After two bruising years, the tide may be turning for UK real estate investment trusts. Panmure Gordon’s latest sector note argues that improving yields, stabilising net asset values and continued investor appetite for income are helping to underpin share prices, even if wider macro risks remain.
The FTSE EPRA Nareit UK Index has rebounded by 9.1% so far in 2025. While that performance still lags the broader UK equity market, it reflects a marked improvement from the drawdowns seen in 2022 and 2023. Several of the highest-quality commercial property trusts now offer dividend yields above 6%, with discounts to NAV narrowing as capital values show early signs of recovery.
“UK REITs are no longer pricing in recession,” Panmure’s analysts write. “We see scope for further re-rating if interest rates fall, and if net asset value erosion continues to moderate.”
Valuation pressures easing
One of the most encouraging developments has been the stabilisation in asset values. According to the note, property write-downs slowed materially in the second and third quarters of 2025. While rental growth has remained modest, the slowdown in outward yield shift suggests that book values are starting to find a floor.
In the logistics and industrial space, this has already translated into positive NAV performance. LondonMetric, for example, delivered a 2.3% NAV total return over the six months to September. Warehouse REIT, which had been one of the hardest hit during the rate hiking cycle, has posted a 3.5% increase in EPRA earnings and held its dividend flat.
Office markets remain more mixed. Derwent London’s NAV was broadly flat in the latest reporting period, with lettings concentrated on premium spaces in central locations. Panmure continues to see limited visibility for rent growth outside prime London assets, although pockets of resilience are emerging, particularly where ESG credentials are strong.
Retail, too, is showing signs of stabilisation. Supermarket Income REIT and LXI REIT, both focused on long leases and indexed rents, are highlighted as defensive plays offering visibility on income. Both yield over 6% and have seen improved investor sentiment following updates that confirmed full rent collection and strong dividend cover.
Discounts narrowing
The average discount to NAV across the sector has improved significantly. From a trough of nearly 30% in late 2023, most REITs now trade 10–15% below book value. Some, such as Segro and Tritax Big Box, are now close to parity, reflecting their status as core holdings for institutions and their exposure to structurally supported logistics markets.
Others, such as Workspace Group and Helical, remain on wider discounts due to sector-specific challenges, including exposure to secondary office space and development risk. However, Panmure argues that the worst may be behind them, particularly if gilt yields continue to drift lower.
“REITs have been highly sensitive to the direction of interest rates,” the analysts note. “If the Bank of England begins cutting in 2026, we think the sector could see renewed inflows, particularly from income-focused investors.”
Income is back in focus
With inflation falling and the base rate likely at its peak, attention is swinging back to income. Panmure notes that many trusts now offer dividend yields of between 5% and 7%, with solid cover and growing emphasis on sustainability credentials.
Tritax EuroBox, for instance, trades on a yield of 7.2% and has maintained its dividend despite currency headwinds and slower European growth. Its UK peer, Tritax Big Box, has raised its interim payout and reiterated full-year guidance. Custodian Property Income REIT and Urban Logistics REIT are also flagged as income names with relatively modest leverage and strong tenant covenants.
Average loan-to-value (LTV) ratios across the sector remain in check, generally in the 30–40% range, and most trusts have refinanced major debt facilities in recent quarters. This reduces refinancing risk and supports dividend stability.
Early signs of rotation
Although sector sentiment remains cautious, Panmure detects early signs of renewed institutional buying, particularly in large, liquid names. Open-ended property fund outflows have slowed, and some private capital is starting to explore listed vehicles again, given the return of double-digit total return potential.
For private investors, the message is one of opportunity, not exuberance. The sector still faces structural challenges, from hybrid working to net zero retrofits. But with valuations more realistic, yields attractive and operational metrics improving, UK REITs may finally be moving from the recovery ward back onto more solid footing.