Introduction to Estate Benchmarking

Indicators show positive signs for the economic outlook which translates into added value for rural estates.

24 September 2013, Words by Sophie Barrett

 

Our latest Estate Benchmarking Survey focuses on the investment performance of rural estates against other assets. Download here.

Our Estate Benchmarking Survey results again reinforce the benefits of holding diverse assets and enterprises in order to provide a secure and stable income stream as well as capital growth.

The investment performance of rural estates (boosted by the strong growth in farmland values) continues to perform well against other assets – limited supply, the security of a tangible asset and demand from expanding farmers, investors (including those looking to shelter tax) and amenity buyers are all driving farmland value growth.

There appear to be some rays of light in terms of the general economic outlook with recent indicators showing a more positive trend. This includes the housing market, which can only translate into added value for rural estates.

Pursuing opportunities

The diversity of estate businesses has helped to overcome volatility peaks and troughs in individual sectors. For example, a combination of the poor weather last summer, together with constraints on disposable household income, dampened the performance of the leisure sector.

However, the increasing optimism in the economic outlook is reflected in more enquiries to rent commercial space, which is helping to boost rents and reduce void periods and debtors.

This optimism is encouraging estates to pursue opportunities to develop underutilised assets and to seek to generate new income streams. This has been assisted in part by greater availability of funding and possibly in the future by more flexibility in the planning system.

Renewable energy projects have begun to deliver a profitable income stream and helped to reduce input costs. Anticipated changes in the level of financial support in the future may limit the uptake by undermining the profitability of more marginal schemes.

The let residential sector continues to produce a strong performance although there has been an increasing turnover of tenants on many estates pursuing the highest rents. Tenants are continuing to feel the affect of tight household budgets, where salaries are not keeping pace with inflation.

This is encouraging many of them to look to move when opportunities to reduce the rental burden and running costs become available. While it remains difficult for many tenants to get onto the housing ladder there continues to be demand for most let property.

The combination of increasing optimism in the economy, government policy delivering some flexibility from historic planning constraints as well as some anticipated reduction in financial support to some sectors, together with the willingness of estate owners to pursue new opportunities has ensured that many estates have delivered a good set of results in the 2013 survey.

Proactive management with a continued focus on costs will be key to maintaining this position and driving more value to the bottom line.

 
 

Key Contacts

Ian Bailey

Ian Bailey

Director
Rural Research

Savills Margaret Street

+44 (0) 207 299 3099

 

Sophie Tidy

Sophie Tidy

Director MRICS, FAAV
Estate Management

Savills Oxford

+44 (0) 1865 269 162

 

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