Changing places

Maintaining a country house is no cheap affair and as a new generation of owners take over the reins they are finding new ways to raise income.

Finding alternative sources of income to support an estate, especially where there is a large, historic house to maintain, is nothing new. Traditionally agriculture and residential lets have provided the backbone of income, 80 per cent on an average estate. However, over the last three years the income that comes from trading, commercial and leisure enterprises has grown by 60 per cent, according to Savills Estate Benchmarking Survey.

For those looking at leisure-based diversification, there is a wide range of potential activities to consider – everything from day visitor enterprises through to weddings, corporate events, holiday cottages, glamping and festivals. Chosen correctly and done well, this type of diversification has a number of benefits, says Simon Foster of Savills Commercial Heritage Consultancy.

“When we meet an owner and discuss what might work for the estate, the first step is to understand their aspirations and how these might be translated into commercial opportunities. A lot of the time, location plays a major role in what will work best,” says Simon. “Depending on the enterprise, you can see a return on investment in a relatively short space of time. There can also be tax benefits as running an enterprise such as a café and farm shop, that is classed as a trading activity, opens up eligibility to business property relief when it comes to inheritance tax.”

Choosing the right diversification is crucial and often the network of other estate owners can provide informal help and advice as a starting point.

“In recent years, there has been a move by estates to look much more seriously at the opportunities and not just from holiday cottages or camping,” says James Higham of Savills Leisure and Trade Related Property. “We’re working with a Scottish estate at the moment that is developing a yoga centre and retreat; it is a good fit for them as there is a personal interest in the activity, plus it is in an area that has traditionally attracted creative types such as artists and musicians,” says James.

Finding that right fit from a personal perspective is another key element to choosing the right enterprise. Not everyone is a “people person”, says James.

“Being honest about your strengths and weaknesses is important – if you don’t enjoy being hands on and engaging with people day to day, then offering something like holiday cottages won’t work. It may be that other members of the family, or team, are better suited to that, or it may be better to outsource the management of the enterprise.”

James also advises being clear about what role the new enterprise will play. For example, if the aim is to generate income that will help to maintain an existing asset such as a historic house, this can be influential in persuading planners to green light the project.

“Business plans that look five, 10 or even 15 years ahead are crucial, as is making sure the younger generation is on board with the plan,” says James.

The influence of the next generation of estate owners is not to be underestimated – Simon says there is a tangible trend for more contemporary leisure enterprises as younger owners take the reins.

“Where once it was about opening the house and gardens up to the public, now owners are working harder to draw in a whole new demographic of visitors,” says Simon. “The wedding market remains very strong, but there has been a move to offer something more informal and imaginative than just the stately home as a venue. There are children’s playgrounds, museums, festivals and seasonal attractions such as Easter egg hunts and Christmas markets.”

Inevitably, the cost of a new enterprise is a significant factor and it varies hugely. At one end of the scale, provision of land for an external promoter to use as a festival or event location usually requires no capital investment and can provide a very good return.

“Holiday lets are still a very popular diversification and will generate a good return if the properties are in the right location and finished to a high standard,” says Simon. “Converting a cottage for use as a holiday let usually means costs of £40-50,000 but, done well, it will quickly see 75-80 per cent occupancy rates.”

A more major project, such as turning the estate into a wedding venue, could require a seven-figure capital investment for a complete renovation of the main house and other smaller properties. “This requires a long-term vision, as returns take longer,” says Simon.

For every enterprise, research and planning is fundamental to success.

“We’re currently working on a project in the south of England for a café and playground and one of the early stages was to complete a demographic analysis of population levels within a 45-minute drive, as well as disposable income levels for those living close by. We also looked at what similar attractions existed locally, what sort of footfall they generated and what that might mean for the new project. This then sets the platform for a business plan, which includes costs and financial projections for the return on investment.”

Whatever the final choice, having a passion for the enterprise sits at the heart of its future success.

“When enterprises fail, it’s often because the owner’s heart was not really in it,” says Simon. “The next generation of estate owners, however, have often had an outside career before taking over the estate which gives them wider business experience. They are often much more comfortable with risk. I think the future will see a more dynamic direction for estate leisure diversification.”

 

 
 

Key contacts

Simon Foster

Simon Foster

Director
Commercial Heritage Consultancy

Savills Cheltenham

+44 (0) 1242 548 000

+44 (0) 1242 548 000

 

James Higham MRICS

James Higham MRICS

Associate Director
Leisure & Trading

Savills Oxford

+44 (0) 1865 269 023

+44 (0) 1865 269 023

 
 

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