Sectors recover after downturn

Commercial and Leisure sectors are making significant contributions to gross income.

27 October 2014, words by Ian Bailey

 

Both commercial and leisure sectors continue to recover after a knock following the credit crunch. Total incomes increased in 2014 by 7.2% (to £31 per acre) and by 9.7% (to £7.25 per acre) respectively.

These sectors are making significant contributions to gross income and we expect this to continue as the economy gains momentum. Indeed, there are already indications of more activity and interest.

Commercial workspace

Our survey recorded significant rental growth across commercial workspace rents as shown in Table 3. The continued success of this sector is generally location driven and due to this, data is sparse in many areas. However, the results of our survey suggest the highest rents and strongest growth is in the southern region.

An analysis of workspace area indicates there may have been a movement between space let for storage and distribution to light industrial. This is not surprising as the two uses are similar and do not require significant expenditure to upgrade. In addition, average rental levels since 2000 have converged with industrial rents now only 20% above storage and distribution rents compared with 50% 14 years ago.

Table 3

Telecom masts

Telecom masts have been a useful income stream but the sector has seen rapid consolidation since 2010 with the average number of masts on estates falling from 2.2 to just 0.8 in 2014. Graph 4 illustrates the change in rental values and the number of masts per estate. The number of masts increased from one per estate in 2000 to 2.5 in 2005 with the numbers during the following five or six years similar. Although, mast rents have fallen since 2009 they are not back to the levels recorded during the early noughties.

In 2014, the rate of decrease recorded for the average rental income from telecom masts over the past four years fell by -3.8% at £5,420 per mast.

Average incomes from telecom masts may have reached the bottom of the trough as industry consolidation is complete, RPI index linked annual growth is ceasing and there is pressure to find new sites to fill the signal ‘black spots’.

Graph 4

Leisure

On many estates leisure activities are an important source of income. Since 2000 the income from this sector has recorded annualised growth of 9.7% and 6.5% in real terms.

This sector has been under pressure during the recession but there are now signs that the corner has been turned. Average income from all leisure sources on ‘All Estates’ increased in 2014 by 9.7% to £7.30 per acre. Although still below the peak of 2010 when it represented 3.4% of gross income.

This sector covers a wide range of activities but opportunities tend to be location driven and it is no surprise that, on average, estates in the South East and South West of England record the highest returns at £12 and £9 per acre respectively.

We expect this sector to continue to be a useful source of income, but new opportunities should be carefully researched.

Renewable energy

Renewable energy is beginning to make a contribution to estate income. Across ‘All Estates’ this new income source represents an average of about £1 per acre and £4 per acre on those estates which are actively producing renewable energy. The predominant source is Solar Photovoltaic schemes although biomass, wind turbines and hydro schemes also feature.

 

 
 

Key Contacts

Sophie Tidy

Sophie Tidy

Director MRICS, FAAV
Estate Management

Savills Oxford

+44 (0) 1865 269 162

 

Ian Bailey

Ian Bailey

Director
Rural Research

Savills Margaret Street

+44 (0) 207 299 3099

 

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