UK-listed property shares suffered another difficult month in September as stubborn inflation, elevated interest rates and renewed pressure on bond yields continued to weigh on the sector.

The average share price fell 3% in September, excluding Abrdn European Logistics Income (ASLI), whose 36.4% decline reflected capital being returned to shareholders as part of its managed wind-down. The median decline across the wider dataset was 3.9%, while just a handful of companies recorded a positive return during the month.

The weakness follows a difficult August and reverses much of the recovery seen earlier in the summer. The macroeconomic backdrop remains a problem for the sector. Hopes that inflation would ease allowing interest rates and property yields to fall have repeatedly been pushed back, with the continued war in Iran putting pressure on bond yields.

Best performers in price terms

Source: Bloomberg, Marten & Co

Harworth Group (HWG) topped the table for the second month running, adding another 5.8% after its 35.6% surge in August as the battle over its future continued.

Peel Holdings increased its offer for the company during September from 172.5p to 177.5p per share. Harworth’s board again rejected the approach, arguing that it significantly undervalued the company and its prospects. Peel subsequently took its holding to 30%, triggering a mandatory offer under the Takeover Code.

The continued bid interest means Harworth has risen 55.8% over the past three months and is now up 12% in 2026, a sharp reversal from its position earlier in the year.

Away from corporate activity, gains were scarce. Custodian Property Income REIT (CREI) was the second-best performer, rising 1.7%. Its latest quarterly update showed net asset value (NAV) edging up to 100p per share from 99.7p, helped by rental growth and a strong contribution from its industrial portfolio. Estimated rental value increased 1% during the quarter, with the company highlighting a 15% gap between estimated and passing rents that provides scope for further rental growth.

Target Healthcare REIT (THRL) was close behind, gaining 1.6% following a particularly strong set of annual results. The care home landlord generated a 12% NAV total return in the year to 30 June, its best annual performance since launching in 2013, while net tangible assets (NTA) per share on the EPRA industry standard increased 6.4% to 122.1p. Its portfolio rose 4.9% on a like-for-like basis and has now recorded 14 consecutive quarters of valuation growth.

As we pointed out in recent commentary, THRL’s resilience stands in contrast to much of the wider property market. Almost all of its latest valuation growth came from inflation-linked rental increases, asset management and disposals rather than falling property yields, demonstrating the importance of underlying rental growth while the anticipated macroeconomic tailwind for property remains elusive.

Henry Boot (BOOT) was the only other company in the table to gain more than 1%, rising 1.4%, although its shares remain down 34.2% in 2026. Home REIT (HOME) and Real Estate Investors (RLE) edged 0.5% and 0.3% higher respectively, while Schroder European REIT (SERE) was unchanged. The fact that three companies made the top ten despite falling during September illustrates the breadth of the sector’s weakness.

Worst performers in price terms

Source: Bloomberg, Marten & Co

The 36.4% fall in Abrdn European Logistics Income (ASLI) needs to be viewed in the context of its managed wind-down rather than as an equivalent loss of shareholder value.

ASLI returned another 6.6p per share through a B Share scheme during September and paid a further 2p interim dividend at the end of the month. Including those payments, the company has returned 58.68p per share, or approximately £242m in aggregate, since its managed wind-down began. It has now sold 26 of the original 27 properties in its portfolio.

The more notable feature of the fallers was the weakness among some of the sector’s larger companies.

Derwent London (DLN) dropped 11.1%, Land Securities (LAND) fell 9.0% and Hammerson (HMSO) lost 8.6%. Despite September’s decline, Derwent remains 4.7% higher for the year, while Landsec is broadly flat. Hammerson is also still up 4.5% in 2026. Sirius Real Estate (SRE) was also weak, falling 9.3%.

Property’s macro problem has not gone away

September’s performance provides another reminder that the listed property recovery remains highly sensitive to the interest-rate outlook.

The hoped-for path for the sector had appeared relatively straightforward: inflation would fall, central banks would cut interest rates, bond yields would follow and property yields would eventually compress. That would reduce financing costs while providing support to capital values.

Instead, that process has repeatedly stalled.

This is particularly problematic for companies where the investment case depends heavily on yield compression to drive a recovery in asset values. The contrast with THRL is notable. Its portfolio increased 4.9% on a like-for-like basis last year, but only 0.1 percentage points of that came from yield movements. Inflation-linked rent reviews contributed 3.2 percentage points, with asset management, disposals and other rental increases accounting for the remainder.

It is an increasingly important distinction within the sector. Property companies capable of generating rental growth and creating value internally are less reliant on the macroeconomic environment turning in their favour.

Corporate activity still provides support

Harworth’s position also demonstrates that, despite the weaker backdrop, corporate activity remains capable of exposing the disconnect between public-market valuations and the value strategic buyers place on property assets.

This follows a summer dominated by bids and consolidation across the listed property sector, most notably Prologis’ agreed acquisition of SEGRO.

The combination of wide discounts, corporate bids and wind-downs continues to raise questions over the future shape of the listed property sector.

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