The UK REIT market posted a return of -41.65% in the year to 30 June, according to a new report from Ernst & Young.
The result was the third-largest negative return across global REIT markets, behind Australia (-48.71%) and Japan (-43.41%).
E&Y’s Global Real Estate Investment Trust Report 2008 says the number of UK REITs has increased slowly from 14 in 2007 to 19 at 30 June 2008, with a total market capitalisation of $41.4bn (£25bn).
The report, which analysed REIT markets in 16 major countries showed that the total market capitalisation of REITs around the world was $604bn (£368bn), as of 30 June 2008, substantially down from $764bn (£466bn) a year earlier.
E&Y real estate director Peter Beckett said: “Global issues with the availability and cost of debt have been exacerbated in the UK with the additional impact of declining asset values.
“The expected specialisation of the UK REIT sector also failed to materialise during 2008 but, once market conditions improve, I believe this is likely to occur.”
On the global outlook for REITs in 2009, Beckett said the sector now offered good value for money, especially if underlying property market fundamentals were sustained.
“Many investors are waiting to jump on these new opportunities but are being held back by lack of finance and market volatility,” he said.
“Once one investor jumps we expect a raft of transactions to follow.
“Top of the predators will be Sovereign Wealth Funds and other cash rich entities from the Middle East, whose cash and investment requirements make them perfectly placed to acquire REITs.”
