So you want to… Offer storage
If there’s one thing that farmers have a surfeit of (apart from red tape) it’s old barns that are not much use for agriculture.
But how do you turn this often-overlooked asset into an easy-to-manage money-earner?
The answer, it appears, depends entirely on location and meeting market demand.
Location
You need to be near a reasonably populated area to attract enough local demand for your business.
Good access is also critical, as the Highways Agency often takes a very strict view when it comes to increasing road usage in rural areas.
“However, if you have exchanged livestock for storage, the chances are your traffic flow will be significantly lower, particularly when it comes to heavy lorries,” says Richard Brown, who runs storage at Gidley Farm, Peasemore, Berkshire.
Markets
There is a wide section of demand, ranging from individuals wanting to store cars or furniture, to hobbyists seeking somewhere to do a bit of woodwork, to larger scale manufacturers.
And every tenant will require a different type of storage – from open-sided barns to fully dehumidified workshops.
The key is to find and service that demand in your particular area.
Planning permission
Planning permission for change of use, or any change to the structure of the building, is required at the outset, although many farmers seem to operate a rather more laid-back approach of tenant first, permission afterwards.
Local communities are often much more amenable to change if they are kept well informed about your plans from start to finish, and beyond.
Business rates
This relaxed approach often extends to business rates and tax matters, but operators would be foolish not to take account of business rates, as they are usually payable at 40% of the building’s rental value.
They can also be backdated for three years.
Even if just a small section of the building is being rented out for next to nothing, business rates will be payable on what the building could be rented out at.
Most farmers pass on these charges to their tenants.
Tax
Income will be treated as farm income, unless the units are set up as a separate business.
VAT is sometimes chargeable – for more information speak to an accountant.
Conversion
The extent of the work required very much depends on what buildings you have and what market you are aiming for.
Usually the building must be made waterproof, have lockable doors and electricity at the very least.
Advertising
The vast majority of advertising is through word of mouth, although adverts in local papers can yield some interest.
Alternatively, you can employ a local agent to act for you, which is more costly but cheaper than leaving a barn empty.
Insurance
The most common arrangement is for the farmer to insure his buildings, and for the tenant to insure the contents.
Public liability insurance should also be considered.
Grants
DEFRA’s Rural Enterprise Scheme grants are coming to an end at the end of this year, as are some of the Objective One grants.
Businesses in Cornwall can apply for 50% support in their planning permission process, and 60% support for business planning.
Other, more local schemes across the country may be available.
Business Planning
It is essential to carry out a feasibility study before spending any money on conversions, says Mark Neason, partner at Carver Knowles.
“Do some figures based on your conversion costs, expected income, running costs and so on to see if it is a runner.
You must also consider your own personality and reasons for running this business – it is only the people who are really keen and passionate who succeed.”
It is often best to start slowly – convert one barn and see how much demand you really do have.
You can then tailor the second conversion to new prospective tenants.
However, in the longer term this can be more expensive, and if you’re aiming for the high quality end of industrial usage, set-by-step conversions will put off potential clients, says John Varley of Clinton Devon Estates.
“But you can phase the development by completing the exterior work and then fit out the units according to demand.”
Other considerations
Car parking, washing and toilet facilities are all essential. Each building should have an electricity meter, and responsibility for maintenance of buildings – both inside and out – must be clearly set out.
Case Study Mark Way
When Mark and Sue Way decided to stop farming on their 2ha (5-acre) smallholding in south Buckinghamshire four years ago, they wondered how they could continue to make a living out of the site.
A classic car enthusiast, Mr Way decided to test the market for car storage, and phoned up all his local car clubs to promote his newly empty livestock sheds.
“Within a month of the last pig leaving the farm we had our first tenant in the old chicken shed,” he says.
“We’ve never done any advertising – it’s all through word of mouth.”
The farm is now full of hobbyists, with tenants ranging from car owners and collectors to a special effects creator for Pinewood Studios.
The units range from a double garage size (300sq ft) to 800 sq ft, and about 30% are completely enclosed.
“If we could get further planning permission I’d like to change more open storage to indoor units because they command more money,” says Mr Way.
He charges between 3 and 5/sq ft a year, as the sheds vary from untouched to fully refurbished with electricity.
“We were frightened to put too much money into conversions in case it didn’t work out.
