Income from other agricultural sources

A mixed result for other income sources as commercial enterprises increases while the leisure sector is hit by macroeconomic conditions.

24 September 2013, Words by Ian Bailey

 

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Commercial income

Average income from all commercial sources on ‘All Estates’ increased in 2013 back to a similar figure recorded in 2010, following downward pressure on incomes for the past few years. In 2013, income from this sector represented 15% of gross income up from the 13% recorded in 2012.

Evidence suggests that there has been more activity for commercial workspace on rural estates and it is hoped that the relaxation of planning regulations, which came into force from 30 May 2013, will stimulate this further.

In contrast to the agricultural and residential let sectors the average surplus for let commercial property on ‘All Estates’ fell in 2013 to 45.4% compared with 54% in 2012 and 52% in 2011.

Property repairs on commercial property in 2013 was over 18% of income suggesting that repairs may be increasing on buildings converted several years ago.

2013 recorded positive growth on all commercial workspace rents following pressure in 2012 with the exception of retail:

• Average office rents on ‘All Estates’ were stable (just 0.8% increase) in 2013 to £9.30 per sq ft.

• Average rents on ‘All Estates’ for let industrial units increased by 4.6% in 2013 to £3.59 per sq ft.

• A 20% increase was recorded in average rents (£2.93 per sq ft) for storage units on ‘All Estates’.

• The average rent for retail units fell by -6.4% to £14.67 per sq ft.

In 2012, average rental income from telecom masts fell by -12% to average £5,287 per mast. This follows four years consolidation from a peak of £7,315 per mast in 2009.

Our research shows that, as well as reduced unit income, the density of masts has fallen adding an additional pressure to overall incomes from this asset.

Leisure income

Income from leisure activities remains under pressure in contrast to the commercial sector. Average income from all leisure sources on ‘All Estates’ represented 4% of gross income in 2013 still lower than the 5% recorded in 2010. Income from this source amounted to £7.40 per acre in 2013 down -7.3% from 2012.

Location is key (see Map 1) and the South West and South East of England recorded the highest levels of income from this sector at £7 per acre and £12 per acre respectively.

The prolonged weak economic climate has clearly had an effect on this sector. This is very evident in the key tourism area of the South West of England, where income is just a third of the £24 per acre that was recorded in 2009.

Woodland income

On the average estate woodland makes no real contribution, in its own right, to gross income although it is an important part of the estate’s structure/assets providing the opportunity for sporting and leisure activities.

However, income generated ranges from over £30 per acre to being a loss of over -£10 per acre.

As mentioned in our 2012 survey report this is a resource that is worth more exploration – it represents around 10% of the area of the average estate. Potential opportunities might include renewable energy, woodland grants and leisure projects.

Sporting income

Our survey shows that the average income from sporting sources fell by -21% to £2.62 per acre – similar to that recorded in 2012. Regionally, the highest average sporting income was again recorded in the South West of England at £3.43 per acre. As with woodland the range is diverse with some estates generating over £15 per acre from sporting enterprises.

Renewable energy

Renewable energy potentially offers estates an additional income stream – the key driver on 80% of estates considering a project.

However, our survey results suggest that 70% have assessed the renewable energy potential of their estate with another 12% planning to do so in 2013.

The main challenge in proceeding with a project (mentioned by 72% of respondents) is the capital cost/ availability of funds, with planning (22%) also being a significant hurdle.

Income from renewable projects in 2013 averaged just over £4 per acre on those estates involved in projects (or almost £1 per acre across ‘All Estates’). Solar Photovoltaic schemes were the principal source of income.

 
 

Key Contacts

Ian Bailey

Ian Bailey

Director
Rural Research

Savills Margaret Street

+44 (0) 207 299 3099

 

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