Best UK REIT ETF To Watch 2024

Read this guide to discover all the essentials of REIT ETFs and some of the UK REIT ETF opportunities in the UK and around the world for 2022.

Popular UK REIT ETF 2022 List

In the table below, we have listed 10 REIT ETFs, you can see a more in-depth review of each further down:

1. iShares UK Property UCITS ETF (IUKP)
2. iShares Global REIT ETF (REET)
3. iShares US Real Estate REIT ETF (IYR)
4. iShares Core US REIT ETF (USRT)
5. Xtrackers FTSE EPRA/NAREIT Developed Europe ex UK Real Estate UCITS ETF (XREA)
6. Vanguard Real Estate ETF (VNQ)
7. iShares MSCI Target UK Real Estate ETF (UKRE)
8. iShares Asia Property Yield UCITS ETF (IDAR)
9. HSBC FTSE EPRA Developed UCITS ETF (HPRD)
10. iShares European Property Yield UCITS ETF (IPRP)

Popular UK REIT ETFs Reviewed

We list below and compare 10 REIT ETFs available to UK investors in 2022. Our picks covers all geographies with particular emphasis on the UK, US and Europe, but also including Asia-Pacific.

Our selection includes a preponderance of iShares products. iShares is the ETF brand of fund management giant BlackRock, the largest fund management firm in the world with $8.67 trillion in assets under management.

1. iShares UK Property UCITS ETF (IUKP)

This single-country ETF focuses on growth from diversified exposure to UK property market, with 27% of the fund invested in diversified REITs, 10.6% in office space, 9.7% in residential, 7.6% in real estate holding and development and 5.7% in retail premises. In calendar year 2020 the iShares UK Property UCITS ETF on average lent out securities amounting to 11.7% of its assets under management. ETFs can lend out securities to enhance returns, although it should be said that in this case it didn’t stop the fund clocking in with a negative tracking difference, meaning it underperformed its benchmark. The fund is eligible for ISAs and SIPPS.

The fund tracks the performance of the FTSE EPRA/NAREIT United Kingdom Index composed of REITs and property companies by investing in their shares. Over the past 12 months the ETF has returned 21% and year to date returned 8.4%. Its expense ratio is 0.40% and comes with a tracking difference of -0.11%. IUKP has a UCITS risk factor of 5, where 1 is lowest and 7 is highest risk. The fund has a decent MSCI ESG Quality Score (environmental, social and governance) of 6.8, with 10 being the highest score available. It distributes dividends to fund holders.

Dividend Yield 1.86%

The largest five holdings:

• Segro REIT 19.91%
• Land Securities  REIT  8.63%
• British Land REIT  8.13%
• Unite Group  5.86%
• Derwent London REIT  5.50%

2. iShares Global REIT ETF (REET)

The REEF ETF provides broad exposure to REITs globally that invest in real estate directly and are listed on stock markets. As with many real estate investment trust ETFs, REEF focuses on securing an income stream for its investors, but in this case from both developed and emerging market economies – its largest regional weightings here in developed economies. With an expense ratio of 0.14% it is among the cheapest REIT ETF in our reviews. The MSCI ESG Quality score is low at 3.2.

REET tracks the performance of the FTSE EPRA/NAREIT Global REIT Net Total Return Index composed of REITs and property companies by investing in their shares. Over the past 12 months the ETF has returned 36% and year to date returned 12.6%. Its expense ratio is 0.14% and comes with a tracking difference of 1.17%. Although badge as a global ETF, REET invests 63% in the US. Its other regions are overwhelmingly in the developed economies, with next largest country weightings in Japan (11.4%), UK (5.6%), Australia (4.6%), Singapore (3.4%), Canada (3.0) and others (10.4%). This ETF distributes dividends.

Dividend Yield 3.49%

The largest five holdings:

• Prologis REIT  5.76%
• Digital Realty Trust REIT  3.05%
• Public Storage REIT 2.73%
• Simon Property Group REIT INC 2.14%
• Welltower  2.11%

3. iShares US Real Estate REIT ETF (IYR)

iShares Provides targeted access to US real estate stocks and REITS. A beneficial fund for gaining exposure to the US property market, retiring 31% over the 12. months to 31 March 2021. It also has a positive tracking difference, meaning is slightly outperformed the index it tracks. The fund has high exposure to specialised REITS at 38% and also includes a wedge of residential, industrial and healthcare real estate holdings, at 14.4%, 10.3% and 8.8%, respectively.

IYR tracks the performance of the Dow Jones U.S. Real Estate Total Return Index. The ETF has physical exposure to the underlying assets of the index. The ETF is 98% invested in the US, with 92% invested in real estate and the balance in the industrials. and financials sectors. Over the past 12 months it has returned 31% and year to date returned 14.4%. Its expense ratio is 0.42% and tracking difference is 0.13%.

