UK real estate investment trusts (Reits) are expected to deliver stronger investor returns as sector consolidation drives improved quality, efficiency and scale across the listed property space, according to an outlook by Time Investments.
The firm, known for its income-focused real asset strategies such as the hybrid Time: Property Long Income & Growth fund, has pointed to a drop in the number of listed Reits in the UK. In 2019, there were 83 Reits or equivalent property securities on the London Stock Exchange. That figure is now nearing 40.
While some Reits have been privatised or acquired, according to the asset manager, the sector’s reduced size may reflect a natural filtering process. “Many of the Reits that exited the market didn’t offer a unique investment or growth opportunity,” the firm shared, noting that similar strategies remain accessible through the current crop of listed vehicles.
“Consolidation should also mean more efficient use of capital. This is because Reits tend to be proportionally more expensive to run when smaller, with fixed general administration costs and high debt margins covered by less rent, so a larger number of small Reits can be a less efficient use of capital,”stated the outlook.
Mergers and acquisitions, on the other hand, can streamline overheads and reduce debt margins across larger portfolios. For instance, LondonMetric has made a series of acquisitions, while logistics-focused Tritax Big Box has also moved to absorb other Reits. In the healthcare and student housing sectors, Primary Health Properties and Unite have proposed mergers with their respective peers.
Time sees this shift as positive for long-term investors. “Fewer, larger Reits should ultimately mean more efficient capital use and more attractive returns,” the firm noted, reinforcing its outlook for the sector.
Andrew Gill, co-fund manager of the Time: Property Long Income & Growth Fund, pointed to a trail-blazer in intra-Reits mergers and acquisitions, LondonMetric, a Reits focused on low-cost to run assets with a logistics theme: “Management has upsized the company, moving from a mid-tier FTSE 250 company in 2018 to an FTSE 100 company in 2025 through strong property returns but primarily through acquiring other Reits. This growth, combined with underlying rental growth, has also supercharged dividend growth, with the company’s dividend per share growing 46% from its 2019 to 2025 financial year-end. That’s an impressive 6.5% per annum growth in dividends. UK inflation (CPI) was up 27.5%, or 4.1% per annum, in that same period.
Whilst further consolidation means there will be fewer UK Reits to choose from, in our view, the sector now offers higher quality and, as a consequence, a much greater chance of higher long-term growth. This could ultimately lead to more attractive returns for investors, such as Time and more cash in the pocket of investors through faster dividend growth.”
