BCPT, AEWU, NRR – Stocks to watch as UK commercial property tumbles

The UK commercial property sector has started to spiral downward and may already have entered a downturn, the latest industry survey suggests. According to the Royal Institution of Chartered Surveyors (RICS), 43% of people who took part in its quarterly commercial property survey thought the sector was in the initial stages of a slump, and a further 10% believed it was already in the middle of a dive.

As inflation rates soar, the Bank of England has raised the interest rate, which currently stands at 1.25%. High interest rates have increased financing costs for investors and led to weakening consumer confidence, hampering demand in the retail space.

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Contrary to the latest figures, the previous quarter’s survey showed that 53% of respondents considered the sector to be in the early or middle stages of a recovery. Whereas now, the proportion of people who think the sector is improving has dropped to 22%.

Reportedly, RICS economist Tarrant Parsons said the darkening macroeconomic outlook had created negative sentiment in the UK commercial property market. As interest rates are expected to continue to rise, this could be a turning point for the market. The BoE is expected to raise the interest rate to 3% by next year, which would lead to tighter credit conditions for real estate investments.

As investments in the property market suffer, UK investors may opt for these real estate investment shares (REITs), which would expose their portfolio to income-generating property assets.

Balanced Commercial Property Trust Ltd (LON: BCPT)

With a market capitalization of £843.30 million, Balanced Commercial Property Trust falls within the FTSE 250 Index. The REIT has provided its investors with positive returns over the past 12 months to July 28, its returns since inception of the year and over one year standing at 12.17% and 27.05%, respectively. It currently offers investors a dividend yield of 2.9% per year. However, its earnings per share is in the negative zone, at -0.11. BCPT stock plunged 0.51% at 11:53 a.m. (GMT+1) on Thursday and traded at 117.60 GBX.

AEW UK REIT plc (LON: AEWU)

AEW UK REIT has a market capitalization of £182.51 million as of July 28. The REIT has provided its investors with positive returns over the past 12 months, with year-to-date and year-over-year returns of 3.72% and 11.64%, respectively. It currently offers investors a dividend yield of 6.3% per year. Its earnings per share are also in the positive zone, at 0.14. AEWU shares rebounded 1.56% at 11:57 a.m. (GMT+1) on Thursday and were trading at GBX 117.00.

NewRiver REIT Plc (LON:NRR)

NewRiver REIT has a market capitalization of £283.22 million as of July 28. 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 currently offers investors a dividend yield of 6.4% per year. Its earnings per share are in the negative zone, at -0.49. NRR shares fell 4.03% at 12:01 (GMT+1) on Thursday and were trading at GBX 88.20.

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