Dividend Yield 1.81%

Largest 5 holdings:

• American Tower REIT 8.71%
• Prologis  6.51%
• Crown Castle international REIT 6.00%
• Equinix REIT 4.75%
• Digital Realty Trust REIT 3.46%

4. iShares Core US REIT ETF (USRT)

This ETF’s Investment objective is to maintain a core long-term exposure to US real estate assets through investment in REITs and real estate stocks. The fund targets both dividend income and growth. USRT also has the lowest expense ratio of our election of REIT ETFs at 0.08%. It has net assets of $1.97 billion spread across 150 holdings. Residential property has a relatively high weighting at 18%.

Tracks the performance of the FTSE NAREIT Equity REITs Total Return Index. The ETF provides physical exposure to the underlying assets of the index. The fund is 98% invested in the US, with net assets of $1.97 billion. Over the past 12 months it has returned 36% and year to date returned 15.3%. Its expense ratio is 0.08% and tracking difference is -0.03%. This ETF distributes dividends.

Dividend Yield 2.41%

Largest 5 holdings:

• Prologis REIT 8.01%
• Equinix REIT 6.85%
• Digital Realty Trust REIT 4.25%
• Public Storage 3.80%
• Simon Property Group REIT 2.98%

5. Xtrackers FTSE EPRA/NAREIT Developed Europe ex UK Real Estate UCITS ETF (XREA)

Net asset value is £54 million, so this is a small fund and around 70% of its assets are denominated in euros, bringing an element of forex hedging to predominantly sterling-denominated portfolios. Some of the popular European fund provides diverse exposure to European stocks in the real estate sector (excluding UK) by investing in eligible listed real estate companies and REITs.

XREA tracks the performance of the FTSE EPRA/NAREIT Developed Europe Ex UK Capped Net Return Index. The ETF provides physical exposure to the underlying assets of the index. Over the past 12 months it has returned 26.5% and year to date returned 2.5%. Its expense ratio is 0.33% and tracking difference is 0.31%. Largest country weightings are Germany (29%), Sweden (19%), France (15%) and Switzerland (9%). Instead of distributing them to investors, this ETF reinvests dividends. Trades on the Deutsche Borse.

Dividend Yield 3.52%

Largest 5 holdings:

• Vonovia  SE10.14%
• Deutsche Wohnen 9.09%
• Leg Immobilien N AG5.51%
• WFD Unibail Rodamco Stapled Units 5.26%
• Aroundtown Property Holdings SA 4.48%

6. Vanguard Real Estate ETF (VNQ)

This ETF invests in listed property companies and REITs in the US that purchase office buildings, hotels, and other real estate. As you might expect, given the popularity of fund management group Vanguard, this is large fund, weighing in at $67 billion and has 174 holdings, although the largest 10 holdings account for 44% of the fund. Specialised REITs account for 37% of the funds, with the next largest weighting in residential at 13.9%.

VNQ tracks the performance of the MSCI US Investable Market Real Estate 25/50 Transition GTR Index. The ETF provides physical exposure to the underlying assets of the index. The fund is 98% invested in the US, with net assets of $67.8 billion. Over the past 12 months it has returned 31% and year to date returned 14%. Its expense ratio is 0.12% and tracking difference is -0.22%. This ETF distributes dividends.

Dividend Yield 2.15%

Largest 5 holdings:

• Vanguard Real Estate II Index Fund 11.9
• American Tower REIT 8.16
• Prologis REIT 6.10%
• Crown Castle International REIT 5.63%
• Equinix REIT 5.18%

7. iShares MSCI Target UK Real Estate ETF (UKRE)

This fund has net assets of £73 million and invests entirely in the UK with targeted exposure to liquid real estate and government bonds. UKRE is eligible for inclusion in ISAs and SIPPs and for ethical investors it has a MSCi ESG Quality Score of 6.29 (10 is highest). UKRE’s inclusion of UK gilts introduces a diversifying factor to the ETF. Average on-loan securities as a percentage of the assets under management in 2020 was 2.95%. The ETF trades on the London Stock Exchange.

Tracks the performance of the MSCI UK IMI Liquid Real Estate Net Total Return Index. The ETF provides physical exposure to the underlying assets of the index. The company is 100% invested in the UK and in terms of asset class is 64.3% invested in REITs and 34.9% invested in UK government bonds. Over the past 12 months it has returned 12.4% and year to date returned 4.1%. Its expense ratio is 0.40% and tracking difference is -0.30%. This ETF distributes dividends.

Dividend Yield 1.03%

Largest 5 holdings:

• UK I/L Gilt  29.30%
• Segro REIT 12.78%
• Primary Health Properties REIT 6.25%
• United Kingdom (Government of) 5.62%
• Tritax Big Box REIT 5.56%

8. iShares Asia Property Yield UCITS ETF (IDAR)

Provides exposure to developed Asian real estate companies and REITs with a focus on income, but with the provison that the holdings must have a one-year forecast dividend yield of 2% or greater. This medium-sized fund has net assets of $535 million, with 40% invested in the Japanese market, 24% in Hong Kong and around  15% each in Australia and Singapore. The average on-loan figure is high at 20% and the fund is expensive for a REIT ETF on an expense ratio of 0.59%, but this is accounted for in the costs associated with investing in countries requiring some currency risk hedging.

