Sector Screener: a FTSE 100 property stock for long-term returns

The FTSE 350 real estate investment trust (REIT) sector’s recent performance has been relatively disappointing. It has posted a capital gain of 8% over the past year, for example, which compares unfavourably with the wider FTSE 350 index’s 18% rise over the same period.

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In the short run, the REIT sector’s high degree of sensitivity to interest rate expectations could mean its performance remains relatively subdued. Indeed, inflation in the UK is currently expected to rise from its already above-target level of 2.6% to 3.2% by the end of the calendar year. This could prompt the Bank of England to implement a tighter monetary policy that weighs on the performance of commercial property over the coming months.

For example, higher interest rates would typically be expected to act as a drag on real-terms wage growth and create tough trading conditions for retailers, thereby potentially reducing demand for retail space. Similarly, a tighter monetary policy should, in theory, reduce demand for office space due to its negative impact on the economy’s performance. When combined with a higher cost of borrowing, this may lead to devaluations in property portfolios across the REIT sector and subsequent share price underperformance.

In addition, the sector faces ongoing elevated geopolitical uncertainty on both international and domestic fronts. The global trade war and conflict in the Middle East, for example, could yet lead to weaker GDP growth and higher inflation, respectively, while a recent change in prime minister may prompt a degree of fiscal policy uncertainty that could lead to worsening investor sentiment towards cyclical industries such as the REIT sector in the short run.

Long-term opportunities

While UK-listed REITs face an uncertain near-term future that could lead to relatively high share price volatility across the sector, their long-term prospects remain upbeat.

Crucially, the market valuations of several sector incumbents appear to adequately factor in an uncertain near-term outlook. In fact, it is possible to purchase FTSE 350 REITs at a discount to their net asset value and on lowly earnings multiples that suggest investors continue to price in a potential moderation in the value of their asset base and financial prospects.

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Low market valuations could equate to long-term capital growth should the outlook for REITs improve over the coming years. In the meantime, their relatively lacklustre recent share price performance means that in some cases they offer dividend yields significantly higher than that of the wider FTSE 350 index. As a result, they could deliver a relatively appealing total return.

Moreover, the operating conditions for the REIT sector are likely to ultimately improve. Following its forecast spike in the remainder of this year, inflation is expected to decline to 2.3% by the end of next year. This would be close to the Bank of England’s 2% target and could mean that the central bank does not raise interest rates in the short run. Indeed, over the coming years, it could even return to its recent policy of cutting borrowing costs.

Once time lags have passed, falling interest rates may have a positive impact on the outlook for commercial property both in terms of increasing demand for retail and office space and in boosting property valuations themselves. This could help support the share price performances of REIT sector members.

Source: ShareScope. Data at 28 July 2026. Past performance is not a guide to future performance.

Potential challenges

Undoubtedly, an uncertain near-term outlook for the economy means that investors should only focus on those REITs which have sufficiently sound finances to overcome prospectively difficult operating conditions. Those companies with modest debt levels may, moreover, be in a strong position to capitalise on any industry-wide downturn, in terms of purchasing commercial property when it trades at a particularly appealing price.

Even such companies, though, are likely to display elevated share price volatility in the near term amid potentially rising inflation and the possibility of interest rate increases. But with them trading at wide discounts to their intrinsic value in some cases, as well as offering relatively high yields, they could post upbeat total returns in the long run.

An attractive market valuation

Source: ShareScope. Data at 28 July 2026. Past performance is not a guide to future performance.

Land Securities Group (LSE:LAND), a member of the FTSE 350 REIT sector, appears to offer a favourable risk/reward opportunity on a long-term view. Even though its shares have significantly outperformed the wider sector of late, gaining 18% in the past year versus an 8% increase for FTSE 350 REIT members, they continue to offer a wide margin of safety.

In fact, the stock currently has a price-to-book (PB) ratio of 0.79. Its price/earnings (PE) ratio, meanwhile, currently stands at 13.6. These figures compare very favourably with respective figures of 2.2 and 17.1 for the FTSE 350 index and suggest that the trust offers good value for money and scope for capital gains.

Income appeal

Furthermore, the company’s shares have a dividend yield of 5.9%. This is almost twice the 3% income return of the wider FTSE 350. The trust’s dividends per share, moreover, are forecast to rise at a brisk pace. In the company’s most recent annual results, it said it expects earnings per share to increase by 5% per annum in the four years to 2030.

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Given that the vast majority of profit increases are set to be paid out as dividends as a result of the company’s status as a REIT, and inflation is set to fall by 30 basis points to 2.3% between now and the end of next year, this suggests that Land Securities’ dividends could rise in real terms over the coming years. This may further enhance its income investing appeal.

Solid fundamentals

While Land Securities faces an uncertain near-term outlook, as per the wider FTSE 350 REIT sector, its financial position is relatively sound. For example, its loan-to-value (LTV) ratio declined from 39.3% to 38.7% in its latest financial year, while it has an average debt maturity around twice as long as that of the UK REIT sector at 8.6 years. This could help protect it from a potential temporary rise in interest rates in response to the forecast spike in inflation over the coming months.

A sound financial position also allows the company to invest for long-term growth. Notably, it is seeking to diversify its exposure away from commercial property by moving into build-to-rent residential assets. Indeed, at the time of its latest annual results, its pipeline of such properties amounted to 9,000 homes. This could help reduce its reliance on UK-based offices and retail properties, which currently make up 50% and 41%, respectively, of its total portfolio.

Risk/reward ratio

Clearly, Land Securities’ share price could be relatively volatile in the short run. The company’s UK focus and relative cyclicality mean that geopolitical and economic risks could realistically impact not only its financial performance, but also investor sentiment towards its shares.

However, on a risk/reward basis, the stock appears to offer long-term potential. Its low market valuation suggests there is scope for a substantial upward rerating that could equate to strong capital growth, while a relatively attractive dividend yield should boost its total return prospects. And with a solid financial position alongside plans to broaden its property portfolio, the stock could deliver an impressive performance versus the FTSE 350 REIT sector and the wider index.

Robert Stephens is a freelance contributor and not a direct employee of interactive investor.