Commerce and leisure boost lowland estates

An increase in commercial and leisure activity is helping to boost incomes on lowland British estates, according to new figures from Savills’ 2005 estate benchmarking survey.

While traditional forms of income like agriculture and residential property still rank as the biggest earners, the survey, which covered almost 300,000ha (740,000 acres), shows that the income from commercial and leisure interests are making gains.

Michael Horton, head of estate management at Savills, said: “Pressure on residential incomes, stagnating income from agricultural sources and fixed costs rising ahead of inflation have slowed the rate of growth of estate net incomes.

“However, where estates have diversified into commercial and leisure enterprises the rewards have in many cases been significant, although location is often the key to success.”

Commercial and leisure sectors accounted for almost a fifth of total gross income, up 5% on last year’s contribution.

But on some estates the figure was even higher, said head of rural research Ian Bailey.

“On one of the more diversified estates they totalled 32% of gross income with agriculture contributing only 18%.”

Across the whole survey, commercial income alone accounted for 14% of gross income, the equivalent of 47/ha (19/acre).

Average office rents increased over 10% to 9/sq ft, with rents in the retail sector rising even more sharply by 15%.

However, rents for industrial space slipped to 3/sq ft.

Income from agriculture remained flat at about 124/ha (50/acre).

At 38% of gross income it is still the biggest earner, but its contribution has fallen sharply since 1996 when it accounted for almost two-thirds.

Income from contract farming operations fell more than a quarter, but in-hand farming stayed constant at 74/ha (30/acre).

Rents from Agricultural Holdings Act tenancies strengthened 4% to 143/ha (58/acre), but farm business tenancies slipped almost 8% to 192/ha (77.75/acre).

FBTs, however, now account for over a quarter of all let land in the survey.

Let residential property made up a static 37% of gross income.

But repair costs increased slightly as more landlords spent money refurbishing houses, let formerly under protected or agricultural tenancies, to benefit from higher assured shorthold tenancy returns.

In terms of capital growth, let housing showed a much stronger return with a 22% increase over the year.

The capital value of agricultural land rose 12%, although it is uncertain how long this trend will last.

“Robust growth in the value of capital assets recorded in this year’s survey may be under threat in the short term if residential values continue to soften and the supply of farmland available on the market increases,” said Mr Horton.

“However, the continued growth in the leisure and commercial sectors should go some way towards counteracting any decline.”

Overall, net incomes on the 150 estates surveyed increased by only 5.7% in 2005 to just over 185/ha (75/acre), half the previous year’s growth. Spending rose 5% to just over 138/ha (56/acre) or 43% of gross income.