IDAR tracks the performance of the FTSE EPRA/NAREIT Developed Asia Dividend+ Net Total Return. The ETF provides physical exposure to the underlying assets of the index. Over the past 12 months it has returned 28% and year to date returned 7.8%. Its expense ratio is 0.59% and tracking difference is -0.67%. This ETF distributes dividends.

Dividend Yield 2.81%

Largest 5 holdings:

• Mitsui Fudosan 5.57%
• Link Real Estate Investment Trust %
• Sun Hung Kai Properties 5.25%
• CK Asset Holdings 3.50%
• Scentre Group 3.30%

9. HSBC FTSE EPRA Developed UCITS ETF (HPRD)

This REIT ETF invests globally, with half in the US. Fund size is small at £137 million and dividends are distributed quarterly. It has a UCITS Risk Indicator reading of 5 (7 is highest). The fund can invest up to 10% of its funds in other funds, including HSBC funds and during exceptional market conditions is able to invest up to 35% of asset value in the securities of a single issuer.

Tracks the performance of the FTSE EPRA/NAREIT Developed Net Total Return Index. The ETF provides physical exposure to the underlying assets of the index. Assets under management stand at €159 million. Over the past 12 months it has returned 34.4% and year to date returned 11.2%. The largest country weightings are US (51%), Japan (11.4%), Germany (5.5%), Hong Kong (5.1%) and UK (4.9%). Its expense ratio is 0.40% and tracking difference is 0.12%. This ETF distributes dividends.

Dividend Yield 2.38%

Largest 5 holdings:

• Prologis REIT 4.67%
• Vonovia 2.67%
• Digital Realty Trust REIT 2.49%
• Public Storage REIT 2.23%
• Simon Property Group REIT 1.74%

10. iShares European Property Yield UCITS ETF (IPRP)

Another Europe ex UK REIT ETF pick, the IPRP can only invest in REITs that have a dividend yield of 2% or greater. The shares are denominated in euros and carry a UCITS risk score of 6. The fund has 65 holdings. Net asset value is €1.76 billion, making this medium sized REIT ETF with a bias towards Germany, where 43% of assets are domiciled. The fund is eligible for ISAs and SIPPS.

Tracks the performance of the FTSE EPRA/NAREIT Developed Europe Ex UK Dividend+ Net of Tax Total Return Index. The ETF provides physical exposure to the underlying assets of the index, with assets under management of $1.68 billion. Over the past 12 months it has returned 23.5% and year to date returned 2.7%. The largest European country weightings are Germany (43.4%), France (15.9%), Sweden (13.2%), Switzerland (8.7%) and Belgium (8.4%). Its expense ratio is 0.40% and tracking difference is 0.30%. This ETF distributes dividends.

Dividend Yield 2.71%

Largest 5 holdings:

• Vonovia 21.02%
• Deutsche Wohnen 9.41%
• Leg Immobilien 5.70%
• WFD Unibail Rodamco Stapled Units 5.44%
• Gecina REIT SA 4.06%

What is a REIT ETF?

Real estate investment trusts (REIT) are companies that invest in property of all types. They will mostly lease buildings and collect the rental income. By law REITs are required to pay out 90% of earnings (profits) as income (dividends) to its shareholders. Also, at least 75% of gross assets must relate to property rental business.

REITs are highly liquid. They are also required to make a profit. REITs can be diversified across the property asset class. When you add to that the fact that an exchange traded fund (ETF) can invest in as many REITs as it wishes, then you may see how REIT ETFs further magnify both the range and number of property investment returns an investor can access.

How ETFs work

As with all ETFs, buyers of the shares must pay a charge known as the expense ratio. This is past on by the broker as a deduction from the returns generated by the ETF. Exchange traded funds typically have low charges when compared with mutual funds.

ETFs are what is known as a passive investment instrument because they seek to replicate the value of an underlying index, therefore their costs will tend to be lower than actively managed funds that employ a manager to, for example, pick stocks to invest in.

Unlike mutual funds, ETFs trade on exchanges in the same way as individual stocks, with their prices changing continually throughout the trading day, unlike mutual funds which are priced once, usually at the end of the trading day.

What is tracking difference and tracking error?

Concretely, when looking at some popular UK REIT ETF to purchase an investor may want to take into account factors such as the income stream, weight of the various types of property held, the region it bases its investment in, in addition to performance, tracking difference and fees.

Tracking difference is a measure of the extent to which an ETF outperforms or underperforms its benchmark. Tracking error is often confused with the former although it is related. Tracking error is a measure of the variability of the tracking difference – in other words the amount it changes for various data points. In this guide we provide the tracking difference data.

Conclusion

Users can invest in REIT ETFs to diversify their assets and add new asset classes into their portfolio. Users should make sure to properly research and analyse each ETF prior to their investment.