How to diversify agricultural land: building to rent or sell

Many farmers are looking to expand their business and generate new revenues through diversification, amid relentless pressure on yields coupled with uncertainty over the future.

Carefully planned residential and commercial development can play a role in this.

Landowners may look at developing strategic, large-scale parcels of land with a regional developer or, for smaller-scale projects of five to 10 homes, or a conversion project, with a local builder.

With an ever-growing demand for homes, or commercial premises in rural settings, the agricultural community is well-placed to harness land – arguably the most valuable asset – to create generation-changing opportunities.

See also: Selling land to developers – what farmers need to know

Where to begin?

Some might presume the biggest conundrum when approaching a development opportunity is whether to convert existing buildings or to build new.

However, it’s advisable to first assess whether any proposals are compliant with local planning policy, followed by an assessment of location, and local demand for commercial or residential accommodation.

The decision whether to build to rent or build to sell must also be considered.

Tax planning advice should also be sought – ideally at the earliest possible stage (at least two or three years ahead) to ensure relevant strategies are given full consideration and opportunities are maximised.

Building to rent

If building to rent, a clear management strategy is critical from the beginning.

This might add as much as 10% to net revenue by minimising vacant periods, increasing lease lengths, and improving the capital value of a scheme – helpful when considering funding arrangements.

Simple measures such as offering additional facilities (storage, garaging, allotments or paddocks) and low maintenance common gardens can reduce void periods and increase gross revenues, while increasing the property’s appeal.

Efforts to foster a sense of community are always appreciated, even if uptake is slow or patchy.

Think about how office tenants can integrate, whether through social activities or shared facilities – such opportunities are increasingly sought by business owners. 

For a residential scheme, community initiatives should focus on “designing out” sources of friction such as parking confusion, bin storage, noise and nuisances.

Potentially common spaces or shared facilities can benefit everyone.

Depending on the site and dwellings, some “Instagramable” or eye-catching design features and facilities can help your proposition stand out.

See also: Exclusive survey: 97% farms find diversification profitable

For residential schemes, offer a lifestyle and not just a building, and factor in how to future-proof homes.

Electric car charging points and properties that fulfil Lifetime Homes Standards, which ensure that homes are easily adaptable for lifetime-use and future-proofed for varying needs at minimal cost, are integral.

Tenants are customers and should be treated as such.

Goodwill, understanding and fairness go a long way in securing long-term occupiers, which benefits both parties.

Building to sell

If building to sell, a cost-benefit analysis is fundamental to maximising profits.

Explore wide-ranging financing options, and seek legal and surveying advice on any restrictive covenants (existing or new), overages, option agreements and other rights reserved or granted, which will help to achieve objectives.

Planning consent is essential, and must be factored into a development timeline.

Cost and complexity depend on each individual site.

Budgets need to take into account the cost of planning applications, architectural plans and planning consultancy, as well as ecology, archaeology, topography and arboricultural reports, which might all be requested by the local authority.

To ensure that development runs smoothly, appoint a cost or project manager to oversee contractors.

Good ones will pay for themselves and help to maintain constructive relationships between client and contractor.

Consider the implications of living close to the development – for you, your family and any tenants, but also for livestock.

Adapt the location of the new buildings accordingly to minimise impact.

Top tips

  • Be realistic with the constraints and what can be achieved on site.
  • Be mindful of the impact of the development on ecology and visual impact.
  • Look at how existing buildings can be converted to minimise costs.
  • Understand basic costs:
    • A planning application for a single dwelling is £462 in England and £385 in Wales.
    • Expect the process to cost upwards of £3,000 once architectural plans have been prepared and a planning consultant has supplied supporting planning, design and access statements.
    • Supporting reports, such as ecology, archaeology, topography, arboricultural, can easily take the sum up to £8,000.
  • Understand timelines:
    • The pre-application stage takes about two months
    • The planning application stage will take four months at best
  • When identifying land that’s viable for development, consider the context and evaluate:
    • Does it fit with the local plan?
    • Is it in a flood zone?
    • Are there ecological or historical constraints?
    • Is it in an Area of Outstanding Natural Beauty?
    • Are there air quality impact issues?
    • Is the site within the development boundary of the settlement and, if so, is the development going to be supported locally in terms of planning policy and politics?