Estate Benchmarking Survey

Estate Benchmarking Survey
 
Spreading The Income Risk

23 November 2015, by Ian Bailey

Commercial and leisure incomes can make an important contribution across the estate.

 

The commercial and leisure sectors, and increasingly renewable energy, make a significant contribution to estate incomes and help in spreading income risk across the estate.

Commercial

Income from commercial property on ‘All Estates’ increased by 4.8% to almost £33 per acre and represented 15% of gross income, but these results conceal a wider range with location, quality and the dependability of services such as broadband speed (see Broadband Case Study below), a key factor in determining the rents achieved. Graph 4 shows the range of average workspace rents across ‘All Estates’.

This is a sector which has expanded over the past 15 years as redundant farm and estate buildings have been converted to workspace – including offices to storage. Total workspace area on ‘All Estates’ is now almost nine times more than in 2000, increasing from just 1,250 sq ft to over 11,100 sq ft. In 2000, 38% of estates had some workspace and this has grown to 53% of ‘All Estates’ in 2015.

GRAPH 4

Average commercial workspace rents on rural estates (rolling five-year average)

 
Graph 4

Source: Savills Research

Leisure income

Leisure activities make an important contribution (around 5%) to estate incomes. In 2015 this sector contributed just over £10 per acre, an increase of 3.9%. Location is key with the highest contributions to estate incomes in the South East and South West of England of 8% and 5% respectively.

Other income

■  Telecom mast rents are still under pressure, with average rents falling by -3.6% to £5,315 across England in 2015. However, the range of rents achieved is wider and depends upon the degree of consolidation per mast. We anticipate that the downward pressure on average rents will start to ease as the consolidation of the past few years slows.

■  Renewable energy is making a growing contribution to estate income. Across ‘All Estates’ in 2015 the average income derived from renewable energy (mainly solar PV) amounted to £2.10 per acre or 1% of gross income; almost double the £1.20 per acre recorded in 2014.

■  Sporting income fell by -16% in 2015, to £2.37 per acre. Our Shoot Benchmarking Survey (see below) shows that the ‘average’ shoot has only broken even in two of the past five years and that the break even point is very susceptible to small changes in costs and bird return rates.

 

 
Sporting

Shoot benchmarking

  2014/15 was a better rearing season which helped raise the average return rate (% of released birds shot) to 42%, from 40% in the previous season.

  Shoots have increased their charges per bird over the past five seasons (by 10% for pheasants and 18% for partridges), and by more than their costs have risen.

  Total costs fell by -3% over the past five years but the saving was in fixed costs as average variable costs increased by 10% over the same period.

  Shoots are positive about next season with 22% increasing bird numbers and over a third have more confirmed bookings now than at the same time last year.

Broadband Case Study

Slow speeds affect commercial lettings and rental levels

A recent snapshot survey of our estate managers suggests that slow broadband is now an issue in some locations in letting residential and commercial property on rural estates.

Nearly 70% of respondents confirmed slow broadband is a constraint on letting residential property with the corresponding figure being 80% for commercial workspace.

The survey also showed that in many cases a poor speed deters potential tenants from even making an appointment for a viewing and, where space is let, on average residential and commercial workspace rents are 16% and 25% respectively lower where the broadband speed is slow.

The Government’s proposals to ‘unleash the full potential’ of the countryside which were announced by Defra in August in its first 10-point Rural Productivity Plan included a pledge to provide extensive, fast and reliable broadband – making superfast broadband available for 95% of UK premises by 2017 and working with providers to address challenges in reaching the final 5%.

For many rural landowners and businesses this is too late and, while the Government reviews how to reach the final 10%, an increasing number of rural estates, communities and individuals are taking the initiative to find their own solutions.

While the start-up costs are significant – around £20,000 – £30,000 in the first year – annuity income from those using the broadband is a valuable new income stream and of course increases the likelihood of finding tenants for the commercial space.

Two estates which have successfully developed their own broadband schemes are The Alscot Estate in Warwickshire and The Rushmore Estate in Dorset.

The Alscot Estate near Stratford-upon- Avon established the network South Warwickshire Broadband in 2014 which has led to a diverse range of businesses occupying premises and a 100% occupancy rate. The tenants all have access to upload and download speeds of up to 36Mb per second plus voice over internet protocol (VOIP) and cloud services.

The Rushmore Estate in Dorset via Wessex Internet is now able to offer wi-fi to residential and commercial tenants as well as providing all the estate businesses with good quality broadband. The two annual festivals held on the estate have complete connectivity and a telephone solution incorporating staff, trader, artist and public wi-fi and voice over IP (VoIP) phones, which enables the organisers to operate an eTicketing system.

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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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