BCPT, AEWU, NRR: Stocks to watch as UK commercial real estate spirals downwards

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BCPT, AEWU, NRR: Stocks to watch as UK commercial real estate spirals downwards

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 BCPT, AEWU, NRR: Stocks to watch as UK commercial real estate spirals downwards
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Highlights 

  • Around 43% of RICS’s quarterly commercial property survey respondents believe that the sector is in the initial phases of a slump.  
  • High interest rates have raised the costs for investors and have led to the weakening of consumer sentiment.
  • The BoE is anticipated to raise the interest rate to 3% by next year, further worsening the credit conditions.    

 

The UK’s commercial real estate sector has started spiralling downwards and might have already entered a downturn, suggests the latest industry survey. As per the Royal Institution of Chartered Surveyors (RICS), 43% of the people who participated in its quarterly commercial property survey believed that the sector was in the initial phases of a slump, and an additional 10% felt that it was already in the middle of a dip.

With inflation rates hitting the roof, the Bank of England has been raising the interest rate, which currently stands at 1.25%. The high-interest rates have raised the financing costs for investors and have led to the weakening of consumer sentiment, hampering demand in the retail space.

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In contrast to the latest figures, the previous quarter’s survey showed that 53% of the respondents considered the sector to be in the initial or middle phases of an upturn. While now, the proportion of people who believe that the sector is improving has gone down to 22%.

Reportedly, RICS economist Tarrant Parsons has said that the darkening macro-outlook has created a negative sentiment in the UK commercial real estate market. As interest rates are expected to keep going up, this might be a turning point for the market. BoE is anticipated to raise the interest rate to 3% by next year, which would lead to harsher credit conditions for investments in property.

While investments in the real estate market take a hit, UK investors can go for these Real Estate Investment stocks (REITs), which would expose their portfolio to income-generating real estate assets.

Balanced Commercial Property Trust Ltd (LON: BCPT)

With a market cap of £843.30 million, Balanced Commercial Property Trust falls under the FTSE 250 index. The REIT has provided its investors with positive returns over the past 12 months as of 28 July, with its YTD and one-year returns standing at 12.17% and 27.05%, respectively. It is currently offering investors a dividend yield of 2.9% a year. However, its earnings per share stand in the negative zone, at -0.11. BCPT shares plunged by 0.51% at 11:53 AM (GMT+1) on Thursday and were trading at GBX 117.60.

AEW UK REIT plc (LON: AEWU)

AEW UK REIT holds a market cap of £182.51 million as of 28 July. The REIT has provided its investors with positive returns over the past 12 months, with its YTD and one-year returns standing at 3.72% and 11.64%, respectively. It is currently offering investors a dividend yield of 6.3% a year. Its earnings per share also stand in the positive zone, at 0.14. AEWU shares rallied by 1.56% at 11:57 AM (GMT+1) on Thursday and were trading at GBX 117.00.

NewRiver REIT Plc (LON: NRR)

NewRiver REIT holds a market cap of £283.22 million as of 28 July. The REIT has provided its investors with positive returns of 0.11% on a YTD basis, but its return is negative on a one-year basis, at -0.90. It is currently offering investors a dividend yield of 6.4% a year. Its earnings per share stand in the negative zone, at -0.49. NRR shares tumbled by 4.03% at 12:01 PM (GMT+1) on Thursday and were trading at GBX 88.20.

 

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