2 REITs to consider for passive income in 2026

Around 25% of my Self-Invested Personal Pension (SIPP) is taken up with real estate investment trusts (REITs). While each of my positions within this sector is diversified across different parts of the value chain, this concentration’s stemmed from too-good-to-resist passive income opportunities.

Higher interest rates have hampered sentiment throughout this sector. But that hasn’t stopped all REITs from thriving. And now that rates are steadily falling, 2026 could be the year that REITs make a comeback.

At least, that’s what some institutional investors are signalling with their recent Buy recommendations. And among these are:

• LondonMetric Property (LSE:LMP) – 6.6% yield.
• Segro (LSE:SGRO) – 4.2% yield.

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1. Diversified logistics and healthcare

LondonMetric’s a business I’ve had in my SIPP since 2023, generating incrementally higher passive income. While the business has historically specialised in prime-positioned warehouses for e-commerce giants, its recent acquisitions have diversified its real estate portfolio into other sectors like healthcare and entertainment properties.

Today, the group boasts an industry-leading 98.1% occupancy level with an average lease duration of 16.4 years. What’s more, only around 8% of its rental agreements are up for renewal over the next three years, signalling a continuation of steady and predictable cash flows that fund an ever-increasing shareholder payout.

There is, of course, risk.

In the latest Autumn Budget, the government announced higher business rates on larger properties like those in LondonMetric’s portfolio. While it’s ultimately up to tenants to pay this bill, it could put pressure on their margins, indirectly slowing demand for LondonMetric and raising the risk of eventual non-renewals.

Nevertheless, with most of its tenants enterprise-scale customers with solid financials, this is a risk I feel’s worth taking. That’s why I’ve recently topped up my existing position.

2. Investing in European data centres

Like LondonMetric, Segro also manages a vast portfolio of big box warehouses and urban logistic hubs. But more recently, management’s been investing in data centres to capitalise on artificial intelligence (AI) tailwinds.

Only around 8% of its real estate portfolio consists of data centres as of June 2025. But with numerous projects in the pipeline that could quickly change. In the meantime, cash continues to flow into the pocket of shareholders, with occupancy standing strong at 94.3%, funding almost eight years of sequential dividend hikes.

While Segro’s exposed to the same UK business rate threat, its diversification across Europe mitigates the impact, making its yield look more secure. However, it nonetheless remains exposed to potential slowdowns in logistics demand as well as emerging competition within the data centre space.

Its average lease duration is also lower than that of LondonMetric’s, standing at 8.2 years. But that’s not entirely surprising given that lease durations in Europe are typically much shorter than in the UK. Regardless, it remains quite lengthy, providing ample long-term visibility to cash flows.

That’s why I’m taking a closer look at this REIT to potentially sit alongside LondonMetric in my SIPP. But the opportunities within this sector don’t end here…

The post 2 REITs to consider for passive income in 2026 appeared first on The Motley Fool UK.

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Zaven Boyrazian has positions in LondonMetric Property Plc. The Motley Fool UK has recommended LondonMetric Property Plc and Segro Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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