Plus, not everyone is looking for beautifully painted space.
We now have people queuing up for the space which they don’t have at home.”
The tenants are all on a monthly contract, to allow for any disagreements.
“I was very nervous to start with, but most people are very amenable and glad to have somewhere to use.”
Planning permission has been a difficult process of negotiation, as with change of use to any pig and poultry sheds.
But by avoiding caravan storage and keeping traffic flow to a minimum, the couple have managed to win the planners’ vote.
“We used a chartered surveyor/consultant to get our planning permission.
This is a very time-consuming and tedious process so patience is needed.”
Business rates are also under negotiation as the sheds may qualify for a reduced rate for use by hobbyists.
And Mr Way’s advice to potential storage operators?
“Be brave and go for it. But you do have to be in the right location – we are close to Windsor and Slough, which is key to our success.”
Case Study John Varley
Clinton Devon Estates has developed a range of uses for its redundant farm buildings, from residential and offices to business parks and smaller scale industrial usage.
“We didn’t want to have all our eggs in one basket, and nor did we want to flood one particular market,” says estates director John Varley.
The estate covers 10,000ha (25,000 acres) of Devon, and in the late 1990s Mr Varley decided to develop one of the farm’s model courtyards into light industrial use.
“The planning process was long and torturous; we had quite a lot of opposition so it’s quite ironic that we’ve since won awards for the site.”
South Farm Court, near Budleigh Salterton, extends to 6000sq ft and was converted into 10 high quality units at a cost of nearly 650,000.
“We were targeting a very distinctive market,” says Mr Varley.
“Our tenants include a coffee manufacturer, a guy who makes leather gun cases for Holland & Holland, and someone who makes dentistry equipment.
They want very high quality space in a lovely rural environment.”
With a rent of 7/sq ft, South Farm Court is in direct contrast to other, more basic sites, where less demanding tenants pay just 3/sq ft.
“It is important to aim for different clients on each site; if we had converted all our barns into the same type of business units we would have flooded the market.”
A more modest development was undertaken at Dotton, near Newton Poppleford, where 9500sq ft was converted into five units at a cost of 30,000.
Tenants here include pine strippers, timber storage and picture framers, and rent is set at 4.50-5/sq ft.
An important factor in any industrial unit is offering tenants the chance to grow, says Mr Varley.
“If they can’t grow then you will lose them.” One must also consider future changes to the business environment, to keep one step ahead of the game.
“The conversion is only the beginning of the story.”
Case Study Tom Brown
Tom Brown, of Gidley Farm, Peasemore, Berkshire, took over the former family pig farm just two years ago, and has almost filled the 25,000sq ft of redundant barns with tenants of every shape and size.
His uncle, Creighton, started the letting business a few years ago after the pig business folded, taking in his first tenants before applying for retrospective planning permission.
“If you go for planning and get turned down, you’re scuppered,” says Tom’s father Richard, who helps to run the business.
“But if you’ve already got tenants in it makes it more difficult for the council to turn you down.
However, that all depends on the individual and the council because it is a risk to take.”
The buildings range from almost untouched to fully refurbished, and Messrs Brown have aimed for the lower end of the rental market.
“That seems to be where the demand is – if you go upmarket people want to be closer to Newbury,” says Richard.
Tenants range from a furniture restorer to a terracotta pot importer, as well as a vintage car dealer, exhibition display stand manufacturer, oak framed building constructors, a marquee hire company, and storage for books and several private cars.
Conversion costs varied from nil to potentially 20/sq ft for a proposed new conversion.
“Most of the costs were getting rid of the old pig stalls, dung channels and so on,” says Richard.
“If you do a unit up you have to be sure that you can attract a tenant who will pay a higher rent – but if it’s too downmarket then you’ll attract the wrong kind of tenant.”
Every tenant is on a three-year contract with a six-month break clause, says Tom.
“It is important to have a proper contract so that you can avoid any problems.”
Each tenant also pays a refundable deposit of two months’ rent.
Rents vary from 2 to 3/sq ft.
“If you can find someone to take a big space it is easy, but if they then leave you will lose a lot of income, so the smaller units are a safer bet.”
Large barns have therefore been split up into several, smaller units.
“It is an ongoing project, but without the income that the units have brought in our 700-acre arable farm would be struggling – it has made the whole business a lot more viable.”