Retail investors have pulled out more than £20 bn from commercial property funds over the past five years, according to Morningstar data. Combined assets in REITs, closed‑ended and open‑ended property funds now sit at £51.7 bn, a steep decline after a decade of weak returns and heavy outflows. For investors seeking safer alternatives in a volatile market.

The hit is hardest on open‑ended funds, where unit trusts have shed more than 85 % of their value in the last decade, leaving just £1.35 bn in assets. REITs, with a market cap of £40 bn, have barely changed in size, yet the FTSE EPRA Nareit UK index has fallen 6.1 % over ten years despite steady dividend payouts.

Rising interest rates and shrinking demand for office and high‑street space have dented valuations. Ten‑year gilt yields jumped from 1.4 % to 4.9 % in ten years, pushing financing costs up and squeezing rental income. Retailers face online competition while hybrid working erodes office demand, tightening the sector’s revenue base and investors await clearer signals from regulators and policymakers.

Closed‑ended funds have also suffered, with many forced to gate during Brexit and the COVID‑19 shock, eroding trust and prompting wealth managers to shy away from them. Some analysts see a modest rebound, citing a 5.7 % average forward dividend yield that still outpaces the Bank of England base rate, inflation, and gilt yields for investors worldwide.