Rural Estates sector proves resilient

    A resilient rural estates sector continues to invest in Scotland’s local economies.

    Savills latest Estate Benchmarking Survey shows that the rural estate sector in Scotland remains resilient despite continued economic uncertainty and ever-increasing costs.

    A blend of income from both residential and agricultural sectors has helped ensure robust economic performances. The survey shows that estates that are able to adapt perform best.

    In 2012, the average gross income on Scottish rural estates was up 5.2%, compared with the year before, and residential property overtook agriculture as the main source of income. Farming contributed 38% of income, a reduction from 46% in 2009, when the Scottish survey began. Income from residential property represented 40% of gross income in 2012, compared with 36% in 2009; this amounts to £36 per lowland acre (£89 per ha).

    Unsurprisingly the leisure and commercial sectors were hit hardest by the fall in disposable incomes. But income from woodland enterprises has increased, thanks to relatively high timber prices.

    Expenditure on the average Scottish estate increased by 3.2% in 2012, to £58 per acre, with repairs to tenants’ housing accounting for the largest proportion of expenditure. The average estate spends 7.5% of gross income on capital improvements.

    Landowners are continuing to reinvest significant sums in rural residential and agricultural property, providing affordable accommodation in fragile communities where there is little or no provision by local authorities. Over 40% of the average estate’s housing stock is provided as affordable housing for local communities, let farms and rural key workers, and we anticipate that estate owners will continue to invest significantly in let residential and agricultural portfolios.

    Average income from all commercial sources came under pressure for the second year running and represented only 8.5% of gross income, compared with 12% in 2010 when they contributed most. Similarly, all leisure sources of income fell to 5.5% of gross income in 2012 at £5.44 per acre (£13.44 per ha), compared with 7.7% in 2010.

    Diversification may still offer opportunities in some locations, but will need careful planning and market research. Woodlands might be a prime target in this regard.

    Although the next few years are unlikely to be without challenges, and there may be some serious economic blows, especially in Europe, we believe flexible and proactive management strategies will ensure success. Maintaining the success of businesses will require regular evaluation and monitoring of an estates’ assets. We expect gross incomes to remain in the black, especially where costs are efficiently managed.