The number of new Real Estate Investment Trusts (REITs) in the UK has soared by 61% in the past year to 45 in 2023/24 financial year (to 5 April 2024), up from 28 new REITs in 2022/23, according to chartered accountants and business advisers Lubbock Fine.
The firm says that rule changes have made it far easier to establish a REIT and the total number of REITs in the UK now stands at 157, a 29% increase on the 122 last year. Chief among these changes is the removal of the requirement for a REIT to be listed on a stock market. This avoids the financial and administrative burdens of being on a stock market such as admission fees and reporting obligations.
In April 2022, the UK implemented a new ‘private’ REIT regime, which allowed fund managers to take advantage of the various benefits of REITs without having to undertake the more onerous listing requirement imposed since the beginning of the REIT regime in 2007.
REITs are a popular investment structure in part due to the tax advantages, including being exempt from corporation tax on both rental income and any gains from sales of investment properties, as long as at least 90% of income is distributed to investors.
Another recent change that has encouraged the creation of more REITs is a relaxation of rules for overseas investment, where many more overseas companies can now be considered ‘REIT-equivalent’. These new rules have enabled more overseas funds to convert to REITs.
Neil Williams, partner at Lubbock Fine, says: “We’ve seen a significant increase in the number of REITs in the past year. The removal of the listing requirement is already producing huge cost savings. A lot of ‘new’ money is being injected into REITs – while at the same time a lot of existing commercial property investment is being converted into REIT structures.”
Williams says of the tax incentives for investors: “REITs are now very low-cost to set up and the tax benefits are almost instant. Now that investors see the benefits, the number of REITs is growing rapidly. This trend will likely continue into next year.”
