BCPT, NRR, AEWU: REITs to watch as rental market booms

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BCPT, NRR, AEWU: REITs to watch as rental market booms

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 BCPT, NRR, AEWU: REITs to watch as rental market booms
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Highlights 

  • A total of £31bn in rent was paid by UK tenants in the first half of 2022, as per London-based letting agent Hamptons.
  • This figure is expected to double up to a record-high level of £63bn by the end of this year.
  • Gen Z is the primary driving force behind the soaring rental bills.

With household budgets getting squeezed amid the escalating cost-of-living crisis, the amount paid in rent by UK tenants is set to double this year. According to a recent analysis by the London-based letting agent Hamptons, a total of £31bn in rent was paid by UK tenants in the first half of 2022, and owing to the robust rental growth, this figure is expected to double up to a record-high level of £63bn by the end of this year.

Since the 2008 financial crisis, the overall rent paid by tenants has more than doubled, exceeding the 2017 peak. This sharp increase in rents has been witnessed in the UK even after a reduction in the number of private tenants. As compared to five years ago, the number of private tenants has gone down by about 275,000, as per the lettings firm.

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In comparison with 2008 figures, tenants across the UK paid an additional £17.3bn in rent in the first half of the year, while compared to 2017 figures, they paid £750m more. People born between 1997 and 2012, known as Gen Z, were the primary driving force behind the soaring rental bills. A record-high rent of about £5.8bn was paid by Gen Z tenants over the first half and this figure is expected to reach £11.7bn over the full year.

For the first time, rent paid by Gen Z would exceed the rent paid by Baby Boomers, who are born between 1946 and 1964. If the trend continues, Gen Z will be paying more in rent than millennials too, who are born between 1981 and1996, over the coming three years.

Amid the booming rental market, UK investors can keep an eye on the following Real Estate Investment Trusts (REITs), which typically own and manage income-generating real estate assets.

Balanced Commercial Property Trust Ltd (LON: BCPT)

Balanced Commercial Property Trust Ltd falls under the FTSE 250 index holding a market cap of £805.50m. The Balanced Commercial Property Trust Ltd has performed decently over the past 12 months as of 18 July with both its YTD and annual returns lying in the positive zone, at 7.24% and 23.46%, respectively. BCPT is currently offering its investors a yearly dividend yield of 3.1%. BCPT shares were trading at GBX 112.60 as the market opened at around 8:00 AM (GMT+1) on 18 July.

NewRiver REIT Plc (LON: NRR)

NewRiver REIT Plc holds a market cap of £282.01m as of Monday. The REIT has performed well over the past 12 months as of 18 July with both its YTD and annual returns lying in the positive zone, at 3.86% and 11.59%, respectively. NRR is currently offering its investors a yearly dividend yield of 6.5%. However, its EPS lies in the negative territory, at -0.49. NRR shares were trading at GBX 91.50 as the market opened at around 8:00 AM (GMT+1) on 18 July. 

AEW UK REIT plc (LON: AEWU)

AEW UK REIT plc holds a market cap of £173.95m as of Monday. The REIT has performed well over the past 12 months and has given a positive annual return of10.35% to its shareholders as of 18 July. However, its YTD return stands in the negative zone, at -2.66. AEWU is currently offering its investors a yearly dividend yield of 6.5% and its EPS lies in the positive territory, at 0.14. AEWU shares were trading at GBX 109.80 as the market opened at around 8:00 AM (GMT+1) on 18 July.

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