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The UK firm's latest annual report forecast that pension funds opting for "more liquid and less management intensive" REIT shares would drive the emergence of "substantial" new property companies. Such a move would double the quoted real estate sector, which currently accounts for just 14% of the UK market.

But the firm cautioned against over-hyping the appeal of UK REITs for pension funds. Although their introduction in January 2007 would boost indirect investment, "we expect only a small proportion of pension funds and other property investors [to] take advantage of the UK-REIT opportunity", it said.

A spokeswoman for the firm said its predictions for UK REITs were "purely speculative". She pointed to potential cost-savings in stamp duty and in-house management teams, but added: "We don't know the speed at which it may happen - if indeed it does happen."

Land Securities also confirmed that it would likely convert to a REIT when the legislation comes into force, if shareholders approve the move.

The firm adds its voice to a growing consensus that the introduction of UK REITs will boost indirect investment at the expense of bricks and mortar, despite recent turbulence in equity markets.

A report published earlier this year by Standard & Poor's, the ratings agency, claimed the introduction of REITs in the UK and Germany would boost market capital by more than $100bn (e80bn) over five years.

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