May 2025 marked a remarkable rebound for UK Real Estate Investment Trusts (REITs), with industry leaders Hammerson and Urban Logistics REIT leading the way. On the back of renewed investor interest, improving market fundamentals, and signs of stabilization across retail and logistics segments, both companies saw significant share price appreciation and renewed institutional attention.
Retail Recovery Powers Hammerson’s Gains
After years of restructuring and asset repositioning, Hammerson — the owner and operator of major retail properties like Birmingham’s Bullring and London’s Brent Cross — saw its shares climb by 14.5% in May, the most substantial monthly increase since late 2021.
The turnaround reflects a strategic pivot toward mixed-use redevelopment, where portions of retail space are being converted into residential and office units. Recent agreements and development projects have enhanced the value proposition of Hammerson’s portfolio. Meanwhile, a resurgence in footfall, rising rental income, and growing demand from food, leisure, and entertainment tenants all contributed to the bullish momentum.
According to the company’s CEO, demand for “experiential retail” — spaces that combine shopping with dining, cinemas, and co-working hubs — is driving rent growth and operational income. In Q1 2025, Hammerson reported a 7.2% increase in net operating income year-on-year, strengthening investor confidence in its transformation plan.
Logistics Momentum Lifts Urban Logistics REIT
Urban Logistics REIT, a specialist in last-mile delivery properties, posted an even more impressive 17.1% share price rise in May. It was the strongest performance among UK logistics-focused REITs, propelled by robust leasing activity and accretive acquisitions.
The REIT announced new lease agreements with major e-commerce and retail operators, alongside the acquisition of distribution assets worth over €110 million in cities such as Manchester, Leeds, and Coventry. These acquisitions were partly funded by a newly secured credit facility with low fixed interest rates, boosting the company’s expansion capacity.
Urban Logistics also revealed a sustainability-focused warehouse upgrade program, which includes solar power installations, energy-efficient retrofits, and automation solutions — all aligning with institutional investors’ growing emphasis on ESG standards. This added another layer of appeal to its portfolio, especially as sustainable logistics becomes a dominant theme in European real estate.
Sector-Wide Recovery: Broader REIT Index Gains
The FTSE EPRA/NAREIT UK index, which tracks the performance of UK-listed REITs, rose 5.8% in May, signaling broader optimism across the real estate sector. Key factors behind the rally included:
- Rate Cut Expectations: The Bank of England has hinted at potential rate cuts in H2 2025, a welcome development for highly leveraged sectors like real estate.
- Improved Leasing Activity: Demand is up across both residential and commercial segments as tenants seek to lock in rents before inflation reaccelerates.
- Renewed Global Capital Flows: Foreign institutional investors — notably from the U.S. and Middle East — are returning to UK real estate in search of yield and stability.
In addition to Hammerson and Urban Logistics, other REITs saw modest gains. Tritax Big Box REIT, which specializes in large-scale warehouses, rose 6.3%, while LXI REIT, known for long-term, inflation-linked leases, gained 4.9%.
Challenges Persist: The Need for Selectivity
Despite the positive tone in May, analysts warn that headwinds remain. The recovery is uneven across sub-sectors and geographies. Notable concerns include:
- Secondary Office Space: Regional commercial properties, particularly older office stock, continue to suffer from elevated vacancy rates.
- Underperforming Assets: High street retail in less affluent locations and legacy hotel properties are still experiencing slow rental growth and weak demand.
- Housing Sector Headwinds: Build-to-rent schemes face regulatory uncertainty and margin pressure from inflation and tenant protection measures.
Investors are becoming increasingly selective, favoring REITs with diversified income streams, proactive asset management strategies, and a clear commitment to ESG. In that light, the outperformance of Hammerson and Urban Logistics reflects their ability to anticipate trends and reposition effectively in a changing market.
Expert Outlook and Summer Forecasts
Consulting firm CBRE expects real estate fund activity to accelerate through the summer, particularly in logistics and institutional rental housing. Hammerson is set to continue redeveloping key assets in Birmingham and Reading, incorporating coworking spaces and entertainment venues into former retail zones.
Urban Logistics is preparing to launch a new sustainable logistics fund focusing on Southern England, with a fundraising target between €250–300 million. Prospective investors reportedly include pension funds from Canada and Scandinavia, reflecting growing international appetite for high-quality UK logistics.
Barclays analysts recently pointed to a “structural shift” in REIT valuations amid improving inflation data and a more favorable interest rate outlook. Funds with income stability, operational agility, and ESG integration are now seen as outperformers — a trend embodied by both Hammerson and Urban Logistics.
Conclusion
May 2025 marked a turning point for the UK REIT market. Hammerson and Urban Logistics REIT not only posted strong returns, but also demonstrated that well-managed and forward-looking property strategies can outperform in uncertain environments.
As monetary policy begins to loosen and demand patterns stabilize, these REITs are setting a new benchmark for operational excellence and investor trust. Their ability to adapt, innovate, and embrace ESG principles offers a blueprint for the sector — and positions them well for continued momentum into the summer and beyond.
