High growing yield and double-digit upside: what’s not to like about UK listed property in 2025?

7 minute read

Matthew Norris

Director, Real Estate Securities

As we move into 2025, Matthew Norris, manager of the VT Gravis UK Listed Property (PAIF) Fund, takes a look at what investors can expect from the UK listed property sector over the next 12 months.

“The outlook for 2025 is more positive than it has been for some time. There are exciting times ahead for investors in UK listed property.”

The outlook for the UK listed property sector

Key take-outs:

  • M&A activity and take-private transactions to continue apace
  • Increased equity issuance to fuel future growth
  • Fastest rental growth in student accommodation and build to rent
  • 5% yield, 5% growth and 20% potential upside
  • Investor interest surged in Q4 2024

What trends will we see in commercial property in 2025?

M&A is a trend that resumed in earnest this year and is likely to continue into 2025. We had consolidation with the likes of Shurgard buying Lok’nStore, the self-storage company that we invested in. We also witnessed an increase in ‘take-private’ transactions. Brookfield, for example, bought Tritax Euro Box, another company held in our fund. As we look out to 2025, I think there'll be more M&A in the sector because valuations remain at a discount to asset values and rental growth prospects for certain mega trends are very encouraging.

In addition to M&A, I expect there to be more equity issuance. This was another trend that began to surge in 2024. £2.2 billion worth of new equity was issued by existing companies. That £2.2 billion exceeded the aggregate amount raised in both 2023 and 2022 combined. Looking out to 2025, I expect to see more equity issuance from those companies that have great development pipelines and want to fuel their future growth.

Which sector dynamics will be key?

Both the purpose built student accommodation sector and the build to rent sector are likely to witness the fastest rental growth across commercial real estate in 2025.

I also expect supply to remain moderate. We've come out of a period of high build cost inflation and high development financing. The cost of debt is likely to edge higher, but the companies that we invest in have a loan to value of about 30%, and the rental growth that they'll achieve is likely to  more than offset that.

What does that mean for dividends?

It means we expect to see dividend growth in 2025. If you look at analyst consensus forecast, the forward dividend yield on the companies that we invest in is a little over 5%. Analysts are forecasting that the dividends will grow by about 5% in 2025 as well. And if you look at the upside to consensus price target, that's 20% plus, similar to the upside to net asset values.

So 2025 looks like it will be a year of yield, plus growth, plus upside potential.

Are investors interested in the property sector?

We’ve clearly entered the easing cycle and Bank of England base rates are likely to come down further in 2025.

That's good news for investor sentiment, which has improved meaningfully since the inflection point in the market in October 2023, when REIT valuations traded at a significant discount. Investors started to be attracted to the sector in 2024, but there was clearly some political uncertainty in the market, which led some to press the ‘pause’ button.

As we enter into 2025, we think those investors have pressed ‘play’. We've certainly seen material inflows into our fund in Q4 2024, and we expect those inflows to continue into 2025.

Important information  

This article and video is issued by Gravis Advisory Limited (“GAL”), which is authorised and regulated by the Financial Conduct Authority. GAL’s registered office address is 24 Savile Row, London, United Kingdom, W1S 2ES.  The company is registered in England and Wales under registration number 09910124. 

VT Gravis UK Listed Property (PAIF) Fund (the “Fund”) is a sub-fund of VT Gravis Real Assets ICVC, which is a non-UCITS retail scheme and an umbrella company for the purposes of the OEIC Regulations. The Fund is a Property Authorised Investment Fund (“PAIF”).  Valu-Trac Investment Management Limited is the Authorised Corporate Director of VT Gravis Real Assets ICVC and GAL is the investment manager of the Fund. 

Any decision to invest in the Fund must be based solely on the information contained in the Prospectus, the latest Key Investor Information Document and the latest annual or interim report and financial statements.  

GAL does not offer investment advice and this article should not be considered a recommendation, invitation or inducement to invest in the Fund. Prospective investors are recommended to seek professional advice before making a decision to invest. 

Your capital is at risk and you may not get back the full amount invested.  Past performance is not a reliable indicator of future results.  Prospective investors should consider the risks connected to an investment in the Fund, which include (but are not limited to) market risk, counterparty risk, inflation and interest rate risks and the risks of investing in real estate and related industries.  Please see the Risk Factors section in the Prospectus for further information.  

This article and video has been prepared by GAL using all reasonable skill, care and diligence. It contains information and analysis that is believed to be accurate at the time of publication but is subject to change without notice. It is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Any recipients outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction.   

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