston Property Investment Company Plc
• Empiric Student Property Plc
• GCP Student Living Plc
• Great Portland Estates Plc
• Green REIT Plc
• Hammerson Plc
• Hansteen Holdings Plc
• Hibernia REIT Plc.
• Highcroft Investments Plc
• Impact Healthcare REIT Plc
• Intu Properties Plc
• KCR Residential REIT Plc
• Land Securities Group Plc
• Londonmetric Property Plc
• LXI REIT Plc
• Mckay Securities Plc
• Mucklow (A & J) Group Plc
• Newriver REIT Plc
• Picton Property Income Ld
• Primary Health Properties Plc
• PRS REIT (The) Plc
• RDI REIT Plc.
• Real Estate Investors Plc
• Regional REIT Limited
• Residential Secure Income Plc
• Safestore Holdings Plc
• Schroder European Real Estate Investment Trust Plc
• Schroder Real Estate Investment Trust Limited
• Secure Income REIT Plc
• Segro Plc
• Shaftesbury Plc
• Standard Life Investments Property Income Trust Ld
• Stenprop Limited
• Supermarket Income REIT Plc
• Target Healthcare REIT Limited
• The Local Shopping REIT Plc
• Town Centre Securities Plc
• Triple Point Social Housing REIT Plc
• Tritax Big Box REIT Plc
• UK Commercial Property REIT Limited
• Unite Group Plc
• Urban Logistics REIT Plc

Now that you’ve seen the number of UK REITs to choose from, you may realise that the task of choosing the best UK REIT to invest in is not a straightforward one.

How to pick the best UK REIT

It is possible to objectively rank UK REITs in a number of ways:

• Longevity
• Historical total shareholder return
• Running dividend yield
• Annual management charge

Although each of these is only a factor. A single ranking is not an ideal way to choose a REIT. We suggest that you consider a blend of factors and continue your research in more detail after finishing this article.

Other fundamental considerations could include:

1. What types of property does the REIT specialise in
2. How diversified is the REIT
3. Is the REIT well managed?

The best UK REITs by longevity

While the term ‘REIT’ is a relatively modern concept, many of the investment trusts existed in their current legal form long before the tax rules were introduced. Here are the top three oldest surviving property investment trusts on the market today:

1. British Land Company PLC – Founded in 1856
2. Segro PLC – Founded in 1920
3. Highcroft Investments PLC – Founded in 1927

British Land’s (visit provider website) corporate history begins with an interesting ambition to expand the political enfranchisem*nt of UK people. In 1856, ownership of land was a necessary criterion for a man to be able to vote. British Land helped to facilitate the acquisition of land by buying and selling land to individuals at fair prices. This had the effect of bringing more people into the voting pool. If it was launched today, perhaps it would be known as a social enterprise.

Segro PLC (visit provider website) was founded just after the First World War in 1920. Initially focused on a trading estate in Slough, Berkshire, the company only removed the word ‘Slough’ from its name in 2007 by shortening Slough Estates Group to the more generic SEGRO. This was perhaps appropriate considering that through organic growth and acquisition of other property investment companies, SEGRO has outgrown its regional footprint.

Highcroft Investments PLC (visit provider website) was incorporated in 1927 in Oxford. Little is known about the original portfolio of the original company founded in the same year that the Labour Party voted in favour of nationalising the British coal industry.

An honourable mention also goes to TR Property Investment Trust (visit provider website) (LSE:TRY), which is an investment trust founded in 1905. As the trust invests in the equities of property companies rather than properties directly, it doesn’t technically qualify as a REIT.

We’ve compiled a full list of REITs and their founding dates from multiple sources and we share this listing below to allow you to separate the ancient institutions from the modern upstarts.

The best UK REITs by income yield

REITs are ultimately property income vehicles, therefore dividend yield is an obvious way to analyse the REIT market to highlight some of the highest-performing trusts.

And remember, investing for an 8% yield will always attract you to high-risk investments which are likely to be more volatile and possess more downside risk than lower-returning options. This is a word of warning to those who would simply invest their money in only the highest yielding REITs available.

When ranked in this mechanical fashion, the highest dividend yield (per Yahoo Finance) are:

1. Capital & Regional PLC
2. Real Estate Investors PLC
3. AEW UK REIT

We recommend that you perform detailed research into the dividend status and recent news events surrounding an investment before investing on the basis of dividend yield. Dividend yield can be flattered by a sudden drop in the value of a company. For the purposes of a dividend yield calculation, the dividend input is usually the last dividend paid by the company.

Therefore, in the absence of fresh dividend data, an older higher dividend and a sudden crash in price can result in a high yield. What may play out, in reality, is a cut in the next dividend payment (for the same reason as the price crash). We will explore this further by looking at the top three REITs by dividend yield below:

Shopping centre investor Capital & Regional PLC (visit provider website) has experienced an 88.7% slump in share price since 2017 (see chart below). 2017 was the latest year in which the company reported a positive EBIT, at the time of writing. Having sustained such a fall in the price of its shares, the 11p dividend paid in 2020 (relating to profits from a previous period) represented a large percentage of the share price.

The 31.25% dividend yield is thus an anomalous result. Given its financial performance, investors will have to keep their ears close to the ground and make an assessment of the likelihood and level of future dividends.

Real Estate Investors PLC (visit provider website) dividend yield of 8.97% is a more meaningful figure. The dividend history has been relatively stable, reflecting a stream of rental income. A reduction in the share price of 31% has flattered the yield metric but not in a way that distorts the outcome.

AEW UK REIT (visit provider website) currently has a dividend yield of 7.41%. It stands out from this shortlist because its share price performance has been positive over the last 5, 3 and 1 year period. Having initially fallen by 50% during the height of pandemic panic, its price has now shot beyond recovery and posted gains in 2021.

Here is a list of the REITs, together with their dividend yields as of the time of writing. Please perform further research to ensure that you are looking at the most up-to-date dividend yield possible.

Best real estate investment trusts by market capitalisation

Biggest doesn’t always mean best, but investors searching for diversification and flagship assets may be drawn to the REITs with the largest market valuation.

Below, we’ve ranked each REIT by its market cap so that you can sort the whales from the minnows. The largest REIT on the list, SEGRO PLC is worth just shy of £16bn, whereas the tiniest REIT is worth £8m.

The larger a REIT, the more likely its shares are traded frequently and the bid/ask spread between the buy or sell price is lower, which translates to lower investment costs.

I hope this article about the best UK REITs has given you plenty of food for thought and options to research further.